MIRNAL MEHTA,CUTTACK vs. ITO WRD-2(4), , CUTTACK

It was submitted by the ld. AR that the original assessment in the case of the assessee came to be completed u/s.143(3) of the Act on 31.12.2019. It was the submission that subsequently the assessment has been reopened by issuance of notice u/s.148 of the Act and the reassessment came to be completed u/s.147/144B of the Act on 30.03.2022. It was the submission that the reopening has been done on the basis of certain information received by the AO that the assessee‟s bank account with State Bank of India, Choudhury Bazar Branch, Cuttack having SB Account No.30926528935, had not been disclosed by the assessee and the said account had substantial cash transaction. It was AO in the course of the original assessment. Ld. AR drew my attention to the paper book filed by the assessee. The ld. AR has also filed written submission as follows :- WRITTEN SUBMISSION Facts of the Case - The appellant is an individual deriving income from business. The appellant filed his audited Return of Income for the aforesaid assessment year. The appellant's return was selected for scrutiny by CASS on reason for substantial cash deposits in banks. Notices were served on appellant regarding the matter for verification. In response to the notices and show cause notices the appellant produced all the materials alongwith books of accounts and all the bank accounts statement for verification. The same was duly verified by the Assessing Officer and assessment was completed u/s 143(3) on 31/12/2019. Thereafter a notice u/s 148 was received by the appellant on 31.03.2021. In compliance the appellant filed the Return of Income in response to the notice u/s 148 on 27.04.2021. IT IS TO BE NOTED: After filling of Return of Income in response to notice U/S 148, the appellant asked to intimate the reason for initiation of proceedings U/S 147, but no reason was intimated to the appellant. During the original assessment proceedings, the assessing officer asked for all the bank accounts for verification alongwith other details. The appellant furnished all Bank account alongwith reconciliation. Books of accounts and other details as asked for were furnished for verification. After due verification, the assessment was made u/s 143(3). As per Assessment order under section 147 read with sec 144B dt 30.03.2022, it can be seen that the reopen reason was cash deposits in State Bank of India having account No. 30926528935. As per AO the information was received from CRIU/VRU Section ( borrowed information by AO ) that heavy cash is deposited in the State Bank of India having account No. 30926528935. The said bank was duly verified by the Id. AO during the original assessment proceedings. No new material was received by the AO nor has any reference to any new materials on record but only on a revisiting of the materials that already stood disclosed at the time of original assessment proceedings. There is no new information which has lead to the knowledge of the AO which lead to the reopening. It appears from the perusal of the same case record. The AO has not came into any possession of any fresh material warranting reopening. The AO before reopen should asked himself "what is not disclosed". The AO issuing notice without there being any tangible materials with the AO as he clearly relied upon the material which was already on record. The AO should have shown that there has been failure on the part of the assessee to disclosed the material fact required for reassessment. It is trite that the assessment cannot be reopened on Change of Opinion. Therefore, the appellant states that this is a clear case of mere Change of Opinion not sustainable in the eye of law. The reopening has to be quashed in the interest of justice. It is purely a mere Change of Opinion. Without any fresh material coming to the possession of Assessing Officer the appellant begs to state that the reopening is bad-in-law and deserves to be quashed in the interest of justice. PRAYER: In the circumstances, this is a clear case of mere Change of Opinion and the re-assessment as made is bad-in-law and deserves to be quashed in the interest of justice.

Ld. AR drew my attention to the original assessment order passed u/s.143(3) of the Act on 31.12.2019, wherein page 1 para 1, the AO mentioned that the assessee‟s case was selected for scrutiny under CASS for compete scrutiny on the reason of substantial cash deposits in different bank accounts, out of which one is the Savings Account maintained with State Bank of India, Choudhury Bazar Branch, Cuttack. Further, the ld. AR drew my attention to page 3 of the assessment order wherein also the cash deposit of Rs.34,05,70,000/- into the said bank account has been explained by the assessee. He further drew my attention to page 9 of the paper book which was the details of the bank accounts maintained by the assessee, which was filed before the AO. At page 13 of the paper book, question No.1 in the show cause notice dated 30.11.2019, in Item No.1, the AO has questioned the cash deposit of Rs.63,25,38,300/- in the said bank account maintained with State Bank of India, Choudhury Bazar Branch, Cuttack. He further drew my attention to page 15 of the paper book which was a balance sheet as on 31.03.2017, wherein under the head “current assets”, the balance with the scheduled banks have been shown as Rs.16,01,718.54 and the schedule to the said balance sheet at page 16, which showed the said bank account to be having a closing balance of Rs.5,87,708.17, which he tallied with the bank account produced before me. He further drew my attention to submit that the reconciliation of the bank account have been provided on online basis at page 18. At page 19 of the paper book, he placed before me the reply given to the AO in respect to the show cause notice, wherein he mentioned that the amount is not Rs.63,25,38,300/- but the amount is Rs.56,32,57,300/-. He has also placed before me the break-up of the cash deposits on various dates in the said bank account. It was the submission that the issue of the said bank have already been considered by the AO in depth in the course of original assessment. Just because no addition has been made in respect to the said bank account, it cannot be said that there is an escapement of assessment in respect to the said bank account. It was the submission that the reopening is on the basis of change of opinion and the same is liable to be cancelled in view of the decision of the Hon‟ble Supreme Court in the case of Kelvinator of India Ltd., reported in [2010] 320 ITR 561 (SC), wherein the Hon‟ble Supreme Court has categorically held that the Assessing Officer has the power to reopen, provided there is „tangible material‟ to come to conclusion that there is escapement of income from assessment; reasons must have a live link with formation of belief. Therefore, it was the prayer of the ld. AR that the reopening done by the AO is deserves to be quashed.

In reply, ld.Sr. DR placed before me the revenue‟s paper book. At page No.1, ld. Sr. DR placed before me the copy of reasons recorded, which are as follows :- Name of the Assessee Mrinal Harshadbhai Mehta PAN of the Assessee: AFUPM1868D Assessment Year 2017-18 The quantum of income which Rs.5,73,30,000/- has escaped assessment Reason of Re-opening : The assessee company has filed its return of income for Asst. Year 2017-18 disclosing total income at Rs.4,77,930/-. As per information received from CRIU/VRU section of Insight portal, it is seen that, the assessee was maintaining a savings bank account bearing No.30926528935 maintained with State Bank of India, Choudhary Bazar, Cuttack Branch. During the demonetization period that is, from the period 09.11.2016 to 30.12.2016, a total amount of Rs.5,73,30,000/- was deposited in cash in the aforementioned account of the assessee. The above deposit of Rs.5,73,30,000/- has not been disclosed in the Income tax Return filed by the assessee. As such, the deposit made out of the income earned during the previous year 2016-17 relevant to assessment year 2017-18 at Rs.5,73,30,000/- has escaped assessment in the hand of the assessee. In this context, I have the reason to believe that, income to the extent of Rs.5,73,30,000/- chargeable to tax has escaped assessment within the meaning of section 147 of the I.T.Act for a.Y.2017-18. In this case, though a return of income was filed for the year under consideration but, no assessment have been made and the only requirement to initiate proceeding u/s.147 is reason to believe which has been recorded above. In view of the above, provision of clause (b) of explanation 2 section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a cause where income of Rs.5.73.30.000/- chargeable to tax has escaped assessment.

The case is within four years from the end of the relevant assessment year under consideration. Hence, necessary sanction of Addl. CIT may kindly be accorded u/s.151(2) for issuance of notice u/s.148 of the I.T.Act. Put up for Ld.Addl. CIT’s kind approval. Sd/- (A.K.Mohanta) Income Tax Officer, Ward-1(1), Cuttack.

He further drew my attention to the page 3 of the return of income at clause 13 to submit that the assessee possessed 11 or 12 bank accounts, however, none of the details of the bank account had been provided in the return except one for refund purposes. He further drew my attention to page 11 of the paper book to submit that the assessee has not requested for the copy of the reasons recorded at any point of time. He also drew my attention to page 13 to 15 of the paper book, which are the verification details issued by the CRIU/VRU Section of the department to submit that as per the information available, the said bank account having not been shown in the return of income. The same was referred to the AO for considering the issue of reopening and the AO after finding that the bank account had not been disclosed in the return, had initiated the reopening proceedings. It was further submitted that the addition had been made because there was substantial cash deposits in the said bank account with SBI maintained at Chaudhury Bazar Branch, Cuttack during the period of demonetisation and this bank account having not been disclosed by the assessee in his return of income, the reopening is liable to be upheld. It was the submission that it was incumbent upon the assessee to show the bank account in his return including the cash AO was right in reopening the assessment.

Ld. Sr. DR has also placed reliance on the decision of Hon‟ble Supreme Court in the case of TechSpan India (P.) Ltd., reported in [2018] 92 taxmann.com 361 (SC), wherein in para 12, the Hon‟ble Supreme Court has held as follows :- 12. Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non- speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the re- assessment proceedings.

It was the submission that the original assessment order being a cryptic assessment and a non-speaking assessment order and no addition on the said issue having been made nor any explanation was called from the assessee, therefore, the reopening deserves to be upheld. It was also the submission that the formation of the opinion, insofar as the said account was not disclosed in the return and substantial cash deposits having been made in the said bank account during the demonetisation having not been considered, therefore, the reopening should be upheld.

He also placed reliance on the decision of Hon‟ble Delhi High Court in the case of Chetan Sabharwal, reported in [2019] 110 taxmann.com 57 (Delhi) and the Full Bench of the Hon‟ble Delhi High Court in the case of Usha International Ltd., reported in [2012] 25 taxmann.com 200 (Delhi)(FB), reiterating the view expressed by the Hon‟ble Supreme Court in the case of TechSpan India (P.) Ltd. (supra). Ld. Sr. DR further drew our attention to the held portion on the issue of Deemed formation of opinion by the Full Bench of the Hon‟ble Delhi High Court in the case of Usha International Ltd. (supra), which reads as under :- Deemed formation of opinion • Even if the Assessing Officer did not examine a particular subject matter, entry or claim/deduction and therefore had not formed any opinion, it must not be presumed that he must have formed an opinion. This is not what was argued by the assessee or held and decided. There cannot be deemed formation of opinion even when the particular subject matter, entry or claim/deduction is not examined. [Para 23]

I have considered the rival submissions. At the outset, a perusal of the original assessment order passed in the said case when compared with the reasons recorded as has been produced by the revenue, shows that the reasons recorded for the purpose of reopening is on the issue that assessee is maintaining a savings bank account bearing 30926528935 with State Bank of India, Choudhary Bazar Branch, Cuttack. This information is, prima facie, wrong as it is not the savings account, rather it is a current account.

Further the reasons recorded by the AO for reopening that during the demonetisation period the assessee has deposited Rs.5,73,30,000/- in cash and the said amount has not been disclosed in the income tax return filed by the assessee. A perusal of clause 13 of the return, the assessee has not given the details of the bank account nor the names but in the remarks column cash has been deposited during the said period in excess of Rs.2 lakhs is mentioned.

With regard to the reasons recorded by the AO for reopening is that on account of the non-disclosure of the said bank account, it is believed by the AO that the income to the extent of Rs.5,73,30,000/- chargeable to tax has escaped assessment. This reason when compared with the original assessment order, shows that in the said original assessment order at page 1 itself talks of the said bank account. In the said assessment order clearly 14 bank accounts have been examined by the AO and none of the 14 bank accounts have been mentioned in clause 13 of the return. The AO is talking of a cash deposit of Rs.5,73,30,000/- in the said bank account, whereas the actual cash transaction is nearly Rs.112 crores in respect of all the accounts. A perusal of the original assessment order shows that Rs.112 crores have been examined at depth by the AO and the reconciliation of all the 14 bank accounts have also been produced before the AO in the course of original assessment. These 14 bank accounts have been considered by the assessee in his balance sheet, the same are also taken into consideration while preparing his audit report. A perusal of the original assessment order further goes on to show that the cash deposit in the said bank have also been specifically examined by the AO and the same was also questioned and the same was reconciled by the assessee. Thus, admittedly in the course of original assessment, the said bank account has been examined in depth by the AO.

A perusal of the decision of the Hon‟ble Supreme Court in the case of TechSpan India (P.) Ltd. referred by the ld. Sr. DR, clearly shows that before interfering with the proposed reassessment on the ground that the same is only based only on a change of opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. Now, clearly in the course of original assessment, the AO has called for the details of the bank account, has issued show cause notice in regard to the cash deposit in the said bank account, has examined the reconciliation as filed by the assessee and has consciously not made an addition in respect of the said bank account. Thus, the AO has clearly formed an opinion in the course of original assessment in respect of the said bank account and the present reopening is nothing but a change of opinion. In fact, the said decision though quoted by the revenue is favour of the assessee.

Coming to the decision of the Full Bench of the Hon‟ble Delhi High Court in the case of Usha International Ltd., relied on by the ld.Sr. DR, wherein it was the opinion of the Hon‟ble High Court that if the AO had not examined a particular subject matter, entry or claim/deduction and therefore had not formed any opinion. In the present case, the AO in the course of original assessment have called for the details of the said bank and having examined the same and also having issued show cause notice in respect of the cash deposited in the said bank account, clearly the said bank account having been examined and no addition having been made, the opinion of the AO is clearly discernible that he did not find anything in the said bank account, which called for any addition.