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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [Ld.CIT(A) in short] dated 18/02/2015 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 24/03/2014 relevant to Assessment Year (A.Y) 2006-2007.
The assessee has raised the following grounds of appeal:
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The assessment order u/s.143(3) r.w.s 147 is bad in law. 2. The reopening of the assessment is bad in law. 3. The learned Assessing Officer has erred in law a well as on facts in making addition of Rs.52,80,06,659/- on account of alleged unexplained cash deposits. The Ld.CIT(A has erred in confirming the same. 4. The appellant craves leave to add/alter/amend delete or withdraw one or more grounds of appeal.
The assessee in the ground of appeal no. 1 & 2 have challenged the validity of the reopening under section 147 of the Act on the reason that there was no material available with the AO leading to form the belief that the income of the assessee has escaped assessment.
The learned AR before us submitted as under:
A notice u/s. 148 was issued on i 5.03.2013 on the reasoning that there were huge cash deposits in the appellant's bank account maintained with ICICT Bank. Copy of reasons recorded is enclosed herewith. It is respectfully submitted that the A.O. mentioned in the reasons recorded for reopening that... ".....The genuineness of the sources of such huge cash transactions requires to be verified....." Thus, it is clear that the reopening has been resorted to for the purpose of mere verification of source of cash deposits. 3. Reopening u/s. H7 is not permissible for the purpose of mere verification of any issue. The A.O, ought to have requisite prima-facie belief that there is an escapement of income. Thus, the mandate and pre-requisite of Section 147 is not fulfilled and hence, the reopening is bad in law on the ground of absence of reason to believe.
Apex Court judgment in case of Chhugamal Raj pal vs. S. P. Chaliha & Ors (79 ITR 603) page 178 to 183
Gujarat High Court in case of Bakulbhai Ramanlal Patel vs. ITO (56 212)-Page 160 to 170 Gujarat High Court in case of Shankarlal Nagji & Co. & Ors. Vs. ITO &
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Anr. (322 ITR 90) - copy enclosed Page 171 to 175 Gujarat High Court in case of Inductotherm (India) Pvt. Ltd. vs. DCIT - 356 ITR 0481 page 184 to 192 > Bombay High Court in case of Nivi Trading Ltd. vs. UOI - 375 ITR 308 page 193 to 205 Delhi High Court in case of CIT vs. Batra Bhatta Company - 321 ITR 526 page 206 to 212 Himachal Pradesh High Court in case of CIT vs. Sahil Knit Fab - 249 CTR 454 page 213 to 223 Ahmedabad ITAT in case of Sonal Arpit Doshi vs. ITO - decision dated 21.10.2015inITANo. 366/Ahd/2015 page 224 to 227 Ahmedabad ITAT in case of ACIT vs. M/s. Shakun Polymers Ltd. - ITA No. 756/Ahd/2013 page 228 to 232 4. The A.O. reopened the assessment for A.Y. 2008-09 on the similar ground of huge cash deposited in the bank accounts of the appellant. A copy of reasons recorded for A.Y. 2008-09 is enclosed herewith. Page 104 to 105 Against the reopening, the appellant filed a writ petition before the Hon'ble Gujarat High Court. The Hon'ble High Court quashed the reassessment vide order dated 28.03.2016 which judgment has been reported at 71 taxmann.com 55 (page 106 to 120). Kind attention to para 14 on page 116 5. Further, the A.O. subsequently reopened the assessment for A.Y. 2009-10 to 2014-15 on the very same ground of cash deposits in the bank accounts of the appellant. A copy of reasons recorded for each of the years is enclosed herewith. Page 121 to 127 However, such reassessments were subsequently dropped by the A.O. following the above mentioned Gujarat High Court judgment Page 128 to 133 6. It is completely illogical to assume that every bank receipt should constitute income of the assessee. The reopening on such a fallacious assumption is not permissible in law.
Delhi ITAT in case of Bir Bahadur Singh Siwali vs. ITO -53 taxmann.com 366 Page 233 to 237.
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Ahmedabad ITAT in case of Mariyam Ismail Rajwani – decision dated 09.08.2016 in ITA No.676/Ahd/2016 Page 238 to 243
On the other hand, the learned DR before us submitted that there was no regular assessment under section 143(3) of the Act for the year under consideration. Therefore, no reference can be made to the judgment of the Hon’ble Gujarat High Court in the own case of the assessee as discussed above.
4.1 The learned DR further submitted that the reassessment proceedings initiated under section 147 of the Act for the other assessment years were dropped after due verification. But in the case on hand, there was no such verification made by the AO.
4.2 The learned DR also submitted that the word used “verification” in the reasons recorded for the reopening of the assessment under section 147 of the Act should not be seen in isolation. The learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. At this juncture we are inclined to refer the reasons recorded by the AO for initiating the proceedings under section 147 of the Act which reads as under: “ The assessee filed its return of income for A.Y. 2006-07 on 24-07-2006 declaring total income of Rs.240860/-. The return was processed u/s.143(1) of the Income Tax Act, 1961 on 29-03-2008. No regular assessment was made in this case. Subsequently, the department came to know that the assessee deposited huge cash to the tune of Rs.52,80,06,659/- during the period from 01-11-2005 to 31-03- 2006 and Rs.4,70,11,830/- during the period from 01-11-2005 to 31-03-2006 and Rs.4,70,11,830/- during the period from 01-11-2005 to 31-03-2006 and Rs.4,70,11,830/- during the period from 01-04-2003 to 31-03-2006 and
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Rs.4,70,11,830/- during the period from 01-04-2003 to 25-04-2008 in its accounts maintained with the ICICI Bank. The genuineness of the sources of such huge cash transactions requires to be verified. Since no regular assessment was made in the instant case, I have reasons to believe that the genuiness of sources of cash deposits of Rs.52,80,06,659/- and Rs.4,70,11,830/- and its taxability has escaped the assessment. Therefore, I propose to assess the income of the assessee for A.Y. 2006-07 as per the provisions of section 147 of the income tax Act subject to the provisions of section 148 to 153 fo the Income Tax Act, 1961.
5.1 On perusal of the above reasons recorded by the AO, it is revealed that the AO has formed his belief based on the deposit of cash in the bank account amounting to Rs. 52,80,06,659.00. As such, there was no tangible material available before the AO from any outside source, suggesting that the income of the assessee has escaped assessment.
5.2 We also note that the Hon’ble Gujarat High Court in the own case of the assessee for the assessment year 2008-09 as discussed above has quashed the reassessment proceedings which was initiated on the similar reasons as elaborated in the preceding paragraph. The only difference between the reopening for the assessment year 2008-09 and the reopening for the year under consideration is that there was assessment framed under section 143(3) of the Act for the assessment year 2008-09 whereas there was no such the assessment carried out for the year under consideration. Thus the question arises whether the reopening is valid for the year under consideration in view of the fact that there was no scrutiny assessment under section 143(3) of the Act for the year under consideration.
5.3 Indeed, there was no scrutiny assessment under section 143(3) of the Act, but yet the AO needs to form a belief that any income chargeable to tax had escaped assessment.
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5.4 At this juncture, we find it necessary to refer the explanation 2 attached to section 147 of the Act which reads as under: Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ;
5.5 A reading of the provision reveals that the AO has to comply with the conditions specified under clause (b) of the explanation 2 of section147 of the Act though there is no assessment carried out under section 143(3) of the Act. As the conditions specified under clause (b) of the explanation 2 of section147 of the Act has not been fulfilled which requires that the income shall be deemed to have escaped assessment if the assessee has understated the income or has claimed an excessive loss, deduction, allowance or relief in the return of income.
5.6 In this regard, we find support and guidance from the judgment of Bombay High Court in the case of Prashant S. Joshi Vs ITO reported in 324 ITR 154 wherein it was held as under: “For all those reasons, it was evident that there was absolutely no basis for the Assessing Officer to form a belief that any income chargeable to tax had escaped assessment within the meaning of the substantive provisions of section 147. Explanation (2) to section 147 creates a deeming fiction of cases where income chargeable to tax has escaped assessment. Clause (b ) deals with a situation 'where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return'. For the purpose of clause (b) of the Explanation (2), the Assessing Officer must notice that the assessee has understated his income or has claimed excessive loss, deduction, allowance or relief in the return and taking of such notice must be consistent with the provisions of the applicable law. The act of taking notice cannot be at the arbitrary whim or
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caprice of the Assessing Officer and must be based on a reasonable foundation. The sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua nonfor a valid exercise of power. In the instant case, having regard to the law laid down by the Supreme Court, it was impossible for any prudent person to form a reasonable belief that the income had escaped assessment. The reasons, which had been recorded, could never have led a prudent person to form an opinion that income had escaped assessment within the meaning of section 147. In those circumstances, the petition was to be allowed by setting aside the notice under section 148.”
5.7 In the case on hand, the reassessment was initiated by the AO under section 147 of the Act on the reason that there was a huge cash deposit in the bank account of the assessee. In our considered view, the deposit of cash in the bank account of the assessee does not lead to form a belief that the income of the assessee has escaped assessment.
5.8 We also find support and guidance from the order of Delhi tribunal in the case of Bir Bahadur Singh Sijwali Vs. ITO reported in 53 taxmann.com 366 wherein it was held as under: “All that the reasons recorded for reopening indicate is that cash deposits aggregating to Rs. 10,24,100 have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. It is not open to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis for holding the view that the income has escaped assessment. The answer is in negative. The Assessing Officer has opined that an income of Rs. 10,24,100 has escaped assessment of income because the assessee has Rs. 10,24,100 in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be restored to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment.”
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In view of the above, we hold that the reopening under section 147 of the Act is not sustainable. Accordingly, we quash the same. Hence the ground of appeal of the assessee is allowed.
5.9 As the assessee has succeeded on the technical issue raised by it in the ground of appeal; therefore we are not inclined to adjudicate the issue on merit. Hence the issue raised by the assessee on merit becomes infructuous and does not require any separate adjudication. Therefore we dismiss the same.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Court on 25/06/2019 at Ahmedabad.
-Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 25/06/2019 manish