SWATI MALOVE DIVETIA vs. INCOME TAX OFFICER WARD7(1)(2)

Petitioner has challenged a notice dated 17.01.2018 issued by the respondent-Assessing Officer to re-open the petitioner's assessment for the assessment year 2015-16. 2. Brief facts are as under: Petitioner is an individual and is employed in a bank. For the assessment year 2015-16, the petitioner had filed the return of income and declared total income of Rs. 9.83 lacs (rounded off). Such return was accepted by the Assessing Officer under section 143(1) of the Income Tax Act, 1961 ['the Act' for short] without scrutiny. To re-open such assessment, he recorded following reasons and issued impugned notice: “It is noticed that the assessee has deposited Rs. 17,86,000/- post demonetization. Further on verification of return of income for the A.Y. 2015-16 assessee had shown income of Rs. 9,86,230/- only and further on verification of return of income it does not justify cash deposit of Rs. 17,86,000/- in a short period i.e. post demonetization and hence the assessee had regular source of income which is undisclosed to the department. Therefore, I have reason to believe and satisfied that assessee has taxable income during A.Y. 2015-16 which has not disclosed to the department and income has escaped assessment within the meaning of section 147 of the Income Tax Act.”

The petitioner raised objections to the notice of reopening under communication dated 09.03.2018. Such objections were rejected by the Assessing Officer by an order dated 09.04.2018. 4. Learned counsel for the petitioner submitted that the reasons recorded by the Assessing Officer lacked validity. There was no basis to even prima facie believe that income chargeable to tax in case of the assessee had escaped assessment. Merely because the assessee deposited some cash amounts post demonetization of currency would not ipso facto mean escapement of income chargeable to tax. Even if cash deposits were made, there was no indication that the same related to the income, needed to be assessed for the assessment year in question. The reasons are thus invalid, vague and unsustainable. Counsel submitted that before issuing notice, the Assessing Officer had raised certain queries with respect to the assessee's cash deposits. The assessee had replied to such queries by filing reports pointing out that the amount deposited post demonetization was withdrawn from the assessee's disclosed bank accounts. Such withdrawals were also reflected in the assessee's accounts. Counsel submitted that withdrawal entry of Rs. 2.84 lacs from assessee's bank account No. 03260100000133 of Bank of Baroda was not indicated therein due to oversight. If such additional amount is taken into account, the total withdrawals would be far in excess of the assessment of the assessee during the said period. Even without the aid of this missing entry, the assessee's response by submitting on-line reply. She gave such details in prescribed format in two separate reports. In first such report, she showed the cash withdrawn from the bank account of Rs. 1,39,460/- and the cash deposited in the account between 09.11.2016 to 30.12.2016 of Rs. 2 lacs. She gave precise details of six different withdrawals which totaled to the said sum of Rs. 1,39,460/-. In second such report, she showed a total cash withdrawal of Rs. 15,85,160/- and gave details of as many as 20 withdrawals from a bank account which totaled to the said sum of Rs. 15,85,160/-. She showed her cash deposits during the crucial period at Rs. 15,86,000/-. Department has produced such reports of the petitioner at Annexure R2 along with an affidavit dated 05.07.2018. Counsel for the petitioner pointed out that the last page of this document is missing. He

The case of the petitioner thus all along has been that the entire amount, which was deposited by the petitioner in the bank account post demonetization, was withdrawn from her accounts which was disclosed to the department. This is what she had stated in their objections to the notice of reopening. In the present petition also, the contentions of the petitioner has been that the entire amount was withdrawn since January 2016 and came to be deposited post demonetization.

Reason recorded by the Assessing Officer must be seen in light of such facts. We are not for a moment judging sufficiency of the reasons enabling the Assessing Officer to form a belief that income chargeable to tax had escaped assessment. We are testing the reasons on the basis of material which was available with him. In pre-notice queries, the Assessing Officer had asked the assessee to explain the source of the cash deposits post demonetization. The assessee disclosed such source being her own bank accounts and their withdrawals matching quite closely to the deposits which withdrawals were made within the close proximity of the deposits. If the Assessing Officer had any reason to discard such disclosures and still form a belief that the deposits were from the sources not indicated by the assessee, nothing of the sort has come in the form of reasons recorded. In fact, the reasons recorded completely ignored the Assessing Officer's query and the response made by the assessee to such queries. In other words, the Assessing Officer in the reasons recorded has simply kept aside the assessee's explanation for the availability of cash on hand for deposit post demonetization. The reasons thus clearly lacked validity and proceeded on erroneous premise.

Impugned notice is therefore quashed. Petition is allowed and disposed of. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI