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Facts
The assessee, an individual, did not file her return of income for AY 2014-15. A notice u/s 148 was issued, and a return was filed. Subsequently, a second notice u/s 148 was issued to verify bank credits, leading to an ex-parte reassessment order adding Rs. 8,36,02,744/- as unexplained under section 69A.
Held
The tribunal held that the second reopening of assessment was bad in law as it was based on a change of opinion and lacked tangible material. Furthermore, the addition of the entire bank deposits without considering the nature of transactions and without applying the peak credit principle was unsustainable.
Key Issues
Validity of second reopening under section 147/148; correctness of addition made under section 69A for unexplained bank deposits.
Sections Cited
147, 143(3), 144B, 148, 69A, 151, 250
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Income Tax Appellate Tribunal, NAGPUR BENCH :: NAGPUR
This appeal filed by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi, dated 25/01/2025 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”), which is arising out of assessment order passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Act, dated 11.03.2022 for the Assessment Year 2014-15.
ITA No. 137/NAG/20245 (Mamta Sanjay Dand) 2. Brief facts of the case are that assessee is an individual and did not file her return of income for AY 2014. A notice u/s 148 was issued on 31.05.2018, pursuant to which return was filed on 12.12.2019 declaring income of Rs. 6,37,670/-, which was accepted u/s.147 r.w.s. 143(3) on 27.12.2019. Subsequently, another notice u/s 148 dated 30.03.2021 was issued to verify bank credits. Due to non-compliance, an ex-parte reassessment order dated 11.03.2022 was passed determining total income at Rs. 8,42,40,414/- making addition of Rs. 8,36,02,744/- u/s 69A treating entire bank deposits as unexplained.
Being aggrieved with the order of Ld. AO, assessee filed appeal before the Ld. CIT(A). In appellate proceedings, assessee filed additional evidences viz. sale deed, bank statements, fund flow explanation etc. The additional evidence filed by the assessee was forwarded to the Ld. AO for his remand report. Ld. AO did not object to admission of additional evidence, but stated that the purpose of documents was unclear. Ld. CIT(A) after considering the submissions and (Mamta Sanjay Dand) documents field, confirmed the addition made by the Ld. AO mainly on the ground of failure to discharge onus as the assessee has not proved or rebutted with cogent evidence against the facts and findings of the Ld. AO in the assessment order.
Learned counsel for the assessee has submitted that the second reopening u/s 148 is bad in law. Earlier reassessment was already completed u/s 147. Reopening done beyond 4 years is invalid. Approval u/s. 151 was granted mechanically without application of mind, as evident from reasons recorded. He further submitted that invocation of Explanation 2(a) to section 147 instead of clause (c) is incorrect. Reopening is merely on change of opinion and for verification of bank transactions, amounts to fishing and roving enquiry which is impermissible in law. On merits of the case, he submitted that Ld. AO made the addition of entire bank credits, without considering the nature of transactions, examining the source of funds. Additional evidence filed by the assessee clearly explain the sources of deposits in bank account. He further (Mamta Sanjay Dand) submitted that Ld. AO in his remand report did not dispute the authenticity of documents and not conducted further enquiry and simply stated lack of clarity. Ld. CIT(A) confirmed the addition without proper appreciation of evidence, and failed to consider that the burden of proof prima facie discharged by the assessee.
Per contra, Ld. Departmental Representative (DR) submitted that assessee failed to comply with the notices issued to her during assessment proceedings. Ld. AO was justified in passing ex-parte order. Mere filing of documents is not sufficient and the assessee must prove nexus and source. Ld. CIT(A) has rightly relied on remand report and held that onus was not discharged. Therefore, the order of the Ld. CIT(A) may be upheld.
We have heard the rival submissions and perused the material on available record. We observe that assessment was already completed u/s 147 on 27.12.2019. The impugned reopening is a second round of reopening. The reasons recorded for second reopening are that bank credits require (Mamta Sanjay Dand) verification. It is settled law that reopening cannot be made for verification purposes and it must be based on reason to believe, not reason to suspect. We further observe that reopening is mere ‘change of opinion’, which is not sustainable in law. The Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India [2010] 320 ITR 561 (SC) wherein it has been held that “reopening of assessment u/s 147 cannot be based on mere change of opinion; there must be tangible material to form a reason to believe that income has escaped assessment”. Therefore, the order for reopening of assessment is not justifiable in the absence of any fresh tangible material establishing live nexus. Even on merits of the case, Ld. AO made the entire addition of bank deposits, which is legally not permissible, as only unexplained portion can be taxed. Assessee has furnished sale deed, bank statements for substantiating deposits, fund transfer and transactions of repayment. Ld. AO in his remand report did not rebut or disprove the evidences. The CIT(A) confirmed the addition without proper analysis and failed to appreciate that once prima facie explanation is given, burden of proof shifts to the 5 (Mamta Sanjay Dand) department. It is well settled law that peak credit / telescoping principle must be applied in such cases and the entire deposits cannot be treated as income. Even on merits, the addition made u/s 69A is unsustainable due to lack of enquiry, failure to consider evidences in proper perspective. Consequently, reassessment proceedings are hereby quashed being invalid in law and the addition made u/s. 69A of Rs. 8,36,02,744/- is deleted. Thus, grounds of appeal raised by the assessee are allowed both on vires of reopening as well as on merits.
In the result, appeal filed by the assessee stands allowed.
Order pronounced on 07.04.2026 under Rule 34 of Income Tax (Appellate Tribunal) rules 1963 Sd/- sd/- PAWAN SINGH KHETTRA MOHAN ROY JUDICIAL MEMBER ACCOUNTANT MEMBER Nagpur: Dated: 07/04/2026 vr/- (Mamta Sanjay Dand) Copy to:
The Assessee 2. The Revenue 3. The Pr.CIT concerned. 4. The DR, ITAT, Nagpur 5. Guard file. By order
Senior Private Secretary ITAT, Nagpur