MS AMITA YADAV,NEW DELHI vs. ITO, NEW DELHI

The representatives of both the sides were heard at length, the case records carefully perused and the judicial decisions relied upon by both the representatives duly considered.

At the very outset, in our considered opinion, there cannot be any decision which would be factually identical to the facts of the case of the assessee, mutatis mutandis, in order to follow the findings given by the co-ordinate benches as well as the Hon'ble High Court. In fact, all the decisions of the co-ordinate benches and Hon'ble High Court relied upon by the ld. counsel for the assessee are based on specific facts on the basis of which the co-ordinate benches and the Hon'ble High Court have decided the appeal after analyzing the facts of the case in hand.

With these observations, we will now consider the facts of the case in hand.

The assessee filed her return of income on 29.03.2013 declaring net taxable income of Rs. 2,76,780/-. The said return was processed u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act']. The appellant has declared income under the head “Business and Profession”.

On the basis of AIR Report for F.Y. 2011-12 relevant to Assessment Year 2012-13, the Assessing Officer came to know that the assessee has entered into the following transactions:

In view of the above information, the Assessing Officer initiated proceedings u/s 147 of the Act and notice u/s 148 of the Act dated 06.02.2014 was issued to the assessee. Several notices were issued to the assessee but nobody attended and no details were filed. Finally, a show cause notice dated 13.02.2015 was issued asking the assessee to file source of cash deposit of Rs. 19.83 lakhs and the source of property purchased of Rs. 35.10 lakhs.

It was made clear to the assessee that if no reply is filed, then these amounts will be treated as “Income from undisclosed sources”.

Assessment was completed as under:

The assessee assailed the assessment before the ld. CIT(A) challenging the validity of notice u/s 148 of the Act. Additions were also challenged on merits by filing additional evidences with application to admit the same u/r 46A of the I.T. Rules.

The first appellate authority upheld the reopening of the assessment by holding as under:

Before us, relying upon various judicial decisions, the ld. counsel for the assessee vehemently stated that without any application of mind, the Assessing Officer has issued notice u/s 148 of the Act which is bad in law and deserves to be quashed. It is the say of the ld. counsel for the assessee that no tangible material evidence has been brought on record and the Assessing Officer had only reason to suspect and not a reason to believe that income has escaped assessment.

In our considered opinion, in a case where initial return is processed u/s 143(1) of the Act and an intimation is sent to the assessee, the reopening of such assessment, no doubt, requires the Assessing Officer to form reasons to believe that income has escaped assessment, but such reasons do not require any fresh tangible material.

In other words, where reopening is sought of an assessment in a situation where initial return is processed u/s 143(1) of the Act, the Assessing Officer can form reasons to believe that income has escaped assessment by examining the very return and/or document accompanying the return.

The returned income of the assessee was Rs. 2.76 lakhs. The admitted business receipt of the assessee is around Rs. 3 lakhs. The Assessing Officer had information that the assessee has deposited Rs. 19.83 lakhs in her bank and has purchased property of Rs. 35.10 lakhs.

The ld. counsel for the assessee had vehemently stated that the Assessing Officer should have made enquiries before issuing notice u/s 148 of the Act. We fail to understand what enquiries the ld. counsel for the assessee was expecting from the Assessing Officer. The ld. counsel for the assessee cannot expect the Assessing Officer to ask the Bank Manager to explain the source of cash deposited by an account holder. Nor the Assessing Officer can ask the Sub-Registrar to explain the source of purchase of property by the assessee.

In our considered opinion, the only person from whom the Assessing Officer could have made enquiry was the assessee herself and the Assessing Officer can make enquiry from the assessee by issuing notice and asking her to explain the source and this is what the Assessing Officer has done. The Assessing Officer has not made additions solely by issuing notice u/s 148 of the Act, but after giving several opportunities to the assessee to explain the source of her investment.

Considering the peculiar facts of the case in hand, we are of the considered view that there is no error or infirmity in issuing notice u/s 148 of the Act and initiating reassessment proceedings. We, accordingly, confirm the findings of the ld. CIT(A). To this extent, reopening of the assessment is upheld.

Coming to the merits of the addition, though the first appellate authority has accepted the additional evidences u/r 46A of the Rules, but has not examined the explanation of the assessee that the source of cash deposits are duly reflected in her books of account regularly maintained by her. We are of the considered opinion that since the assessee has sought to explain the source of cash deposit from her books of account, the entries need to be examined.

Therefore, in the interest of justice and fair play, we restore this issue to the file of the Assessing Officer. The assessee is directed to explain the source by relevant entries in her books of account and the Assessing Officer is directed to verify the same and decide the issue afresh after giving reasonable and sufficient opportunity of being heard to the assessee.

In the result the appeal of the assessee in is allowed in part for statistical purposes.