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Facts
The assessee, an individual, filed an income tax return for AY 2015-16. Information revealed huge cash deposits of Rs. 3.74 Crore in a cooperative bank which were not offered for taxation. The Assessing Officer initiated reopening proceedings u/s 148A(b) and 148, estimated an 8% profit on these deposits, and made an addition of Rs. 29.93 lakhs, which the Ld. CIT(A) subsequently confirmed.
Held
The Tribunal admitted additional legal grounds challenging the validity of the notice u/s 148, citing issues of limitation and monetary thresholds for reopening, and the legality of the assessment proceedings. Following Supreme Court precedents, the Tribunal restored the entire matter, including both the legal issues and the merits of the addition, back to the Ld. CIT(A) for fresh adjudication in accordance with law.
Key Issues
Validity of the notice issued u/s 148 concerning limitation periods and monetary thresholds for reopening assessment, and the legality of the subsequent assessment proceedings. Also, the merits of the addition relating to estimated profit on cash deposits.
Sections Cited
148A(b), 148, 147, 148(1)(b), 149(1)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI MANISH BORAD
Assessee by : Shri Govind Prasad Mundada Department by : Shri Sanjay Dhivare, Addl. CIT (through virtual) Date of hearing : 04-02-2025 Date of pronouncement : 06-02-2025 O R D E R PER MANISH BORAD, AM :
This appeal filed by the assessee is directed against the order dated 16.08.2024 of the Ld. CIT(A)/NFAC, Delhi, relating to assessment year 2015-16.
Facts of the case, in brief, are that the assessee is an individual and has filed his return of income on 15.06.2016 declaring total income of Rs.2,76,870/-. As per the information available, the assessee had deposited huge cash to the tune of Rs.3,74,18,873/- in the bank account maintained with M/s. Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. during the year under consideration. Since the assessee has not offered the income for taxation, the Assessing Officer issued a notice u/s 148A(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) to the assessee requiring the assessee to show cause as to why a notice u/s 148 of the Act should not be issued and accordingly, the said notice was issued to the assessee. In response to the said notice, the assessee filed return of income declaring the same income as offered in the originally filed return of income and filed some reply. The Assessing Officer being not satisfied with the submission made by the assessee, estimated the profit on the business transactions of the assessee @ 8% on total amount of Rs.3,74,18,873/- which comes to Rs.29,93,509/- and accordingly made addition of Rs.29,93,529/- to the total income of the assessee.
The Ld. CIT(A) / NFAC confirmed the addition made by the Assessing Officer.
Aggrieved with such order of Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1) The Ld. CIT(A) Aurangabad erred while upholding the order u/s 147 of the Income Tax Act, 1961, passed by the Faceless Assessing officer (FAO). Faceless Assessment Unit, Delhi. 2) The Ld CIT(A) Pune has failed to appreciate the fact that income declared by the appellant is as a commission agent, who earns commission (@ 1% which is as per the prevalent market rate. 3) The Ld CIT(A) has erred in forming his opinion regarding the nature of the business of the appellant as a trader instead of a commission agent merely due to the fact that he was involved in buying/purchasing from market and then selling them to the customers in other cities/markets. 4) The learned CIT(A) has failed to appreciate the fact that assessed income as per assessment framed by learned FAO is Rs.32,72,219/- after making
addition of Rs.29,93,509/- is not in accordance with the provision of Sec 148(1)(b) of the Income Tax Act 1961, since the income which has been assessed by the FAO does not exceed the monetary limit Rs.50,00,000/- as prescribed under the statue. 5) The learned CIT (A), NFAC has also grossly erred while upholding the order passed by LFAO that the later has initiated proceedings u/s 148 of the Income Tax Act 1961 after conducting due enquiries by computing the escaped income to the tune of Rs.3,74,18,873/- but later on while framing the assessment order he has came to the conclusion that the income escaping assessment is Rs.29,93,509/-, which is well within the limits prescribed u/s 148(1)(b) of the Income Tax Act 1961, thus the order passed by the LFAO and upheld by CIT(A) is void and against the provisions of Income Tax Act 1961. 6) The appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal.
5. The assessee has also filed the additional grounds which read as under:
1) The learned CIT(A) has failed to appreciate the fact that notice issued u/s 148 of the Income Tax Act 1961 issued on 27.07.2022 is barred by limitation and hence the assessment completed u/s 147 of the Act is liable to be quashed. 2) The learned CIT(A) has also erred in not appreciating the fact that provisions of Specified Act TOLA are applicable only to cases where the time line for issuing notices expired on or before 20.3.2020 or 31.03.2021, but in the present case the period of limitation got expired on 31.3.2022. 3) The learned CIT (A) erred in upholding the reopening of assessment vide notice u/s. 148 of the Act dated 28/7/2022 ie After expiry of three years from the end of the assessment year 2015-16 without appreciating that notice under 148 can be issued beyond 3 years only if income escapement is above 50 lacs, in fact of present case the impugned notice issued for A.Y 2015-16 is for income escaped below Rs.50 lacs ie., Rs.29,93,509/-, therefore reopening is bad in law. 4) The learned CIT (A) has not considered the fact that as the escaped income does not exceed ₹50 lakhs, the issuance of the notice is contrary to the provisions of Section 149(1) (b) of the Income Tax Act and is liable to be quashed 5) The appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal
The ld. Counsel for the assessee submitted that the additional grounds raised are purely legal in nature which goes to the root of the matter and all the necessary facts are already available on record. Referring to the decision of Hon’ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (1991) 187 ITR 688 submitted that the additional grounds raised by the assessee should be admitted.
The Ld. DR on the other hand relied on the orders of the lower authorities.
I have heard rival contentions and perused the record placed before me. After hearing both the sides and considering the fact that the additional grounds raised by the assessee are purely legal one and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon’ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (supra), the additional grounds raised by the assessee are admitted for adjudication.
On a perusal of the additional grounds raised by the assessee I find that these are the legal grounds challenging the validity of notice issued u/s 148 of the Act and also challenging the legality of the assessment proceedings framed in the case of the assessee for the year under appeal and they have been raised for the first time before the Tribunal. Since this issue was never raised before the Ld. CIT(A), there was no occasion for the Assessing Officer to make his submissions and also there was no occasion for Ld. CIT(A) to examine the facts of the case in order to deal with the legal issue raised by the assessee, therefore, I deem it proper to restore the legal issue raised in the additional grounds by the assessee to the file of the Ld. CIT(A) for necessary adjudication and for deciding in accordance with law.
As far as the merit of the case is concerned, the Assessing Officer in the instant case has made addition by estimating the profit on the unexplained cash deposits treating them to be business receipts. The Ld. Counsel for the assessee during the course of hearing submitted that similar type of additions have been made for the preceding two years and subsequent two years based on similar observations of the Assessing Officer. However, the said additions have been made of different nature as in some cases profit has been estimated and in some cases total deposits / credits have been added in the hands of the assessee. However, all these matters for preceding two years and subsequent two assessment years are pending before the CIT(A). Considering this fact and also considering the fact that the legal issue raised before me has already been restored to the file of the Ld. CIT(A) for necessary adjudication, I deem it fit to restore the matter on merit also to the file of the Ld. CIT(A) to which both the parties agreed. I hold and direct accordingly. The grounds raised by the assessee on merit are accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on this 06th February, 2025.