DCIT, CC-3(3), MUMBAI vs. MURARILAL R. MITTAL, MUMBAI

In the result, the appeal filed by the revenue is dismissed.

I have gone through the order sent by learned brother. However, I am unable to persuade myself to concur with the same. Hence, I propose to write a separate order. It may also be worthwhile to note here that during the course of hearing learned Departmental Representative has referred to Hon'ble Bombay High Court decision in the case of Export Credit Guarantee Corporation of India Ltd. Vs. Addl.CIT (350 ITR 655). In the order sent by the Brother, the said decision has not been dealt with. It may not be out of place to note here that Hon'ble Apex Court in the case of Surasthra Kutch Stock Exchange Ltd. 262 ITR 146] has held that non-consideration of Hon'ble Jurisdictional High Court decision render the ITAT decision suffering from mistake apparent from record. 2. It may also be not out of place to mention here that in the open court it was told by me in the Bench that the assessee has not come clean with source of cash deposited in the Bank. That there is Hon'ble Delhi High Court decision in this context where it has been observed that the assessee cannot be granted any benefit for peak credit theory out of unexplained deposit in the bank unless the assessee comes clean with the source of cash deposit and the Tribunal decision was reversed by Hon'ble High Court. The learned Counsel of the assessee has not rebutted the case. This also finds no reference in the order written by learned Brother. 3. Before adverting to the facts in this case it is noted that this is the case of reopening within four years of the earlier assessment done u/s. 143(3) of the Act. Hence, it may be gainful to refer to the provisions of section 147 of the Act in this connection, which reads as under :- 147. If— (a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or

It may also be relevant to note here the exposition of Hon'ble Hon'ble Jurisdictional Bombay High Court in the case of Export Credit Guarantee Corporation of India Ltd. (supra), which was rendered after duly considering the decision of Hon'ble Supreme Court in the case of Kelvinator India Ltd. (320 ITR 561). Concluding para 8 to 10 may be referred hereunder :-

From the above it is evident that the Assessing Officer has asked the assessee to provide reconciliation of F&O segment receivables and cash deposits with supporting documents, copies of statements and bank statement. However, assessee vide letter dated 15.12.2016 merely stated that deposit in the bank account was after the search itself and payment of tax from said deposit supports the contention that source of cash deposit is out of income declared u/s. 132(4) of the Act. The Assessing Officer noted that the assessee has not substantiated above with any sort of evidence. That the assessee not even furnished copy of statement recorded u/s. 132(4) and also the correlation vis-à-vis cash deposit made with the income declared in the statement u/s. 132(4) of the Act and cash deposits in the bank statement has not been established.

Thereafter the Assessing Officer also noted that search was conducted on 13.10.2010. That the assessee has opened savings bank account No. 61119999752 in the State Bank of Bikaner & Jaipur, Dana Bunder Branch on 18.11.2010. That in the said bank account the assessee had deposited Rs. 8.66 crores in cash from 7.12.2010 to 18.3.2011. Therefore the Assessing Officer

Upon assessee‘s appeal learned CIT(A) observed that in this case in statement of oath u/s. 132(4) dated 27.10.2010 the assessee has informed about the declaration of undisclosed income of Rs. 11 crores. Breakup was said to be unaccounted cash advance for purchase of properties of Rs. 4 crore, unaccounted miscellaneous income to cover various discrepancies liable to be found from documents/assets found/seized of Rs. 4.71 crores and the balance was in the form of cash and jewellery found at the time of search action. Learned CIT(A) further noted that subsequently vide letter dated 3.12.2010, application of the undisclosed income of Rs. 11 crores was rectified to comprise of unaccounted advance payment for investment in properties of Rs. 4 crores, other unaccounted receivable of Rs. 4.7 crores and balance of Rs. 2.3 crores for unaccounted cash, jewellery, assets etc. found at the time of search. Learned CIT(A) further noted that in the said letter also assessee informed that receivable and advances against the property will be deposited in the bank account as and when received. Learned CIT(A) further noted that in the course of assessment proceedings vide letter dated 15.10.2013 assessee has given following cash account :-

From the above learned CIT(A) concluded that after examination of the aforesaid cash account Assessing Officer found source of credit of Rs. 8.66 crores to Bank of Bikaner & Jaipur to be in order. Therefore the Assessing Officer did not draw any adverse inference in the assessment order. Further, learned CIT(A) noted that original assessment proceedings the Assessing Officer was in possession of AIR information regarding cash deposited in the bank account and this information was also provided to the assessee for his explanation. Hence, learned CIT(A) held that since aforesaid information was in possession of the Assessing Officer, it cannot be said that any new tabgible material in the form of an opinion that income has escaped assessment. Learned CIT(A) also held that the Assessing Officer cannot review his own order. Learned CIT(A) observed that it can be observed that information about the source of said cash deposit of Rs. 8.66 crores to be cash advance and receivable received back was duly submitted by the assessee to the Assessing Officer and was found to be acceptable.

It may be noted here that learned CIT(A) has misdirected himself by observing that source of cash deposit was available with the assessing officer. It may be recapitulated that in the letter assessee had stated that there will be realisation from undisclosed advances and undisclosed investments. What was the realisation, when and from whom were never explained and the AO did not apply any mind to this aspect.

Learned CIT(A) further hypothesized that this information must have been examined by the Assessing Officer because assessment proceedings completed pursuant to a search action are finalized after a thorough verification of the incriminating seized documents especially related to unaccounted cash receipts and cash expenses. That the cash account submitted of the unaccounted cash generated and expended on the basis of various incriminating evidences at the time of search action, is extremely critical since it is a summary of the unaccounted income generated as well as its application. Hence learned CIT(A) further held that it will be incorrect to presume that this information was not examined by the Assessing Officer in course of the original assessment proceedings. Learned CIT(A) further held that reasons recorded state that the evidences in respect of cash deposits have not been submitted by the assessee but does not specify the proceedings in which these evidences were not submitted. That if these evidences were not submitted in the original assessment proceedings then an adverse view have been taken in the original assessment proceedings itself. Hence, learned CIT(A) held that the reopening is not based upon fresh tangible evidence and also on the ground that the issue involved was duly examined in course of the original assessment proceedings. On merits also on the same basis learned CIT(A) held that addition was not sustainable as the cash deposits have been duly explained as above. While doing so, learned CIT(A) also observed that the Assessing Officer in the assessment order has observed that there is no correlation or nexus between the disclosure of income made u/s. 132(4) of the Act at the time of search action and cash deposited in the bank account. Here learned CIT(A) observed that ―the level of documentary proof which is normally available in respect of accounted transaction cannot be expected from the unaccounted transactions since the unaccounted transactions are carried out plainly on the basis of trust and there is little documentation. Therefore, the insistence of the Assessing Officer for a direct correlation between the disclosure of the income at the time of search action and the said cash deposited is not appropriate considering the amount in question is the undisclosed income.‖ He also noted that the assessee contends that the cash received back from the unaccounted advances given for properties and the unaccounted receivables was deposited by it in its bank account and this information was given to the Assessing Officer in the original assessment. Learned CIT(A) further noted that the same income cannot be taxed twice once at the time

From the above order it is clear that learned CIT(A) has himself admitted that there was no correlation between the amount deposited in cash in the bank and disclosure of income made by the assessee at the time of search. Learned CIT(A) even went on to hold that level of documentary proof is different in the case of search and direct correlation cannot be there. In this regard we note that the assessee has given ‗cash account‘ in the course of original proceedings. But the deposit of cash in the bank account if they were out of what source was never explained. If the source of cash deposit was the realisation of earlier unaccounted advances/investment etc., there was no reason why deposit could not be correlated with corresponding credits. By not mentioning sources of credits specifically which were from which source the assessee did not prove the source of cash deposited in the bank.

From the above it is clearly evident that cash deposited in bank was not linked with the source from which it was received. That exact source was not mentioned has been accepted by learned CIT(A) himself wherein he as observed that in such a case addition should have been done in the original proceedings u/s. 143(3) itself.

In this regard the said cash account may be reproduced hereunder :-

The above cash account hid and misled more than the disclosure claimed by the assessee and learned CIT(A). Firstly there is no date mentioned hence, it cannot be treated as cash flow or cash account. This is amply clear as drawing of Rs.

Now this brings us to Hon'ble Hon'ble Jurisdictional High Court decision in the case of Export Credit Guarantee (supra). We have already quoted rulings of Hon'ble Jurisdictional High Court above. On the facts of the present case discussed here, it is amply evident that the Assessing Officer in the original assessment has overlooked the fact that the cash deposits in the bank were not specifically linked to the source and that the cash flow stated was not a cash flow but a misleading statement. What learned CIT(A) has done is that he has deemed the Assessing Officer to have accepted what he has plainly overlooked or ignored in the assessment order. As held by Hon'ble Jurisdictional High Court, such action would be to stretch the interpretation of section 147 to a point where provision would be ceased to have meaning and content. That such exercise by excision by judicial interpretation is impermissible when assessment is sought to be reopened within a period of four years of the end of the relevant assessment year. The test to be applied is whether there is tangible material to do so. That what is tangible is

Here as detailed above the assessing officer has plainly ignored the relevant material that the cash account given was a misleading statement. If he had applied any mind he would have discovered the same. Hence the assessing officer's action is contrary to law. In such circumstances as held by honourable Bombay High Court if there is escapement of income in consequence, the jurisdictional requirement of section 147 will be fulfilled on the formation of a reason to believe that income had escaped assessment if the reopening is within 4 years.

To recapitulate in the present case as noted above the assessee has given a disclosure of income broadly being unaccounted advances and unaccounted investment at the time of search. When cash from them was realised, and from whom has never been explained. Hence there was no explanation for the credit entry from which cash deposits in bank account was made. Thus it is amply clear that the assessing officer has plainly overlooked that the source of cash deposit remains unexplained.. Ld CIT(A) is also aware of this as he has commented that if the assessing officer was not satisfied addition should have been made in the original assessment itself.

However as I have noted the assessing officer has not applied any mind to the material. Hence in the background of aforesaid discussion and precedent from honourable jurisdictional High Court I am of the considered opinion that the reopening is valid. Hence I set aside the orders of Ld CIT(A) wherein he has held that the reopening is not valid.

As regard merits of the case it is also clear that source of cash deposit was never explained by reference to the corresponding income/credit and the source thereof. Despite Assessing Officer‘s request no information was given. Without any

As the assessee has not done so in my considered opinion there is no infirmity in the addition on merit also.

In the result, appeal filed by the Revenue stands allowed.