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Facts
The Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Income Tax Act, 1961, for Assessment Year 2015-16, based on information regarding cash deposits in bank accounts. The assessee contended that the proceedings were initiated beyond the prescribed limitation period under Section 149 of the Act.
Held
The Tribunal held that the reassessment proceedings were initiated beyond the statutory limitation period of three years as prescribed under Section 149 of the Income Tax Act, 1961. Therefore, the proceedings and the impugned order were unsustainable in law.
Key Issues
Whether the reassessment proceedings initiated under Section 147/148A of the Income Tax Act were within the period of limitation prescribed under Section 149 of the Act.
Sections Cited
147, 148, 148A, 149, 151, 69A, 115BBE, 271(1)(c), 139(1), 271F
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Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld CIT(A)/ NFAC, Delhi dt. 30/11/2023 pertaining to Assessment Year 2015-16. 2. In the present appeal Assessee has raised the following grounds:
1. That The AO has wrongly initiated re assessment proceedings under section 147 of Income Tax Act without any reason to believe that income chargeable to tax has escaped assessment and therefore entire proceeding is bad in law and serves to be quashed .
2. That the Ao has wrongly issued notice under section 148 of Income Tax which is barred by time limitation prescribed under section 149 of income Tax Act .
3. That the AO has not served notice under section 148A(b) & order under section 148A(d) in accordance with provisions of law & therefore entire proceeding is bad in law and deserves to be quashed,
4. That the competent authority has given sanction under section 151 of income Tax act in mechanical manner without going in to material and without verifying the facts relating income escaping assessment & therefore entire proceeding is bad in law deserves to quashed.
5. That the CIT(A) has wrongly upheld addition of Rs. 1079994 on account of credit in bank account.
6. That the CIT(A) has wrongly upheld addition of Rs. 852000 on account of cash deposit in bank account.
During the course of hearing the Ld. AR submitted that in the present case assessee has raised the additional grounds and prayed for admission of the same. The additional grounds raised by the assessee read as under:
That The AO has wrongly initiated re assessment proceedings under section 147 of Income Tax Act without any reason to believe that income chargeable to tax has escaped assessment and therefore entire proceeding is bad in law and serves to be quashed.
2. That the AO has wrongly issued notice under section 148 of Income Tax which is barred by time limitation prescribed under section 149 of income Tax Act 3. That the AO has not served notice under section 148A(b) & order under section 148A(d) in accordance with provisions of law & therefore entire proceeding is bad in law and deserves to be quashed, 4. That the competent authority has given sanction under section 151 of income Tax act in mechanical manner without going in to material and without verifying the facts relating income escaping assessment & therefore entire proceeding is bad in law deserves to quashed. 4. The learned DR opposed the admission of additional grounds, arguing that they were not raised at the earlier stages.
After considering the rival submissions, we find that the additional grounds raised by the assessee are legal in nature and goes to the root of the matter. We relied upon the order of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [(1998) 229 ITR 383 (SC)] wherein it was held that a legal issue can be raised at any stage of the proceedings if it does not require fresh facts to be brought on record.
In view of the above judicial precedents and in the interest of justice, we deem it appropriate to admit the additional grounds raised by the assessee for adjudication.
Accordingly, the additional grounds are allowed for consideration, and the matter shall discuss accordingly.
In this case the important facts which is required to be considered is that the order under section 148 A(d) was passed on 31/03/2022, mentioning that the assessee had deposited an amount of Rs. 50,90,000/-. Thereafter, a show cause notice under section 148 A(b) was issued wherein the amount mentioned by the AO was Rs. 50,90,000/-. 8.1 The AO in para 3.4 has made the variations for Rs. 41,45,150/- in para 3.8 which is to the following effect: 3.8 Conclusion drawn: i) In this case show cause notice of the I.T. Act was issued on 20.03.2023 and asked why the addition of Rs.41,45,150/- was not made as per above discussed para no.3.4 by 21.03.2023. But assessee failed to submit to file reply along with documentary evidences. In view of the above facts and circumstance, it is clearly ascertained that assessee had deposited cash of Rs.15,84,000/- in his SBI, HDFC and OBC accounts during F.Y.2014-15. Further out of the same cash deposits, the assesse has explained that he had sold agricultural product and live stock amounting to Rs.4,32,000/-. The same has been considered, but assessee has not justified source of cash deposit i.e. Rs.11,52,000/- (15,84,000- 4,32,000) with documentary evidences. Further on perusal of the SBI and OBC banks statements of the assessee there were credit entries found as discussed above in para no.2.3 amounting to Rs.14,79,865/- and Rs.15,13,285/- respectively aggregating to Rs.29,93,150/-, in which assessee has not explained the source of the aforesaid deposit entries. In light of these facts, the foregoing provisions of section 69A of Act are clearly attracted in instant case. The undersigned is therefore of considered opinion that above discussed unexplained cash deposit of Rs.11,52,000/- and credit entries found in OBC and SBI banks of Rs.29,93,150/- aggregating to Rs.41,45,150/- is an unexplained money and therefore required to be added to total income of the assessee u/s 69A r. w. s. 115BBE of IT Act, 1961. Since assessee is found owner of unexplained money added supra, therefore penalty u/s.271(1)(c) of the Act is proposed to be initiated separatelyfor concealment of income.(Addition u/s 69A for Rs.41,45,150/- ) . ii) Since the assessee has offered total interest income of Rs.1,37,363/- (Saving as well as FDR interest) and rental income of Rs.50,820/- in his return of income which filed u/s.148 of the I.T.Act, the same has been accepted. Penalty proceeding u/s.271(1)(c) of the Act is initiated separately for concealment of income. iii) As the assessee has not filed the return of income as per section 139(1) of the Income Tax Act, 1961 and having taxable income, penalty proceeding u/s. 271F of the Income Tax Act, 1961 is initiated separately by issue of notice.
Feeling aggrieved by the order as mentioned hereinabove the assessee preferred in appeal before the Ld. CIT(A) and brief facts in para 2 of the impugned order read as under:
Facts of the Case: The assessee has not filed its return of income as required u/s.139(1) of the I.T. Act for the year under consideration. In this case, specific information was flagged as per Risk Management Strategy formulated by the CBDT through ITBA software under the head Non-filers monitoring system (NMS) that assessee has deposited cash of Rs.50,90,000/- in his Oriental Bank of Commerce A/c no.01662010031460 and also earned interest income of Rs.50,373/- during F.Y. 2014-15. Since the sources of the aforesaid cash deposits and interest income remain unexplained, the case was reopened on the basis of order u/s. 148A(d) of the I.T. Act dated 31.03.2022. The case was reopened u/s. 147 by issue of notice u/s. 148 of the Income Tax Act, 1961 on 31/03/2022. In response to that assessee has filed return of income u/s.148 of the I.T. Act on 01.06.2022 with declaring income of Rs.1,78,180/-The assessee has shown source of income mainly from Rent and Interest. Assessee had deposited cash of Rs. 15,84,000/- in his SBI, HDFC and OBC accounts during F.Y.2014-15. Out of that, assessee has failed to explain the sources of cash deposit of Rs.11,52,000/- in his OBC Bank account no. 01662010031460. Further on perusal of the SBI and OBC banks statements of the assessee credit entries found as discussed above in para no.3.3 amounting to Rs. 14,79,865/- and Rs.15,13,285/- respectively aggregating to Rs.29,93,150/- were found. After hearing the appellant, the AO made addition of Rs.41,45,150/- u/s 69A r.w.s. 115BBE of the Act.
From the conjoint reading of the findings of the Ld. AO as well as of the Ld. CIT(A) it is abundantly clear that the reopening was made by the AO for the A.Y 2014-15 for a sum of Rs. 41,45,150/- though it is wrongly mentioned in the order under section 148A(d) that reopening was done for an amount of Rs. 50,90,000/-. In the present case Revenue failed to show before us the basis of arriving at the amount of Rs 50,80,000/- as mentioned in Section 148A(d) order. IN 148A(d) order it is mentioned that there was cash deposit of Rs. 50,90,000/- in Oriental Bank of Commerce. Quite contrary to this in notice under section 148A(b) the AO mentioned Rs. 28,80,000/- were deposited in OBC A/c No. 01662010031460. Further it is mentioned Rs. 22,00,000/- was time deposit in the same bank. However in para 2.3 of the assessment order it is mentioned that Rs. 15,84,000/- were deposited in OBC, HDFC & SBI bank. Further, SBI Bank statement shows unexplained source of credit entries of Rs. 14,79,865/-. Based on deposits made in various bank AO made addition of Rs. 41,45,150/-. Thus it is clear that Revenue best case was that there was escapement of Rs. 41,45,150/-. In our considered opinion, as the escapement of Rs. 41,45,150/- was alleged by Revenue, the limitation provided by the Act is 3 years. For the above said purposes we may reproduce Section 149 of the Act, which provides as under: 149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more. (2) No notice to show cause under section 148A shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than five years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment, as per the information with the Assessing Officer, amounts to or is likely to amount to fifty lakh rupees or more.
Since the addition, were made and the reopening was also made for an amount of Rs. 41,45,150/- therefore the reopening is required to be made within a period as provided by the Act under section 149 of the Act. From the perusal of the above it is clear that the case of the assessee, falls in first limb of Section 149 (1)(a) of the Act and therefore the reopening is required to be made within three years from the end of the relevant year. In the present case the Assessment Year involved is 2014-15. However the proceedings were initiated under section 148A on 23/03/2022 by issuing the notice and therefore, period of limitation which is required to be applied is three years. Since the reopening was made beyond the period of three years, therefore reassessment initiated by the Revenue against the assessee is beyond a period of three years hence reopening is not sustainable and accordingly bad in law. Therefore we hold that the reassessment, made is not sustainable and accordingly the same is quashed. We further relied upon the decision of Hon’ble Rajasthan High Court n case of Abdul Majeed Vs. ITO (2022) 140 taxmann.com 485 wherein it was held as under: 20. Therefore, while passing an order under section 148A of the Act, the authority is required to reach satisfaction to not only that income chargeable to tax has escaped assessment, but in case where three years have elapsed from the end of the relevant assessment year, the order under section 148A of the Act for issuance of notice under section 148 of the Act could be passed if there were no statutory impediment as contained in section 149 sub-section (1)(b) of the Act, referred to hereinabove.
The authority, as is apparent, sought to bridge this statutory impediment not on the basis of any material available on record but only with the help of a surmise that the assessee may have some more accounts. Even before this Court, when the reply has been filed by the respondent, no material has been placed to show that at the time when the authority passed order under section 148A of the Act, there was some material on record that the income chargeable to tax which escaped assessment amount to or is likely to amount Rs. 50,00,000/- or more for that year.
On conjoint reading of the provisions contained in section 148A of the Act and what has been provided under section 149 of the Act, it is vividly clear that in order to initiate proceedings under section 148A of the Act, it is not enough that in case where notice is proposed to be issued under section 148 of the Act after three years have elapsed from the end of the relevant assessment year that there should exist material available on record to reach to conclusion that some income chargeable to tax has escaped assessment, but the amount should be more than Rs. 50,00,000/-. Only on the basis that the cash deposits of Rs. 19,39,000/-chargeable to tax have escaped assessment, without anything more, the authority was not justified in jumping to the conclusion that the assessee may have more bank accounts. If such an interpretation is placed on the provision of section 148A(d) of the Act with reference to expression 'material available on record', then in that case, it will open flood gate and even without availability of any material, the authority would be initiating proceedings under section 148 of the Act, which will completely frustrate the object of incorporation of section 148A in the Act. It is well settled principle of interpretation that the taxing statute is required to be construed strictly. The interpretation as has been suggested by the learned counsel for the revenue cannot be placed upon the expression 'material available on record' to include possibility of collection of any relevant or tangible material for opening of proceedings under section 148A of the Act.