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Facts
The assessee challenged the reopening of assessment under Section 147 and the subsequent addition of Rs. 31,36,744/-. The Assessing Officer (AO) initially believed the assessee had not filed a return, but later acknowledged the return was filed but not processed under Section 143(3).
Held
The Tribunal held that the reopening of assessment was bad in law. The AO's reasons for reopening were contradictory and based on wrong facts. The AO first presumed no return was filed and then acknowledged it was filed but not scrutinized, which is insufficient grounds for reopening under Section 147.
Key Issues
Whether the reopening of assessment under Section 147 was justified based on the AO's recorded reasons, and whether the addition made under Section 68 was valid.
Sections Cited
148, 147, 68, 143(3), 143(I), 2(40), 151, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGRH BENCH, ‘SMC’ CHANDIGARH
Before: SHRI RAJPAL YADAV
PHYSICAL HEARING O R D E R The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 09.05.2024 passed for assessment year 2012-13. The assessee has taken three grounds of appeal
, out of which Ground No. 3 is general ground which does not call for recording of any specific finding. In Ground No. 1 assessee has challenged the validity of the re-opening of assessment by issuance of a notice under Section 148 of the Income Tax Act and in A.Y.2012-13
2. Ground No. 2 assessee has challenged confirmation of addition amounting to Rs.31,36,744/- which was added by the AO with the aid of Section 68 of the Income Tax Act and confirmed by the CIT(A).
The brief facts of the case are that according to the assessee, he has filed his return of income on 20.06.2012. The copy of the return is available on page No. 1 and page No. 3 to 37. The AO has harboured the belief that assessee has not filed the return and he has deposited a sum of Rs.38,19,800/- in cash in a bank account with Punjab National Bank. He recorded reasons and issued a notice under Section 148 of the Income Tax Act. The copy of the reasons recorded by the AO are available on page 38 and 39 of the Paper Book. The relevant part of the reasons read as under :
The assessee Sh. Baljeet Singh S/o Sh. Om Prakash is a resident of Vill. Rupa Majra, PO Dhurkada, Distt. Ambala.
2. The Individual Transaction Statement (ITS) shows that during the F.Y. 2011-12, the assessee has made cash deposits amounting to Rs.38,19,800/-with Punjab National Bank. Further, as per details available oh system, the assessee has not filed his return of income for the Assessment Year 2012-13. 3. Analysis of brief details and information received/collected reveals that the assessee was liable to file Income Tax Return for the AY 2012-13, which he has failed to file. In response to the verification letter, the A.Y.2012-13 3 assessee submitted that cash was deposited out of sale of agriculture land and business income. However, he submitted documentary evidence only in support of sale of agriculture land in which his share was Rs.6,83,056/-. Therefore, the remaining amount of cash deposit i.e. Rs.3l,36,744/-(Rs.38,19,800/- - Rs.6,83,056/-remains unexplained.
In the absence of any satisfactory response to the notice issued through NMS portal, it is considered that the amount of cash deposit made with Punjab National Bank i.e. Rs.31,36,744/- is his income from unexplained sources and the assessee is in default of not filing Income Tax Return for the A.Y. 2012-13 whereas he was liable to file the same.
In this case return of income was filed for the year under consideration but no Scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration-but no assessment as stipulated u/s 2(40) of the Act was made and the return of income was only processed u/s 143(I) of the Act. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. Therefore, after independent verification of records; I have reason to believe that the income of Rs. 31,36,744/- has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. Moreover, this escapement of income is due to the failure of the assessee to fully and truly disclose all material facts relating this income and therefore, the proceedings in the case of the assessee for the AY 2012-13 are being initiated u/s 147 of the Income Tax Act, 1961. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from the Principal Commissioner of Income Tax as per the provisions of section 151 of the Act. D. S. Chauhan) Income Tax Officer Ward-1, Ambala 3. The AO, thereafter passed an assessment order under Section 143(3) read with Section 147 on 03.12.2019. He made addition of Rs.31,36,744/-. A.Y.2012-13 4
4. Dissatisfied with the assessment order, assessee carried the matter in appeal before the CIT(A). He challenged the assessment order on two reasons, namely, (a) ld. AO has erred in re-opening the assessment; (b) The AO has erred in making the addition. It was contended by the assessee that there are inherent contradictions in the observation of the AO in the reasons recorded for re-opening. The assessee further apprised the CIT(A) that he is an agriculturist and also engaged in the business. He has filed his return on a presumptive taxation (44AD) and therefore, no addition is required to be made.
5. The appeal to the CIT(A) did not bring any relief to the assessee.
Before me, ld. Counsel for the assessee reiterated his submission as were raised before the CIT(A) qua inherent lacuna in harbouring the belief that income has escaped assessment. He further relied upon the order of the ITAT passed in in the case of Society of Education and Research. He also relied upon the order of the ITAT in the case of Parveen Kumar Mittal ITA A.Y.2012-13 5 22/CHD/2021. On the other hand ld. DR relied upon orders of Revenue Authorities.
A perusal of the reasons (extracted supra) would reveal that in paragraph No. 2 of these reasons, AO has specifically recorded that assessee has not filed his return of income.
However, in paragraph No.5, ld. AO has observed that though assessee has filed the return but since no assessment order was made under Section 143(3) of the Income Tax Act, therefore, the alleged cash deposits could not be verified and examined. The assessment year involved herein is assessment year 2012-13. The time limit to issue notice under Section 143 sub-section (2) was over much before the issuance of 148 notice. The AO has issued a notice under Section 148 on 22.03.2019 when six years from end of the relevant assessment year were going to be expired. It is pertinent to note that deposits in a bank account would not be per-se an unexplained income. It is the AO who has to assign reason as to how he harboured the belief that deposits in the bank account are to be construed as an escaped income. A perusal of Section 147 would A.Y.2012-13 6 indicate that it starts with the opening line, “If the AO has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Section 148 to 153 assess or re- assess such income…………” The AO has to assign the reasons. Here the foundation made by the AO is on wrong facts. He firstly construed that assessee has not filed the return and thereafter he himself observed that assessee has filed the return but it was not taken up for a scrutiny assessment. For this type of reasoning, assessment cannot be permitted to be reopened. There should be a categoric and positive observation of the AO about escapement of income. He cannot undertake a roaming enquiry under Section 147. Therefore, this re-opening is bad in the eyes of law and I, accordingly, quash the re-assessment order.
In result, appeal of the assessee is allowed.