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Facts
The assessee filed an appeal against the order of the CIT(A) for AY 2013-14. The AO had reopened the assessment based on AIR information regarding cash deposits, suspecting income escapement. The assessee initially did not file an ITR but later filed one declaring income. The AO made an addition on account of trading turnover, estimating profit at 15% on the enhanced turnover, ignoring the declared income.
Held
The Tribunal held that the AO's action of making an addition on grounds unconnected to the reasons for reopening was illegal. The Tribunal disagreed with the CIT(A)'s conclusion that the trading addition was connected to the initial reason for reopening, stating that the basis for reopening had ceased to survive when the assessee explained the income.
Key Issues
Whether the AO can make additions on grounds not connected to the reasons for reopening, after the original reason for reopening has ceased to exist or been explained by the assessee?
Sections Cited
147, 144, 148, 271(1)(c), 234A, 234B, 234C, 44AD, 44AF, 143(2), 142(1), 139, 142, 133C, 92E, 143(3), 133C, 148(2)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 366/JPR/2025
PER DR. S. SEETHALAKSHMI, J.M. The assessee has filed this appeal challenging the impugned order dated 06/12/2024, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ld. CIT(A)], for the assessment year 2013-14.
2. The assessee has raised following grounds:
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1. The impugned order u/s 147 r.w.s.144 of the I.T.Act, 1961 dated 28.12.2017 as well as the action or proceedings u/s 147/144 are illegal, bad in law, barred by limitation, without jurisdiction, without approval/ satisfaction Mo. Shariph Kureshi, Sikar. from the proper or competent authority, against the principle of natural justice and various other reasons and contrary to the real facts of the case, hence the same make kindly be quashed. The Ld.AO has grossly erred in law as well as on facts of the case in passing the ex-parte order in gross breach of law, without providing adequate and reasonable opportunity of being heard. Hence the addition so made may kindly be deleted in full.
2. The ld.CIT(A) has grossly erred in law as well as on facts of the case in sustaining the trading addition of Rs.7,24,872/- out of Rs.9,12,460/- made by the ld.AO by applying a higher net profit rate of 15% on the estimated turnover of Rs.60,83,077/- and further erred in not invoking any provisions of law while making the addition. Both the Ld.AO and CIT(A) have erred in not considering the vital facts and material available on record in its true perspective and sense. Hence the addition so made by the ld.AO and confirmed by the ld.CIT(A) may kindly be deleted in full.
3. The Ld.CIT(A) and the AO have grossly erred in law as well as on facts of the case in taking the entire cash deposits in the bank as turnover of the assessee and enhancing the turnover and thereby making the addition. Hence the addition so made by the AO is totally contrary to the provisions of law andfacts of the case and make kindly be deleted.
The ld.AO has grossly erred in law as well as on facts of the case, in charging interest u/s 234A,B,C. The interest so charged is totally contrary to the provisions of law and facts of the case and hence may kindly be deleted in full.
5. That the appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.”
3. During the course of hearing, the Registry has pointed out that there is a delay of 7 days in filing the present appeal before the Tribunal. The assessee has filed an application explaining the cause of such delay which is supported by an Affidavit.
4. We have gone through the averments made in the affidavit and thus, we are of the opinion that the assessee is prevented in filing the appeal in time and we are satisfied that the delay in filing the appeal is Mo. Shariph Kureshi, Sikar. due to reasonable cause. Thus, the delay of 7 days in filing the appeal by the assessee is condoned in view of the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the assessee is prevented by sufficient cause. Consequently, we condone the delay of 7 days in filing the present appeal and admit the same for adjudication on merit.
Succinctly, the facts as culled out from the records are that the assessee had not filed ITR for the relevant year, as his income was below the threshold limit. The AO on the basis of cash deposits made in the bank account by the assessee, believing the income to have thus escaped assessment, issued notice u/s 148. The assessee, in response thereto filed return declaring an income of Rs. 1,87,590/- Assessment was completed u/s 144/147 of the I.T. Act assessing income of Rs. 11,00,050/- Penalty proceedings u/s 271(1)(c) of the I.T. Act were initiated along with the assessment order dated 28.12.2017, for concealing the particulars of income.
6. Aggrieved from the order of Assessing Officer, the assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the ld. CIT(A)/NFAC dismissed the legal ground. As on the facts of the case, he restricted the trading addition from Rs.9,12,460/- to Rs.7,24,870/-.
Mo. Shariph Kureshi, Sikar. 7. Now the assessee is in appeal before the ITAT. While pleading on behalf of the assessee, the ld. AR has made the following ground wise submissions- “GOA-1: Invalid action u/s 147/148: FACTS:
1. The brief facts of the case are that the assessee is having income from business and profession and engaged in the retail trading of Tyers and their spare parts and job work of tyre retreading. He declared income u/s 148. In this case the ld. AO has issued the notice u/s 148 on dt. 27.09.2016 on the reasons that “ As per AIR information the assessee has deposited total Rs.32,05,580/- in cash in his saving bank account of Axis Bank and PNB during the year, Further assessee has not filed return of income of the year hence nature and source of cash deposited remains unexplained”. The ld. AO has issued the notice u/s 148 requiring the assessee to file the return. In response thereto the assessee has filled his return of income on dt. 21.10.2016 declaring the total income of Rs.1,87,590/-. There after the ld. AO has issued the notices u/s 143(2) and 142(1). And the assessee has filed all the details required.
2. The ld.AO has further noted that the assessee has declared Rs.1,95,570/- as net profit/income from Proprietor business. The ld. AO has stated that Rs. 43,99,231/- is credited in Axis Saving Bank and Rs.6,70,000/- in the PNB bank totaling to Rs.50,69,231/-. In want of non compliance the ld. AO held that the assessee has declared presumptive business income amounting to Rs.1,95,570/- on his total turnover of Rs.6,48,560/- and the Inspector has reported the assessee was engaged in the business in retail trading of tyres and their spare parts , job work of tyre retrading. Hence the amount deposited in the bank account out of cash sale of this business. Hence the ld. AO has assumed the total sale proceeds/turnover of the assessee is assumed at 20% more than its bank deposits, which arrived at 60,38,077/-(120% of Rs.50,69,231/-). The ld. AO has further stated that as per market information the inspector reported in such type of business normally results in 12 to 15% net profit on total turnover. Hence the ld. AO has applied the Net Profit of 15% on the estimated turnover of Rs.60,83,077/- and calculated the Net profit of Rs.9,12,462/- ignoring the net profit of Rs.1,95,570/- already declared by the assessee and the amount transferred by cheque and cash withdrawals and made the addition of Rs.9,12,462/-. In first appeal assessee filed the detailed WS, legal position and details. The ld. CIT(A) has stated that though the AO has not made any addition on account of cash credit but the Trading addition is also connected to the initially formed reason as the Mo. Shariph Kureshi, Sikar. profit has been computed on that cash deposits also. The profit was also part of the deposit made by the appellant and therefore, his contention is not correct The ld. CIT(A) also stated that the appellant has challenged the addition of Rs.9,12,462/- on the ground that the Net Profit of 15% was applied which was higher than the rates applicable u/s 44AD/44AF of the Act. Once the Assessing Officer is completing assessment u/s 144 of the Act it is not necessary to apply the rates provided in section 44AD/44AF of the Act. Further, the appellant has submitted that there were banking transactions also in the bank account and all the entries were not trading receipts. I find that looking to the all circumstances the Assessing Officer has estimated the trading receipts @120% of the cash and credit entries deposit in the bank account. However, I find that the appellant had himself declared income of Rs.1,87,590/- in the return filed in compliance to notice u/s 148 of the Act (which has been considered in computation of Income) and he should get benefit of it. Therefore, the appellants gets a relief of Rs.1,87,590/- Further stated that the appellant has challenged the estimation of turnover by the Assessing Officer. The Assessing Officer has estimated the trading receipts @120% of the cash and credit entries deposit in the bank account. The appellant failed to explain the entries in the bank account and the Assessing Officer very liberally took it as trading entries. Further, as in small business all the cash receipts are not deposited in the bank account and various small purchases and expenses are done in cash the Assessing Officer has increased the turnover by 20% which is not excessive. Hence this appeal. SUBMISSIONS: 1. No addition made on the reasons recorded u/s 148: As the ld. AO issued the notice u/s 148 on the reasons recorded as per assessment order that ““ As per AIR information the assessee has deposited total Rs.32,05,580/- in cash in his saving bank account of Axis Bank and PNB during the year, Further assessee has not filed return of income of the year hence nature and source of cash deposited remains unexplained”. However on perusal of the assessment order it has been come to know that the ld. AO has not made addition on the issue or on the issue recorded in the reason for reopening the case and he has made different addition on account of trading addition. The ld. CIT(A) has also admitted that though the AO has not made any addition on account of cash credit but the Trading addition is also connected to the initially formed reason as the profit has been computed on that cash deposits also. Here the ld. CIT(A) tried to misinterpreted the case of the assessee to justify the action of the ld. AO, which is illegal and the assessment order is liable to be quashed for this kindly refer following decision. 1.1 In the case of CIT vs. Shri Ram Singh 306 ITR 0343(Raj.) the Hon’ble High Court Of Rajasthan Held that It is only when, in proceedings under s. 147 the AO assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had "reason to believe" to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under s.
147. To put it in other words, if in the course of Mo. Shariph Kureshi, Sikar. proceedings under s. 147, the AO were to come to conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under s.
It is a different story that for such other income, the AO may have recourse to such other remedies, as may be available to him under law, but then, once it is found, that the income, regarding which he had "reason to believe" to have escaped assessment, is not found to have escaped assessment, the AO is required to withhold his hands, at that only. Once the AO came to the conclusion, that the income, with respect to which he had entertained "reason to believe" to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of reassessment proceedings, which were found by him, to have escaped assessment.—CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P&H) concurred with. 1.2. In the case of CIT vs. Jet Airways (I) LTD331 ITR 0236(Bom):HeldReassessment—Scope—Items unconnected with escapement for which notice was issued—When Expln. 3 to s. 147 was introduced, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain Courts that the AO has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment—However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147—AO has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings—However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him to independently assess some other income—If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee 1.3. In the case of Ranbaxy Laboratories Ltd. vs. CIT 336 ITR 0136(Del) held that The crux of s. 147 is the escapement of income which may be assessed or reassessed as well as any other income chargeable to tax which has escaped assessment and which comes to the notice of the AO subsequently in the course of proceedings under this section. Explanation 3 makes it clear that the AO may assess or reassess the income in respect of issue which has escaped assessment, if such issue comes to his notice in the course of proceedings under this section even though said issue did not find mention in the reasons recorded and the notice issued under s.
Since there was confusion prevailing with regard to the powers of the AO to assess or reassess on the issues for which no reasons were recorded, Expln. 3 came to be inserted as Mo. Shariph Kureshi, Sikar. clarificatory. Now, after the insertion ofExpln. 3, the position is that the AO may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under s. 147 though the reasons for such issue were not included in the reasons recorded in the notice under s. 148(2) on the basis of which he had initiated proceedings under s. 147.—Vipan Khanna vs. CIT (2002) 175 CTR (P&H) 335 : (2002) 255 ITR 220 (P&H) and Travancore Cements Ltd. vs. Asstt. CIT (2008) 219 CTR (Ker) 359 : (2008) 305 ITR 170 (Ker) held no longer good law. The heading of s. 147 is "Income escaping assessment" and that of s. 148 "Issue of notice where income escaped assessment". Sec. 148 is supplementary and complimentary to s.
147. Sub-s. (2) of s. 148 mandates reasons for issuance of notice by the AO and sub-s. (1) thereof mandates service of notice to the assessee before the AO proceeds to assess, reassess or recompute escaped income. Sec. 147 mandates recording of reasons to believe by the AO that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Expln. 3 if during the course of these proceedings the AO comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction under s. 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before AO during the course ofproceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under s. 148.— CIT vs. Jet Airways (I) Ltd. (2011) 239 CTR (Bom) 183 : (2011) 52 DTR (Bom) 71 : (2011) 331 ITR 236 (Bom) concurred with. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the AO proceeded to reduce the claim of deduction under ss. 80HH and 80-I which as per above discussion was not permissible. Had the AO proceeded to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of the discussion as above, he would have been justified as per Expln. 3 to reduce the claim of deduction under ss. 80HH and 80-I as well. In view of the above discussions, the Tribunal was right in holding that the AO had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. 1.4. In the case of CIT vs. Dr. Devendra Gupta336 ITR 0059(Raj): held Reassessment—Scope—Addition in respect of items other than the one on which notice in given—Income alleged to have escaped assessment in reasons recorded not having been actually found to Mo. Shariph Kureshi, Sikar. 1.5 Recently the Honble ITAT Jaipur Bench in the case of Shri Shambhu Dayal Saraf v/s IT in dt02.07.2018 58 TW 355(Jp), has also held the same view copy of order is enclosed 1.6 In the case of Vijay Harish Chandra Patel vs. ITO 400 ITR 167(Guj.) (2018) where it has been held that” When very basis for reopening no longer survives, assumption of jurisdiction u/s 147 by AO by issuing notice u/s 148 was without authority of law and could not be sustained.
1.7. Also refer AVG Construction Pvt. Ltd v/s ITO Ward 6(2) Jaipur in dt. 02.09.2021, Shri Shambhu Dayal Saraf v/s IT in Pappu Qureshi v/s ITO in ITA No. 314//Jp/2019 dt. 28.04.2020 Also Pradeep Kumar v/s ITO Ward 1(2), Jhunjhunu in ITA No.370/Jp/2022 dt.11.01.2023. Vikram Singh vs. Income Tax Officer (2021) 63 CCH 0044 Lucknow Trib CIT(EXEMPTION) vs. B.P. Poddar Foundation For Education Sep 13, 2022 (2022) 115 CCH 0026 KolHC.
2. The ld. CIT(A) has not consider these settled legal position in their true perspective and sense, rather wrongly stated that the trading addition is also part of cash deposit. This is wrong because there is difference between the trading addition which has been made by estimating the profit and in cash deposit which is deposited in the bank account. Thus in view of the above submissions the Assessment order as well as notice U/s 148 may kindly be quashed.
3. No income escaped: Further it is submitted that the notice u/s 148 can be issued only when there is any escape of income because S. 147 provides that If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, here the assessee has not escaped any income he has disclosed all the income in the return of income, the AO has reopened the case on the basis of AIR information for cash deposits in the bank account and the ld. AO himself has not made any addition or brought on record any escapement of income. Hence if there is no escarpment then the notice issued u/s 148 is invalid.
4. Reason to believe and not reason to suspect: 4.1It is submitted that even under the amended law by the finance act 1989 the condition precedent or words, which continues right since inception till date, are “reason to believe" and not "reason to suspect". The word “believe” has to be understood in contradistinction of suspicion or opinion. Belief indicates something concrete or reliable. Kindly refer Gangasharan& Sons Pvt. Ltd. 130 ITR 1 (SC), and ITO v. LakhmaniMewal Das, (1976) 103 ITR 437 (SC).
4.2The belief of the Officer should be as to escapement of income and the belief should not be a product of imagination or speculation. There must be reason to induce the belief. 4.3Further, the belief must be of an honest and reasonable person based upon reasonable grounds. The officer may act on direct or circumstantial evidence; but his belief must not be based on mere suspicion, gossip or rumor. The AO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the provision of law. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court (SheoNath Singh v. AAC, (1971) 82 ITR 147 (SC). In the case of Mukesh Modi &Ors. vs. DCIT 366 ITR 418 (Raj) held that Evasion of tax was menace to society but Assessee contributing to the exchequer in form of tax could not be allowed to suffer on mere pretence that it had evaded payment of tax. Rowing and fishing enquiry in hands of AO on mere suspicion or change of opinion could not satisfy expression "reason to believe" exposing Assessee for reopening of assessment. Notice for reopening of assessment was not in consonance and in conformity with under Section 147 and made specified notice vulnerable. High Court pointed that, reasons given by AO for issuance of notice for Re-assessment were not plausible and convincing. In fact order, where objections were rejected by AO, was not self-contained speaking order. Upon perusal of the order, it was amply clear that the same contains conclusions and is bereft of reasons.(para 12) Notices issued to Assessee by AO under Section 147/148 were not satisfying the pre- requisites for same. There was no whisper in the notice, or iota of proof that while issuing same. AO had reason to believe that any income chargeable to tax had escaped assessment for the assessment year. Notice issued by AO simply for his own verification and to clear his doubts and suspicions to re-examine the material which were already available on record at time of passing of t earlier assessment orders. The legislature under Section 147 has not clothed AO with such jurisdiction therefore the action could not be upheld in the background of facts of instant case. One more redeeming fact which had direct nexus with the subsequent re-assessment proceedings and ramification of the same had culminated into re-assessment orders was the impugned order where AO rejected the objections submitted by Assessees pursuant to notice under Section 147/148. Order passed by AO in this behalf was not a speaking order which could not be sustained. In view of legal infirmity in the notice under Section 147/148 and laconic order of AO while rejecting objections Assessee the consequential assessment Orders were liable to be annulled.(para16) 5. As the ld. CIT(A) has also not stated anything contrary to our other submissions on legal except one. Which shows the contradictory approach of the ld. CIT(A).
Thus notice u/s 148 cannot be given on wrong facts. Hence the same may kindly be quashed.
Mo. Shariph Kureshi, Sikar. GOA-2: Trading addition of Rs.7,24,872/-: FACTS: Kindly refer facts of GOA-1. SUBMISSIONS: 1. No reason given for making the additions: At the very outset it is submitted that the ld. AO has blindly made the trading addition of Rs.9,12,462/- and the ld. CIT(A) has also not considered the facts, material and accounts available before him in their true perspective and sense because of following reasons: (i) Wrong addition of Rs.7,620/-: firstly the ld. AO has not given the set off or credit of Rs.1,95,570/- shown by the assessee admittedly from the same business, however the ld. CIT(A) has given the credit of Rs.1,87,950/- ignoring the facts that the assessee had shown the profit of Rs.1,95,570/- not of Rs.1,87,590/- as in the return of income there was net income of Rs.1,97,590/- after deduction under Chapter VI-A, which has been ignored by the ld. CIT(A), hence the addition to this extent of Rs.7,620/- is also wrong or incorrect and is liable or deserve to be deleted. (ii) Addition of Rs.1,52,077/- is also wrong: Secondly the ld. AO has wrongly enhanced the turnover to the extent of Rs.60,83,077/- from Rs. 50,69,231/- has wrongly been enhanced or assumed without any basis on assumption by adding the 20% when as per the ld. AO the deposit in the bank account is sale and further enhanced the 20% on assumption and presumption and suspicion and without any material evidence brought on record, which was not permissible in the law and specifically in the case of reopening u/s 148, which talks to reason to believe not reason to suspect. Hence the addition of Rs.1,52,077/-[15% of Rs.10,13,846/- (60,83,077/- less 5069,231/-)] which is not permissible in the eye of law, hence the addition to this extent of Rs.1,52,077/- is also absolutely wrong or incorrect and liable to be deleted in full. (iii) The ld. AO wrongly taken entire deposit either case or cheque as turnover of the assessee: Thirdly the ld. AO has wrongly taken the entire deposits in the bank statement as turnover of the assessee. If we look both the bank statements there were so many entries through bank account which is either transfer from one bank to other bank, some entries through bank clearing, there were some loan taken by the assessee through the cheques and the loan has also been given by assessee, there were many cash withdrawals on various dates, which have been again re-deposited in the bank account. In support of our these contention we filed the detailed charts with details of entire entries and there narration prepared on the basis of bank statements itself which have also been filled before the Honble CIT(A)(PB8-12) both the lower authorities have not speak a single word thereon and not rebutted the same, when there is no wrong found then hoe the addition can be made and sustained.
Mo. Shariph Kureshi, Sikar. As on perusal of the details we have to submit that there was initial capital of Rs.2,75,000/- of the assessee as he was doing business for last so many years, Rs.14,23,651/- was loan taken by the assessee from various person through the account payee cheque, Rs.27,23,020/- was other deposits ie cash re-deposits out of the cash withdrawals and remaining of Rs.6,48,560/- is the turnover of the assessee all these are supported with the bank statement itself which is also on record. And we explained each and every entries before the lower authorities either in remand proceedings or before the ld. CIT(A), in case if they had any doubt they could have asked to the assessee but failed to do so rather made wrong additions, which is not permissible in the law.
Transaction not considered in full: Further it is submitted that the lower authorities have not considered and appreciated the true and correct facts and entries regarding the deposits in the saving bank account they have not considered the transactions recorded in SB account on debit side. They only seen the credit side and not read the nature of transaction noted in bank a/c in toto. When from the copy of bank statement it is very clear that there were credit as well as debit entries related to cash deposited and cash withdrawn. He has not read the nature of transaction noted in bank a/c. The lower authority has simply totaled the transactions on credit side ignoring the transactions on debit side and made the addition treating all deposits as the turnover of the assessee in credit side and applied the 15% as net profit without any basis as unexplained income from undisclosed sources of the year under consideration on assumptions and presumptions only. Which is against the principle of natural justice. When from the copy of bank statement it is very clear that there were credit as well as debit entries related to cash deposited and cash withdrawn. There were cash withdrawals of Rs.9,65,000/- from the PNB bank and Rs.24,51,500/- from Axis Bank and the total withdrawals was of Rs.34,16,500/- which is more then to cash deposited of Rs.32,05,580/-. On perusal of the bank statement it is very clear that there were gradually withdrawals and deposits on various dates and it is not the case that the deposits are in one or two times. And the lower authorities have blindly ignored these vital facts.
In support of our contentions we are enclosing herewith all the details of bank transaction which has been prepared on the basis of bank statement itself. All these document clearly indicate the entire deposits are not the turnover of the assessee. Despite these they have neither considered nor rebutted with the help of any documentary evidences. 4.1 Further we have to submit that as the assessee has taken the loan of Rs.14,23,651/- and this also has also invested in giving the further loan of Rs.17,05,000/-. Hence there should not be in mind that credit amount have been invested in purchase or business. 4.2 Further Rs.1,00,000/- has been transferred from the PNB bank of the assessee to Axis Bank for opening the ban account of Axis Bank. And also there are so many transaction which is verifiable from the bank statements itself.
Mo. Shariph Kureshi, Sikar. 5. Further we have also stated to the lower authorities “ that if your honor wants any other supporting documents in support of our above contention kindly letus know, we shall file the same before your honor or before the ld. AO if your honor demands any comments from the AO. “ but they failed to do so rather confirmed the wrong additions.
6. The ld. AO has proceeds only and only on his own assumption and presumption and other side he has denied the material, evidences etc. The ld. AO in his support has not brought on record any single evidences. The ld. AO despite having the relevant material, evidences and information’s could not rebut the same with the adverse evidence. He has proceeded only on suspicion. An allegation remains a mere allegation unless proved. Suspicion cannot take the place of reality, are the settled principles kindly refer Dhakeshwari Cotton Mills 26 ITR 775 (SC) also refer R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All).All the addition deserves deletion on this submission alone. The AO neither speak a single word on the evidences filed by the appellant nor rebutted the same with the help of any supporting evidence. Also refer CIT v/s Kulwant Rai 291 ITR 36( Del). Here we would like to submit that while doing a judicious act by a person (here the AO) should also keep in mind the circumstance, facts, general approach, status etc. . He should not restrict to himself only to the evidence where the same is not possible. Here the AO restricted to himself only evidence and ignored the circumstance, facts, general approach, status of the assessee etc. Kindly refer the decision of Mange Ram Mittal v/s ACIT 105 TTJ 594(Del)(SB) Hence we pray your owner to consider our contention in the interest of natural Justice and delete entire addition. We also would like to submit that despite our above various submissions, legal position, details and evidences the lower authorities have not considered the same and the ld. CIT(A) has wrongly confirmed the additions, which is not permissible in the law, hence the entire additions are liable to be deleted.
Hence in view of the above facts, submissions and legal position the additions may kindly be deleted in full. “
The ld. AR of the assessee, further placed reliance on the Paper Book furnished as under :- S. No. Particulars Page No. 1. Copy of Bank statement 1-7 2. Copy of charts and details of bank entries and transactions 8-12 with explanations. 3. Copy of written submission CIT(A). 13-23
On the other hand, the ld. DR relied on the orders of the lower authorities.
We have heard the rival contentions and perused the material placed on record, as well as the relevant provisions of law and the case laws cited by the Ld.AR in support of his case. We find that the Ld. CIT(A), on the issue of legality of addition made, after making a reference to the case of CIT vs. Jet Airways (India) Ltd., has observed – “ I find that though the AO has not made any addition on account of cash credit but the trading addition is also connected to the initially formed reason as the profit has been computed on that cash deposits also. The profit was also part of the deposit made by the appellant and therefore his contention is not correct. Therefore, the ground is not tenable and is dismissed”. We are afraid that the conclusion drawn by the Ld.CIT(A) is farfetched. We disagree with the Ld.CIT(A) on this issue. We would like to refer to section 147, as applicable to AY 2013-14, to have an idea as to what income can be assessed and under what circumstances, while assessing escaped income.
Income escaping assessment (Section 147) If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax Mo. Shariph Kureshi, Sikar. which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or Mo. Shariph Kureshi, Sikar. (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub- section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.
The AO while completing the assessment, did not make any addition on the ground of reopening the case (nature and source of cash deposits of Rs.32,05,580/- in SB A/c alleged to be unexplained) He, however, did not accept the income declared in ITR filed under the presumptive tax scheme and went on to apply a profit rate of 15% on the turnover estimated by him. The appellant’s case is that the AO not having made any addition on the ground of reopening of the case, was disentitled to make addition on any other ground not connected with the reasons. If the income, the escapement of which was the basis of the formation of the Mo. Shariph Kureshi, Sikar. reason to believe, is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. The Parliament, when it enacted the provisions of section 147 with effect from 1-4-1989, clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter.
We find that the Bombay High Court, in the case of CIT v. Double Dot Finance Ltd. [2013] 31 taxmann.com 352/214 Taxman 47 followed its decision rendered in Jet Airways. The facts of the case were as under- “After processing of return under section 143(1) of the Act, the Assessing Officer issued notice under section 148 of the Act seeking to reopen the assessment of the assessee on the ground that capital subsidy was Mo. Shariph Kureshi, Sikar. outstanding in respect of the business and if that was taken into account, the income was likely to increase by the same. However, while passing the order under section 143(3), read with section 147 of the Act, the ground on which the assessment was reopened had been dropped i.e., not confirmed and certain other income was added. The Commissioner of Income-tax (Appeals) upheld the reopening of the assessment. The Tribunal by its order set aside the reassessment. The High Court following the decision of Jet Airways (I) Ltd. (supra) held that "unless the Assessing Officer assesses the income with reference to which he had formed a reason to believe within the meaning of section 147 of the Act, it would not be open to him to reassess or assess any other income chargeable to tax which has escaped assessment and comes to his notice in reassessment proceedings."
Also the Delhi High Court in CIT v. Living Media India Ltd. [2013] 35 taxmann.com 105, held that "where the Assessing Officer reopened the assessment of the assessee after recording reasons and served on it a notice under section 148 of the Act on 19th January,2010, and that when the original notice issued with reference to bad debts was no longer an issue, additional reasons recorded by the Assessing Officer subsequent to issuance of notice under section 148 of the Act could not be looked into Mo. Shariph Kureshi, Sikar. for purposes of determining validity of proceedings initiated under notice dated 19th January 2010 and until and unless, there was an addition on the basis of the original reasons, no other additions could be made in view of the expression 'and also' used in Explanation 3 to section 147 of the Act."
The Hon’ble Rajasthan High Court in Commissioner of Income Tax V. Shri Ram Singh [ 217 CTR 345 (Rajasthan) ] held as under:
“32. The result of the aforesaid discussion is that the question framed, in the order dated. 23rd May, 2006, is required to be, and is, answered in the manner, that the Tribunal was not justified in holding, that the proceedings for reassessment under section 148/147 were initiated by the AO, on non-existing facts, because ultimately the assessee has been able to explain the income, which was believed to have been escaped assessment, was explainable. It is further held, that the AO was justified in initiating the proceedings under section 147/148, but then, once he came to the conclusion, that the income, with respect to which he had entertained "reason to believe" to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which In view of the decisions of various judicial forums referred to by the AR of the assessee on the issue; coupled with the decisions reproduced by us supra and the binding decision of jurisdictional High Court in the case of CIT vs. Ram Singh (supra) and further following the latest decision of this Bench, pronounced on 10.03.2025, in the case of Kailash Chand vs. ITO in (in which one of us was the author) we hold that the addition made by the AO and upheld by the CIT(A) deserve to be deleted. Based on these observations ground no. 1 raised by the assessee is allowed. Since we have considered the assessee's appeal on technicality, the other merit-based grounds are educational and do not require a finding.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 18/09/2025.