ASHOK KUMAR SINGH BHADAURIA,NEW DELHI vs. ITO, WARD-32(5), NEW DELHI

Facts of the case, in brief, are that the AO had reopened the assessment u/s.147 of the Act on the basis of AIR information that the assessee has made cash deposits of Rs.60,55,000/- in his savings bank account. During the course of assessment proceedings, it was found by the AO from the bank statements that the total cash deposits amounted to Rs.34,20,000/-during the year under consideration. The AO asked the assessee about the source of cash deposits and the assessee explained that there was an opening cash balance as on 01.04.2009 of Rs.10,82,297/- and agriculture income of Rs. 9,00,500/-. The assessee also filed the cash flow statement in which it was shown that the assessee had withdrawn Rs. 23,55,000/- from the bank account. The AO did not give the benefit of opening cash balance of Rs. 10,82,297/- and redrew the cash flow in the assessment order. After treating some of the entries of cash deposits as explained the AO treated cash deposits amounting to Rs. 13,13,000/- as unexplained.

Before CIT(A) the assessee apart from challenging the addition on merit challenged the validity of the reassessment proceedings. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee on both the issues. So far as the ground challenging the validity of reassessment proceedings are concerned, he decided the same against the assessee by observing as under :-

Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal by raising following grounds :-

The Ld. Counsel for the assessee strongly challenged the order of the CIT(A) in confirming the validity of reassessment proceedings. He submitted that the reopening of the assessment was made on suspicion and without verification of information received. He submitted that as per AIR information received the assessee had made cash deposit of Rs.60,55,000/- whereas the assessee has actually deposited an amount of Rs.34,20,000/-. Therefore, the reopening of the assessment has been done on incorrect facts in a mechanical manner and without verification of facts, therefore, the reopening is bad in law.

He submitted that the reopening has been made on borrowed satisfaction which can lead to reasons to suspect but cannot be considered as reasons to belief. There was no tangible or credible material to form a reason to believe that cash deposit represented income of the assessee. There can be number of sources of cash deposits in the bank account. Relying on the following decisions he submitted that the reopening is bad in law and should be quashed.

Munni Devi Vs. ITO Rewari,

So far as the merit of the case is concerned he submitted that the assessee during the course of assessment proceedings as well as appeals proceedings had furnished the date wise details of cash withdrawn and cash deposit. However, it was Page | 6 presumed by the Assessing Officer that the cash withdrawn on earlier dates would have been consumed prior to subsequent withdrawal and therefore, the benefit of the same cannot be allowed. He submitted that the above observation of the Assessing Officer is solely based upon surmises and presumptions and without any evidence contrary to the claim of the assessee. He submitted that the assessee during the course of assessment proceedings as well as before the CIT(A) has duly explained the nexus of cash in hand, deposit in the bank account and its utilization.

So far as the non-acceptance of the statement of affairs of earlier years is concerned he submitted that in the ITR for A. Y. 2009-10 there was no column to enter the details of statement of affairs of the assessee. Only balance sheet of proprietary business of the assessee was entered in the said ITR form. Since in the instant case the opening cash in hand was part of personal assets appearing in statement of affairs, the same could not have been reported in said column. He accordingly submitted that the addition on merit is also not sustainable. He accordingly submitted that the grounds raised

The Ld. DR on the other hand heavily relied on the order of the CIT(A) on both the issues. He submitted that when the assessee was having two PAN numbers and since the Assessing Page | 7 Officer had information related to the other PAN not being used by the assessee for filing of the return and when there were huge cash deposits in the bank account, therefore, the Assessing Officer had rightly initiated the proceedings u/s. 147 of the IT Act. So far as the merit of the addition is concerned the Ld. DR heavily relied on the order of the CIT(A).

I have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. I have also considered the various decisions relied on by Ld. Counsel for the assessee. I find the Assessing Officer, on the basis of AIR information received that the assessee has deposited cash amounting to Rs.60,55,000/- in his bank account reopened the assessment. While doing so he had observed that no return has been filed by the assessee for A. Y.2010-11 which is discernable from the copy of the reasons placed at paper book pages 4&5. It is also an admitted fact that the assessee was having two PAN numbers, the reason of which is best known to the assessee. When the Assessing Officer had information related to the other PAN number not being used by assessee for filing of return of income, and since the assessee has not surrendered the duplicate PAN, therefore, it cannot be said that the Assessing Officer reopened the assessment based on wrong information. I find the Assessing Officer in the instant case had done due verification with respect to the PAN number and had found that no return of income was filed in that PAN. In view of the above and in view of the detailed reasoning given by the CIT(A) while Page | 8 upholding the validity of reassessment proceedings, I do not find any infirmity in the same. Accordingly the same is upheld. The various decisions relied by Ld. Counsel for the assessee are not applicable to the facts of the present case especially when in non of the cases, the assessee was having two PAN numbers. The ground raised by the assessee on the issue of reopening is accordingly dismissed.

So far as the addition on merit is concerned I find as against the information received of cash deposit of Rs.60,55,000/-, it was found by the Assessing Officer that the assessee has actually deposited cash of Rs.34,20,000/-. I find the Assessing Officer accepted an amount of Rs.20,07,000/- and treated the balance amount of Rs.13,13,000/- as unexplained. It is not understood why there is a difference of Rs.1,00,000/- between the actual difference of Rs.14,13,000/- and addition made at Rs.13,13,000/-. From the various details furnished by the assessee in the paper book I find the assessee has declared income of Rs.23,48,906/- which includes agricultural income of Rs.4,39,876/-. The assessee during the current year has declared an income of Rs.26,79,460/- after claiming deduction chapter VI-A. I find the assessee during the course of assessment proceedings has also filed the following cash flow statement to substantiate the deposit of cash in the bank account which is as under :-

I find the basis of rejection of the above cash flow statement is due to non consideration of the opening cash balance and non consideration of the earlier cash withdrawals which were utilized again for deposit in the bank account. I find from the assessment order that the Assessing Officer had presumed that the earlier cash withdrawals were consumed for house hold expenses and not available for re-deposit. This, in my opinion, cannot be accepted in absence of any evidence with the AO that the assessee has infact consumed such huge cash and incurred huge expenditure for some other purpose such as any capital expenditure or for some marriage function in the family etc. Further when the assessee is showing huge income and also having agricultural income in the preceding years as well as during the current year, therefore, non consideration of the opening cash balance as on 01.04.2009 in my opinion is also incorrect. So far as the cash flow statement is concerned the assessee has shown the opening balance at Rs.10,82,297/- Page | 10 and closing cash balance at Rs.6,79,942/-. Even if the opening cash balance at Rs.10,82,297/-is considered to be higher, however, the same cannot be considered as nil. If a reasonable amount of opening cash balance of 50% of the above amount is considered and the withdrawal from the bank made earlier is considered as available for redeposit in the bank account then also there appears to be sufficient cash balance available to the assessee for deposit in the bank account. In view of the above discussion I am of the considered opinion that no addition is called for on account of cash deposit made in the bank account and the assessee in my opinion has successfully explained the source of cash deposit in the bank account. I, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 24.07.2019.