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Facts
The assessee did not file her return of income for AY 2011-12. The AO initiated reassessment proceedings under Section 147 after information of a cash deposit of Rs. 4,00,000/- and a receipt of Rs. 15,469/- was found. The AO made additions of Rs. 1,88,550/- for unexplained income u/s 44AD, Rs. 15,53,500/- for unexplained cash deposits, and Rs. 16,469/- from other sources.
Held
The Tribunal held that at the stage of initiating reassessment proceedings, the AO only needs a 'reason to believe' and not conclusive proof. However, concerning the addition for cash deposits, the Tribunal found the cash flow statement to be reliable, showing no negative balance, and thus deleted the addition sustained by the CIT(A).
Key Issues
Whether the reassessment proceedings under Section 147 were validly initiated? Whether the addition on account of unexplained cash deposits in bank accounts was justified after considering the cash flow statement?
Sections Cited
147, 148, 142(1), 143(2), 44AD, 139(1), 194A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 1223/JPR/2024
fu/kZkj.k o"kZ@Assessment Year : 2011-12 Dropti Devi, cuke Income Tax Officer, Rajeev Colony, R.T.D.C., Ward 1(3), Vs. Behror. Alwar. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AXSPD0940M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Vedant Agarwal, Advocate. jktLo dh vksj ls@Revenue by : Shri Gautam Singh Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 20/02/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 07/05/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. CIT(A), National Faceless Appeal Centre (NFAC) Delhi dated 22.07.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2011-12. The assessee has raised the following grounds of appeal :-
1. On the facts and circumstances of the case and in law also ld. AO grossly erred in initiating reassessment proceedings u/s 147 of the Income Tax Act, 1961.
2. On the facts and circumstances of the case and in law also ld. AO grossly erred in not providing the copy of reason recorded to the assessee.
Dropti Devi, Behror.
3. On the facts and circumstances of the case and in law also ld. Lower Authorities grossly erred in making and confirming addition of Rs. 7,76,750/- on account of cash deposits in bank account.
4. On the facts and circumstances of the case and in law also ld. CIT (A) grossly erred in restricting the addition to 50% at Rs. 7,76,750/- of additions made by Ld. AO even after agreeing that the assessee has made withdrawals and without considering cash flow chart submitted before him.
5. On the facts and circumstances of the case and in law also ld. Lower authorities grossly erred in making and confirming addition without mentioning any section.
6. That the appellant craves his indulgence to add, amend, alter or delete the grounds of appeal.”
From the record we find that there is a delay of 7 (Seven) days in filing the present appeal and in this regard an application for seeking condonation of delay has been filed by the assessee wherein it has been specifically submitted that the delay was because of illness of the assessee. The assessee was suffering Sciatica/Lumbar Strain from 15.09.2023 to 26.09.2023. In this regard, the assessee submitted an Affidavit and also furnished a Certificate from Park Hospitals, Delhi- Jaipur N.H-48, Behror from where assessee was taking treatment, in support of her illness. The Certificate reads as under :-
To Whom It May Concern This is to certify that Ms. Dropti Devi, 57F, has been under medical treatment at Park Hospital from 15.09.2024 to 26.09.2024 due to Sciatica/Lumbar Strain. As per medical advice, the patient requires bed rest and should refrain from work or any strenuous activity during this period. For any further medical clarifications, please feel free to contact us. Sincerely Sd/- PARK HOSPITAL (a Unit of Kailash Super Speciality Hospital Pvt. Ltd.) DELHI-JAIPUR HIGHWAY NH-48 BEHROR (ALWAR) RAJ-301701 Considering the reasons mentioned in the said application accompanied by an Affidavit of the assessee and also Certificate from the concerned Hospital, we feel that the reasons mentioned in the application constitute sufficient cause for not filing the appeal within the time before us. Moreover, no counter affidavit has been filed by the revenue. Therefore, taking a lenient view and considering the principles laid down in the case of Collector, Land Acquisition vs. Mst. Katiji, 1987 AIR 1353 (SC), we condone the delay in filing the appeal before us.
The brief facts of the case are that an information was in possession with the Income-tax Department that the assessee has deposited a sum of Rs. 4,00,000/- in her bank account and got receipt under section 194A of Rs. 15,469/- during the FY 2010-11 relevant to the AY 2011-12. The assessee has not filed her return of income for the year under consideration as required under section 139(1) of the Income Tax Act, 1961. Therefore, in the absence of return of income, the transaction of deposit and receipts has not been verifiable and the AO was of the view that income to the tune of Rs. 4,15,469/- has escaped assessment for the year under consideration. Accordingly, proceedings under section 147 of the IT Act, Dropti Devi, Behror. 1961 were initiated after recording reasons and issued notice under section 148 of the IT Act, 1961 on 30.03.2018, after taking prior approval from the competent authority. The notice was duly served upon the assessee through registered post. In response to the notice under section 148, the assessee did not file her return of income, therefore, notice under section 142(1) of the IT Act, 1961 was issued. In compliance, the assessee filed her return of income on 31.08.2018 declaring total income of Rs. 2,05,020/-. Notice under section 143(2) of the IT Act was issued to the assessee. Thereafter, the A/R of the assessee attended and furnished written submissions. 3.1 During the assessment proceedings, the AO found that the assessee has deposited cash of Rs. 4,88,000/ in HDFC Bank, cash of Rs. 1,66,800/- in ICICI Bank and Rs. 8,98,700/- in her PNB Bank account. The assessee was asked to explain the source of cash deposits in the bank accounts with documentary evidences. In response the A/R of the assessee filed written submissions along with various details but the AO could not found it acceptable. The AO further noted that the assessee has filed her return of income under section 44AD showing total sales at Rs. 23,47,969/- and NP of 8% has been declared thereon. The assessee was asked to furnish necessary details i.e. sundry debtors, sundry creditors, details of stock, details of sales and sale bills/vouchers etc. in respect of income declared under section 44AD of the IT Act. The assessee has not filed any Dropti Devi, Behror. details. Therefore, in absence of any details, the AO completed the assessment by making additions of Rs. 1,88,550/- on account of income shown u/s 44AD not explained, Rs. 15,53,500/- on account of unexplained cash deposit in bank and Rs. 16,469/- on account income from other sources and assessed the total income at Rs. 17,58,520/-. Aggrieved by the order of AO, the assessee preferred an appeal before the ld. CIT (A). The ld. CIT (A) considering the submissions of the assessee, allowed some relief and partly allowed the appeal. Now the assessee is in appeal before the Tribunal on the grounds mentioned herein above.
Before us, the ld. AR of the assessee reiterated his submissions as made before the ld. CIT (A).
On the other hand, the ld. DR supported the orders of the Revenue authorities.
We have heard the rival contentions, perused the material on record and gone through the orders of the lower authorities. In first ground of appeal the appellant has challenged the action of AO in initiating proceedings u/s 147. During hearing, the ld. AR submitted that the AO did not apply his mind in considering the withdrawals made by the assessee which has worked as source of cash deposit in the bank account. The contention of the ld. AR is not acceptable in view of the fact that while framing reasons to believe the concealment of income, the ld. AO is Dropti Devi, Behror. not statutorily required to analyze the information in his possession in a way so as to reach on conclusive proof of escapement. The only requirement is that he must have a prima facie belief about concealment of income which was available in this case as the AO was having information about cash deposit in the bank account and coupled with the fact that appellant did not file her ITR for the year under consideration and both these facts were sufficient to raise a doubt about concealment of income and hence the AO was justified in issuing a notice u/s 148 on the facts of the case. In this regard we refer to the case of ACIT v/s Rajesh Jhaveri Stock Brokers P Ltd. (SC) (291 ITR 500) wherein the Hon’ble Supreme Court held that at the stage of initiating action u/s 147, the final outcome of the proceeding is not relevant and at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. Hence we dismiss first ground of appeal
7. Ground No.2 has not been pressed by the ld. AR, hence the same is dismissed as not pressed.
8. In ground no.3 the appellant has challenged the action of lower authorities in granting part relief only. In the assessment order the AO made addition of Rs. 15,53,500/- on account of cash deposits in bank accounts which was restricted by the ld. CIT (A) at 50% i.e. Rs. 7,76,750/-. However the appellant is not satisfied with such part relief allowed by the ld. CIT (A) and has challenged his action of Dropti Devi, Behror. allowing only part relief before the Tribunal. We have noted that ld. CIT (A) while disposing this ground observed as under :- “ 8.2 During the course of the appellate proceeding, the appellant submitted that the deposits made in the bank account of opening cash balance of Rs. 3,77,000/-,withdrawals made during the year and the cash generated out of the coal business of the appellant. It was also stated that the deposits were made through out the year in a staggered manner and the peak amount of deposit is very low. In support of which contention, the appellant had submitted its bank statements and cash flow statement. The contention of the appellant have been examined. However, the appellant could not specify the sources of each of its deposits and the reasons for the intermittent withdrawals. The nexus between the deposits and withdrawals could not be established by the appellant. Regarding the claimed that part of the deposits were made out of the cash generated from the coal business, the appellant could not furnish any evidence of having actually carried out the coal business as claimed. Under such circumstances, the claim of the appellant regarding the source of cash deposits can not be fully accepted. However, considering the fact that the deposits were made in staggered manner and there were withdrawals in the intermittent periods and also the appellant’s claim that it had cash balance of Rs. 3,77,000/- at the beginning of the year, it will be fair and reasonable to restrict the addition to the extent of 50% of the total deposits made during the year. Accordingly, the AO is directed to recomputed the addition and determine the tax and interest liability thereon. Thus, the ground no. 3 filed by the appellant is partly allowed.”
The ld. CIT (A) seems to had used his estimations only for allowing part relief to the appellant. The ld. A/R had submitted a cash flow statement covering all cash deposits, cash withdrawals made by the assessee during the year under consideration to the ld. CIT (A) and which has been submitted before us also. There is no infirmity pointed out by the ld. D/R also on such cash flow statement. We find that in this cash flow statement the appellant has adopted an opening cash Dropti Devi, Behror. balance of Rs. 3,77,000/- and thereafter by incorporating all transactions of cash deposit and withdrawals in various bank accounts, at no stage any negative balance has been worked out. Neither the ld. CIT(A) nor the ld. D/R raised any doubt about the opening balance of Rs. 3,77,000/- in the cash flow statement and the entries appearing therein. Therefore, in view of the fact that there is no doubt about contents of the cash flow statement wherein no negative balance was noticed at any stage, we are inclined to allow the appeal of the assessee and hence we delete the addition of Rs. 7,76,750/- as sustained by ld. CIT (A) on account of cash deposit in the bank account of the assessee. This ground of appeal is allowed.
9. As we have allowed the effective ground of the appeal and hence we do not think it necessary to adjudicate on other grounds.
10. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 07/05/2025.
Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 07/05/2025. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Dropti Devi, Behror. izR;FkhZ@ The Respondent- ITO, Ward-1(3), Alwar. 2.