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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Ms. Annapurna Gupta & Shri Mahavir Prasad
Appellant by : Shri P.F. Jain, CA Respondent by : Shri N.J. Vyas, Sr. D.R. Date of hearing : 3-02-2022 Date of pronouncement : 10-03-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-5, Ahmedabad, (in short referred to as CIT(A)), dated 20-09-2018, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2010-11.
The Ld. D.R. had filed an application seeking adjournment on the ground that further time was required to study the case but noting that it was a very old matter, the appeal having been filed in November 2018 and adjournments thereafter Page No 2 Shri Mohit Prafulbhai Shah vs. ITO being repeatedly sought and granted, the Ld. D.R. was directed to proceed with the hearing the matter and the adjournment application accordingly rejected with the consent of both the parties.
Ground no. 1 to 4 raised by the assessee, it was pointed out, was legal grounds challenging the validity of the assessment framed u/s. 147 of the Act. The said grounds read as under:
1. 1. The Ld.C.I.T.(Appeals) has erred in law and on facts in upholding the reassessment proceedings in the case of the assessee without appreciating the facts that the requisite conditions envisaged in section 147 have not been fulfilled resulting into wrong assumption of jurisdiction for reassessment.
2. The Ld.C.l.T. (appeals) has erred in law and on facts in not appreciating the facts that objection to reassessment vide letter dtd. 14/10/2017 has not been disposed of by the A.O.
3. He has erred in law and facts in not properly appreciating the written submission made to him as well as the reply letters made during assessment proceedings and duly submitted before him.
4. He has erred in law and facts in not considering the decision of Ahmedabad ITAT in the case of Mariyam Ismail Rajwani in relied upon by the assessee.
It was pointed out to us that in the present case, on the basis of information available with the Assessing Officer (A.O). ,the case of the assessee was reopened u/s. 147 of the Act for bringing to tax the income which the A.O. believed had escaped assessment, being cash deposits in the bank account of the assessee. Reasons were recorded by the A.O. and notice issued u/s. 148 of the Act by the A.O. for assuming jurisdiction to reopen the case of the assessee. After considering the reply filed by the assessee, order u/s 143(3) r.w.s 147 of the Act was passed making addition of Rs.32,72,380/- on account of unexplained cash deposit.
4.1. The solitary arguments of the ld. Counsel for the assessee challenging the reopening was that the reasons recorded by the A.O. were not sufficient for the formation of belief of escapement of income. In this regard, he drew our attention to the reasons recorded placed before us at paper book page no. 15 as under:
Page No 3 Shri Mohit Prafulbhai Shah vs. ITO 11. Reasons for the belief that income has escaped assessment:- As per information available with this office, the assessee has deposited cash amounting to Rs. 57,22,380/- in his bank account with Axis Bank Ltd. Maninagar Branch during the f.Y. 2009-10. On examination of ITD details of the assessee, it is seen that the assessee has not filed his return of income for assessment year under consideration. The status of returns of income of the assessee as ascertained from ITD is as under: A.Y. 2008-09 2009-10 2010-11 Return Income Not filed Not filed Not filed More over, the assessee was issued two query letters dated to furnish his response on his transaction of cash deposits in bank account. However, assessee failed to comply with the letter issued to him. Since, neither the assessee has filed his return of income for A.Y. 2010-11 nor he furnished any explanation sought for vide query letter ddated 22.08.2013, the cash deposit of Rs. 57,22,380/- made by him his bank account during the financial year 2009-10 is unexplained/undisclosed. In view of the above facts, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the IT Act for A.Y. 2010-11 by an amount of more than Rs. 1 lakh as the assessee has failed to disclose fully and truly all material facts necessary for his escapement. Therefore, this is a fit case for issue of Notice u/s. 148 of the IT Act for A.Y. 2010-11.
Referring to the same he contended that the A.O’s belief of escapement of income rested on the fact of cash deposits found to have been made in the bank account of the assessee amounting to Rs. 57,22,380/- and no return having been filed by the assessee. Ld. Counsel for the assessee contended that this information was not sufficient for the formation of belief of escapement of income and in this regard he drew our attention to the order of the ITAT Ahmedabad Benches in the case of Mariyam Ismail Rajwani In assessment year 2006-07 dated 09.08.2016 wherein identical reasons recorded of cash deposits in the bank account of the assessee and no return filed were held to be insufficient for the formation of belief of escapement of income. Our attention was drawn to the relevant findings of the ITAT in the said case as under: "In the present case also, there is nothing more than cash deposit of Rs.12,76,000/- in the bank account to justify the reopening of assessment by holding the belief that Page No 4 Shri Mohit Prafulbhai Shah vs. ITO income has escaped assessment. A mere cash deposit in the bank account, however, cannot justify such a belief or inference. In this view of the matter, and respectfully following the division bench order in the case of Bir Bahadur Singh Sijwali (supra), I hold that the very initiation of reassessment proceedings, on the facts of this case, were unsustainable in law. I, therefore, quash the reassessment proceedings and the Jmpugned reassessment order. As the reassessment itself stands quashed, all other issue raised in the appeal are rendered in fructuous and do not call for any adjudication."
Ld. Counsel for the assessee therefore contended that the issue was squarely covered by the decision of the Co-ordinate Bench in favour of the assessee. He therefore pleaded that the assessment order in the impugned case needed to be quashed.
Ld. D.R. on the other hand, relied on the order of the Ld. CIT(A) at Para 4.3.1 as under: 4.3.1. Having considered the facts and submissions, it is noticed that the A.O. properly recorded the reasons on the basis of the material available on record. Thus, the reopening is held to be perfect as per the provisions of law and does not warrant any interference. Therefore, the grounds of the appellant are dismissed.
We have heard both the parties and have also gone through the documents and the case laws relied upon before us. On going through the reasons recorded, we find that the A.O. had information of cash deposit in the bank account of the assessee coupled with the fact that no return of income had also been filed by the Assessee. The A.O.’s belief of escapement of income of cash deposits in the bank account of the assessee did not rest on this information alone but the reasons disclose that armed with this information, he proceeded to make enquiries from the assessee seeking explanation of the cash deposits but the assessee chose not to respond to the same.
Page No 5 Shri Mohit Prafulbhai Shah vs. ITO 9. In this background, we hold, there can be no iota of doubt that there was sufficient information for the formation of belief of escapement of income, with the assessee having been found to have deposited substantial cash in his bank account which could neither be explained by any return of income filed by the assessee ,which he had evidently not filed and nor had the assessee offered any explanation of the same in the course of enquiries conducted by the A.O. The cash deposits therefore were found to be unexplained by the A.O. and it was this information which logically and rightfully led to the formation of belief of escapement of income. The contention of the assessee therefore regarding the insufficiency of reasons for formation of belief of escapement of income needs to be out rightly rejected. Further the reliance placed by the ld. Counsel for the assessee on the decision of the Co-ordinate Bench of the ITAT in the case of Mariyam Ismail Rajwani (supra), we find is of no relevance since it is clearly distinguishable on facts. In the said case the information with the A.O. was of cash deposits in the bank account of the assessee and no return of income filed. The A.O. in that case had not made any enquiry from the assessee seeking explanation of this cash deposits prior to forming belief of escapement of income as in the present case before us. Therefore in the light of these set of facts, the ITAT had held that the information was not sufficient for forming the belief of escapement of income. The ITAT we have noted relied on the decision of the Coordinate Bench of the ITAT in the case of Bir Bahadur Singh Sijwali 68 SOT 197 and on going through the same, we have noted that in the said case, the ITAT had noted that the mere fact of cash deposits in the bank account alone were not sufficient for formation of belief of escapement of income since it proceeded on the fallacious assumption that the cash deposits constituted undisclosed income. The ITAT held that merely because some further investigations, which could have led to the belief of escapement of income, have not been made cannot be reason enough to hold the view that income has escaped assessment. The decision of the ITAT in the case of the Bir Vahadur Singh Sijwali(supra) in fact validates the reasons recorded in the present case since the AO did conduct inquiry from the assessee to find out the Page No 6 Shri Mohit Prafulbhai Shah vs. ITO source of cash deposit who did not respond . The source of cash deposit remaining unexplained by the assessee, the formation of belief of escapement of income on account of the same was justified and as a consequence, the initiation of re- assessment proceedings also.
9.1 No other arguments challenging the validity of reopening the case were made before us.
9.2. In view of the above, we reject the contention of the assessee challenging the validity of reopening in the present case u/s. 147 of the Act. Ground of appeal No. 1 to 4 are therefore dismissed.
10. Ground no. 5 & 6 relate to the merit of the addition made and read as under: 5. He has erred in law and facts in upholding addition of Rs.32,72,380/- as income from undisclosed source without appreciating the fact that no inquiry was made by the A.O. and without consideration of Affidavit and submission made by the appellant in its proper perspective. 6. On the facts , no addition of Rs.32,72,380/- in the bank account of the assessee as income from undisclosed source ought to have been made.
11. Briefly stated the A.O. on noting that there were cash deposits in the bank account of the assessee amounting to Rs. 32,72,380/-, the source of which was not satisfactorily explained, made addition of the same to the income of the assessee. These additions in turn was upheld by the Ld. CIT(A).
Before us, the Ld. Counsel for the assessee contended that his submissions and contentions vis-à-vis the explanation of the cash deposit was not properly appreciated by the revenue authorities. He stated that it had been repeated contended to the lower authorities that the assessee was a man of meagre means being a salaried employee working with one Mr. Prakash Dilipbhai Mirani who was an agent of M/s Page No 7 Shri Mohit Prafulbhai Shah vs. ITO Bonanza Portfolio Ltd., that his total income from salary and other sources aggregated only Rs. 1,53,030/-, that the entries in the bank account of the assessee actually related to his employer Mr. Prakash Dilipbhai Mirani who was operating the account. Ld. Counsel for the assessee contended that to substantiate his contention he had submitted: a)all details of the employer shri Prakash Dilipbhai Mirani was given to the A.O. including PAN No. (b) Copy of the bank account of the assessee, wherein the cash deposits were made, pointing out that the narration in the bank entries revealed the name of his employer Shri Prakash Dilipbhai Mirani, M/s Bonanza Portfolio Ltd. of which his employer was an agent and names of the relatives of Mr. Mirani i.e. Dharmesh Mirani, Bhumika Thakkar, Dashandi Champakbhai, Vishal Bhrambhatt etc (c) the assesse affidavit stating on oath that the above facts of the bank account being operated by his employer.
12.1 Ld. Counsel for the assessee contended that his explanation of the bank account being operated by his employer duly evidenced with the narration in the entries in the bank account and his affidavit on oath, there was no reason for the revenue authorities to have rejected the same. That the assessee having given details of the PAN No. of his employer, the A.O. ought to have made enquiries from him and in the absence of the same with the assessee having sufficiently discharged his onus of having satisfactorily explained the nature of entries in his bank account,there was no reason at all for treating the cash entries as that relating to the assessee and making the addition of the same in his hands.
Ld. D.R. per contra relied on the order of the Ld. CIT(A) at para 4.4.2 is as under: 4.4.2. Facts of the case and the submissions are considered carefully. The main argument of the assessee that the transactions in the bank account had been carried out by his employer Sliri Prakash D. Mirani only, who was operating his bank account for withdrawals and deposits. The same has not been accepted by the AO mainly for the Page No 8 Shri Mohit Prafulbhai Shah vs. ITO reason that the assessee has not been able to furnish a confirmation from his employer. The appellant has also contended that the AO has not made any further enquiries and has not issued any summons to verify the contentions of the assessee in the affidavit submitted. Since the assessee has failed to explain the source of cash deposits in the Axis Bank amounting to Rs.32,72,380/- with supporting evidence the AO made the addition. During the course of appellate proceedings, the appellant has not furnished any evidence regarding his claim. It is a fact that as per the information available with the AO, the appellant is having a bank account with Axis Bank, Maninagar branch, Ahmedabad. Though the appellant has denied operating the same but failed to substantiate the same. It is also a fact that there is a substantial cash deposits in the said bank account which is supposed to be explained by the appellant. However, the appellant has failed to do so and simply stated that the account is operated by his employer for which nothing has been furnished. Considering the facts of the case, I am of the opinion that the AO is justified in making the addition. Accordingly, the addition made by the AO is confirmed and grounds of appeal are dismissed.
We have heard both the parties carefully and have also gone through the documents referred to before us. We are in agreement with the Ld. Counsel for the assessee that the assessee had sufficiently discharged his onus of satisfactorily explaining the nature and source of the entries in his bank account more particularly those relating to cash deposits. His explanation that the bank account was infact being operated by his employer, we find was evidenced by the narration in the entries in the bank account reflecting the name of his employer, the brokerage firm of which he was an agent i.e. Bonanza Portfolio Ltd. and his purported relatives. We have noted that almost entirely all the withdrawals in this bank account by cheque related to these aforesaid persons only while there were few withdrawals in cash also. Therefore, it is clear that whatever amount was deposited in this account was withdrawn either in the name of the asseesses employer, his brokerage firm which he was an agent or for the benefit of his relatives. The explanation of the assessee therefore that his bank account was being operated by his employer appears to be justified on the touchstone of preponderance of probability. The onus stood shifted to the Revenue to prove otherwise. It was incumbent on the Revenue to have examined the evidences, make necessary inquiries from the employer of the assessee, Mr.Prakash Mirani, and also from the bank and only thereafter on finding these Page No 9 Shri Mohit Prafulbhai Shah vs. ITO evidences to be of no consequence ,the onus to justify his explanation with further evidences would have shifted to the assessee. The Revenue, on the contrary, we find insisted on further evidences from the assessee without even considering that filed by the assessee or pointing out why they were not relevant.
In the present case, the assessee having sufficiently evidenced his explanation regarding the nature of cash deposits and the revenue being unable to controvert the same, we hold that the Ld. CIT(A) was not justified in dismissing the explanation of the assessee and upholding the addition of cash deposits of Rs. 32,72,380/-.The addition of cash deposits of Rs. 32,72,380/-.is directed to be deleted.
15.1. Ground no. 5 & 6 are allowed.
In effect, appeal filed by the assessee is partly allowed.