PALLAV,JAMNAGAR vs. DCIT, CIRCLE 2, JAMNAGAR

The case of the assessee was reopened u/s 147 of the Act and the notice u/s 148 of the Act, was issued to the assessee, on 31/03/2021. The assessee filed his return of income, in response to the notice u/s 148 of the Act, declaring total income of Rs. 6,00,410/-on 28/05/2021.Subsequently the notice u/s 143(2) was issued on 27/08/2021. The assessee did not comply to this notice. The notice u/s 142(1) was issued on 25/11/2021. The assessee, again did not comply to this notice also. Further, notices u/s 142(1) of the Act, was again issued on 27/01/2022 & 28/02/2022 respectively, however, there were no compliance of these notices by the assessee. Non -compliant attitude of the assessee, towards various notices issued to the assessee, clearly indicates that the assessee is intentionally avoiding to make any compliance to the notices issued to the assessee, despite the fact that ITR in response to the notice u/s 148 of the Act, has been filed by the assessee. Despite sufficient number of opportunities given to the assessee, no compliance has been made by the assessee. Therefore, the details related to source of cash credit of Rs. 7,20,96,670/- could not be verified.

Learned Counsel for the assessee, argued that reasons recorded by the assessing officer for reopening of assessment are bad in law and there is no application of mind by the assessing officer. Therefore, the re- assessment proceeding may be quashed.

On the other hand, ld. DR for the Revenue, argued that reasons for reopening of assessment have been recorded by the assessing officer, with help of the tangible material. The tangible material in the assessee`s case is the bank statement, wherein the assessee has deposited lot of money, in bank account, by way of cash and cheque, and no explanation have been provided by the assessee in respect of the entries made in the bank statement. Therefore, reopening of assessment is valid in the eye of law, as the assessing officer was having sufficient material to initiate the reassessment proceedings.

We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We find that section 147 of the Act, lays down that the reopening the assessment can be done by the Assessing Officer, if he has ‘reason to believe’ that the income has escaped assessment. Escapement of income chargeable to tax can be due to not filing of return of income by the assessee despite having taxable income, receipt of information from other agencies, or failure on part of the assessing officer during the initial assessment proceedings to account for a portion of the income or allowing of excess loss or depreciation etc. In such a case, the provisions of Section 147 of the Act, would be applicable and the assessment can be reopened. The very fact that reasons are recorded and notice u/s 148 of the Act was issued, goes to show that the assessing officer had applied his mind and was satisfied himself about the re-opening of the case. The Income Tax Act, envisages that the assessing officer should only have a reason to believe to re-open a case, he need not establish beyond doubt that there is escapement of income before issuing the notice. The assessing officer is not required to carry out any investigation before reopening as held by Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd v ITO 236 ITR 34(SC). The Hon'ble Apex Court held that in determining whether commencement of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at the stage of reopening. In view of this, the action of the assessing officer to re-open the case by issuing of notice u/s.148 was held to be valid by ld. CIT(A). We have gone through the above findings of the ld. CIT(A) and noticed that there is no infirmity in the conclusion reached by the ld. CIT(A). Therefore, we dismiss the ground number two raised by the assessee.

In the result, ground No.2, raised by the assessee, is dismissed.

On merit, we find that assessee has submitted the following reconciliation and explanation, about the entries in the bank statement, which are reproduced below.

Auto Fixed Deposit (Sweep Account) – Rs.4,42,26,000 As per arrangement with bank whenever bank balance exceeds specified limit, it get automatically converted into fixed deposit and when assessee issues cheque / withdrawal and bank balance is not sufficient then amount from fixed deposit get transferred to current account. All fixed deposits were made from said bank account only and duly reflected on credit side to bank statement and re-conversion is reflected on debit side of bank statement. Ld. assessing officer had considered only debit side and made an addition. We enclose herewith bank statement and ledger account of Auto FD from books of accounts. In view of such clear facts, this cannot be treated as income and unexplained deposit.

Interest on Fixed Deposit (Sweep Account) – Rs.1,16,802 Interest income on fixed deposit as explained above is duly accounted for, credited to profit and loss account and declared as income in tax audit report and income tax return. Hence, same cannot be treated as unexplained deposit. Also addition was made of income. already disclosed amounts to double addition. We enclose herewith tax audit report and audited accounts and ledger of interest income from books of accounts 3. Cash Deposit – Rs.1,80,88,225 The said deposit out of cash sales and receipts from debtors duly account for in books of accounts. We enclose herewith cash book, sales register, tax audit report and audited accounts.

Sales through Cheques / POS / Credit Card – Rs. 95,42,141 Sales is duly accounted for, credited to profit and loss account and declared as income in tax audit report and income tax return. Hence, same cannot be treated as unexplained deposit. Also addition was made of income already disclosed amounts to double addition. We enclose herewith sales register of entire year, tax audit report, audited accounts and VAT returns

We note that assessee has not furnished any documentary evidence such ledgers of the sundry debtors, creditors or name and address of the persons from whom the amounts were received during the year under consideration. During the proceedings before assessing officer, as well as before ld CIT (A), the assessee failed to explain the source of receipts. The assessee has never come forward to explain the entries in the bank account even after providing various opportunities to do so at various levels of the proceedings. Now before us, the assessee has submitted reconciliation and explanation of the entries in the bank statement, therefore, we are of the view that such reconciliation and explanation of the assessee, should be examined by the assessing officer, with documentary evidences, and supporting documents, which the assessee, now, ready to submit before the assessing officer.