PRADEEP KUMAR AGRAWAL, DHAMTARI,DHAMTARI vs. INCOME TAX OFFICER, WARD-DHAMTARI, DHAMTARI

आदेश / O R D E R Per Arun Khodpia, AM:

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari 2. In order to deliberate upon and to decide the common issues involved in the present appeals, for the AY 2016-17 has been taken up for adjudication as the lead case, wherein our findings / observations / decision shall have a direct bearing on the issues in the other cases, therefore, the outcome of the lead case shall apply mutatis mutandis to the remaining other matters.

3. The grounds of appeal

along with additional ground of appeal raised by the assessee, assailing the impugned orders in all the aforesaid appeals are extracted as under: Ground of appeal in (2015-16)

1. On the facts and circumstances of the case and in law, reopening u/s 148/147 is invalid as based on borrowed satisfaction of escaped income of Rs.3,59,78,500 on 'cash withdrawal from bank', which is related ·to receipts from debtors against accounted sales; it is only 'reason to suspect' ,merely verifying the 'cash withdrawal'; there is live link/ nexus between the 'information of cash withdrawal' & 'formation of believe' for alleged escaped income of Rs.3,59,78,500;'in absence of pre-requisite condition for assuming jurisdiction u/s147, reopening ·u/s 148/147 would be. invalid; liable to be quashed; relied on Lakhmani Mewaldas (1976) (SC); Shodiman Investments (P) Ltd (2018) (Born); Meenakshi Overseas (P) Ltd (2017) (Del HC); Smt Sudesh Rani (2023) (Chd-Trib); Jai Prakash Gupta (2021) (Kol-Trib);

2. On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs.3,59,78,500 on 'unexplained investment u/s69'; when cash withdrawal from bank are fully recorded in the books of account audited u/s44AB; in absence of any evidence/material brought on record by the AO/ CIT(A) for any investment made by the assessee which is not recorded or not satisfactorily explained; when nature & source of· cash withdrawal is from receipts from debtors against accounted/ disclosed sales of Rs.10,14,26,743 u/s44AB; impugned addition made u/s69 is not sustainable in the eyes of law; is liable to be deleted.

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari 3. , On the facts.and circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs.3;59,78,500 on 'cash withdrawal from bank', treating it 'unexplained investment u/s69 which is related to receipts from debtors against accounted/ disclosed sales of Rs.10,14,26,743 u/s44AB; addition ofRs.3,59,78,500 made merely on presumption & surmises, would lead to GP of 38.38% from GP of3.38% shown, which is impossible in the business of the assessee & is unjustified; is liable to be deleted.

4. The appellant craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing.

1. On the facts and circumstances of the case and in law, assessment made u/s147 rws.144B dt.26-3-22 is invalid as ld AO has not issued notice u/s 143(2) after filing letter dt.8-3-22· enclosing original ROI filed on 25-3-16 showing income of Rs.4,59,680 by mentioning that in response to notice issued u/s148; in absence of a notice u/s143(2), assessment made u/s147 rws.144B would be invalid and is liable to be quashed.

1. On the facts and circumstances of the case and in law, reopening of concluded assessment u/s 143(3) dt.8-12-18 wherein audited sales of Rs.8,37,26,439 u/s 44AB has been examined/ accepted by the AO which ultimately includes alleged 'deposits / RTGS credits into bank' of Rs.8,31,02,597; in absence of any fresh/ new material possessed by the AO, impugned reopening be treated merely 'change of opinion' on the same material facts, is not permissible in the eyes of law, is liable to be quashed.

2. On the facts and circumstances of the case and in law, reassessment made u/s 147 is invalid as there is addition made of Rs.41,55,130 on count of undisclosed business income (i.e., u/s28) which is not the issue of the 'reasons recorded'; the 'very basis' of reopening was 'unverifiable/ unexplained deposits/ credits into bank' (i.e., u/s 69A/68) and no addition made on the 'very issue'; addition made on an 'independent issue' of 'business income', which is not the part of the 'reasons recorded' earlier, is not permissible in the eyes of law; reassessment made u/s 147 would be invalid & is liable to be quashed; relied on Shri Ram Singh (2008) (Raj); Prosperous Buildcon (P) Ltd (2023) (Del HC).

3. On the facts and circumstances of the case and in law, reopening u/s 148/147 is invalid as based on borrowed satisfaction of escaped income of Rs.8,31,02,597 on 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari the count of 'deposits/ RTGS credits into bank', which is related to receipts from debtors against accounted sales; it is only 'reason to suspect' merely for verifying the 'deposits/ RTGS credits into bank'; there is no live link/ nexus between the 'information of deposits into bank' & 'formation of believe' for alleged escaped income of Rs.8,31,02,597; in absence of pre-requisite condition for assuming jurisdiction u/sl47, reopening u/sl48/147 would be invalid; liable to be quashed; relied on Lakhmani Mewaldas (1976) (SC); Shodiman Investments (P) Ltd (2018) (Born); Meenakshi Overseas (P) Ltd (2017) (Del HC); Smt Sudesh Rani (2023) (Chd-Trib); Jai Prakash Gupta (2021) (Kol-Trib);

4. On the facts and circumstances of the case and in law, approval granted u/s 151(2) by JCIT is invalid; JCIT has not cared that there is only 'change of opinion' on same material facts when it had assessed u/sl43(3) & there is no fresh/ new material brought on record; JCIT has also not cared/ not pointed out the mistake of the AO in proposal form u/s151(2) i.e., incorrect amount ofRs.4,67,78,900 which is 'cash withdrawal from bank'; while as per annexure to the proposal form, escaped income is Rs.8,31,02,597 on the different issue of 'deposits/ credits into bank'; approval granted u/s 151(2) without application of mind in a mechanical manner without verifying the facts/issue involved; in absence of a valid approval granted u/s151(2) by JCIT as mandated by law u/s151; impugned reopening u/sl48/147 would be invalid; is liable to be quashed; relied on Kalpana Shantilal Haria (2017) (Bom); Kartik Sureshchandra Gandhi (2023) (Born HC); Ram Nebhnani Huf(2023) (Born).

5. On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining addition ofRs.41,55,130 which is on adhoc basis of5% of deposits/ RTGS credits into bank' of Rs.8,31,02,597 which is related to receipts from debtors against accounted/disclosed sales in the books of account u/s44AB, more so, it had earlier assessed u/s 143(3) dt.8-12-18; addition of Rs.41,55,130 on the same count is not permissible in the eyes of law; addition made merely on presumption & surmises, is not justified and is liable to be deleted. ·

6. On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs.41,55,130 is unjustified and is liable to be deleted.

1. On the facts and circumstances of the case and in law, assessment made u/s147 rws. 144B dt.26-3-22 is invalid as Id AO has not issued notice u/s143(2) after filing letter dt.8-3-22 enclosing original ROI filed on 9-3-18 showing income of Rs.49,810 by mentioning that in response to notice issued u/s148; in absence of a notice u/s143(2), assessment made u/s147 rws.144B would be invalid and is liable to be quashed.

Grounds of appeal in (2017-18)

1. On the facts and circumstances of the case and in law, approval granted u/s151(2) by JCIT is invalid; JCIT has not cared/ not pointed out the mistake of the AO in proposal form u/s151(2) i.e., incorrect amount of Rs.1,88,67,200 which is ,'cash ,withdrawal ·from bank'; while as per annexure to the proposal form, escaped income is 'Rs.5,95,39,179 on the different issue of 'deposits/ credits into bank'; approval granted u/s 151(2) without application of mind in a mechanical manner without verifying the facts/issue involved; in absence of a valid approval granted u/s 151(2) by JCIT as mandated by law u/s 151; impugned reopening u/s 148/147 would be invalid; is liable to be quashed; relied on Kalpana Shantilal Haria (2017) (Born); Kartik Sureshchandra Gandhi (2023) (Born HC); Ram Nebhnani Huf(2023) (Born).

2. On the facts and circumstances of the case and in law, reassessment made u/s 147 is invalid as there is addition made of Rs.29,76,959 on count of undisclosed business income (i.e., u/s28) which is not the issue of the 'reasons recorded'; the 'very basis' of reopening was 'unverifiable/ unexplained deposits/ credits into bank' (i.e., u/s69A/68) and no addition made on the 'very issue'; addition made on an 'independent issue' of 'business income', which is not the part of the 'reasons recorded' earlier, is not permissible in the eyes of law; reassessment made u/s147 would be invalid & is liable to be quashed; relied on Shri Ram Singh (2008) (Raj); Prosperous Buildcon (P) Ltd (2023) (Del HC).

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari (Del HC); Smt Sudesh Rani (2023) (Chd-Trib); Jai Prakash Gupta (2021) (Kol- Trib); 4. On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs.29,76,959 which is on adhoc basis of 5% of 'deposits/ RTGS credits into bank' of Rs.5,95,39,179 which is related to receipts from debtors against accounted/disclosed sales in the books of account u/s44AB; addition of Rs.29,76,959 as 'undisclosed business income' merely on presumption & surmises, is unjustified, and is liable to be deleted.

5. On the facts and circumstances of the case and in law, Id CIT{A) has erred in sustaining addition of Rs.29,76,959 is unjustified and is liable to be deleted.

6. The appellant craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing.

Additional ground of appeal in "I. On the facts and circumstances of the case and in law, assessment made u/s 147 rws.144B dt.26-3-22 is invalid as Id AO has not issued notice u/s143(2) after filing letter dt.8-3-22 enclosing original ROI filed on 24-3-18 showing income of Rs.1,18,690 by mentioning that in response to notice issued u/s148; in absence of a notice u/s 143(2), assessment made u/s147 rws.144B would be invalid and is liable to be quashed."

7. Aggrieved with the aforesaid additions, assessee preferred an appeal before the Ld. CIT(A), however, with no success the appeal of the assessee has been dismissed by the Ld. CIT(A), with the following observations: Findings and Decisions:

Revised Ground No.1, 2, 3 & 4 The appellant in his revised ground of appeal, has challenged the reopening of the assessment, stating that the reason was recorded without having tangible material for escaped assessment of Rs.8,31,02,597/- merely on presumption and surmise only based on information received from ITO(lnv), Raipur. The appellant further claimed that granting of approval on the same day (i.e.30/03/2021) in most mechanical and routine manner without application of mind, without recording any subjective satisfaction.

The above said claim of the appellant is not acceptable as the credible information in respect of mainly RTGS credits in the appellant's bank account and subsequently followed by cash withdrawals, was received from ITO(lnv), Raipur which was duly verified by the AO from the information available on record. The total credits was reported at Rs. 8,31,02,597/- during the financial year under concerned in the bank account of the appellant's, out of which total cash withdrawal were Rs.4,67,78,900/- .

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari The information with regard to credits and cash withdrawals in the appellant's bank account was reported in every rupee, which probably could have not been possible, if the information was unverified merely on the basis of presumption. There were the tangible materials in the form of information, was available with the AO, which was verified from the accessibility with the AO in due course, on the basis of which reason was recorded for reopening of assessment. The case was reopened only after approval of the competent / approving authority after being satisfied on the reason so recorded by the AO.

The process of reopening of the assessment was done as per provision laid down for reopening of the case under I T Act. In the appellant's case reason was recorded on basis of information and on the basis of inquiry made by AO. After being satisfied by the reason so recorded by the AO, granting of approval by the competent/ approving authority for issuance of notice u/s 148 of the I T Act is done after following the procedure as laid down u/s 151 of the I T Act.

The above said process is as per under Income Tax Act, 1961, therefore, it cannot be claimed that recording of reason and approving the same for issuance of notice u/s 148 of the I T Act was as a most mechanical & routine work.

The appellant has alleged that the AO recorded the reason without application of mind only to verify the credits/deposits into bank account on a fallacious assumption and the credit which was found in the appellant's bank account need not necessarily be income of the appellant.

It is pertinent to mention that the case was taken up for verification by reopening the case on the basis of information received and outcome of enquiry conducted by the AO. It is appellant's duty to prove himself free from allegation for which the case was taken up for scrutiny by reopening of the case, by furnishing substantial details/documents, which the appellant failed to do during the course of assessment 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari proceedings as well as during the course of appellate proceedings. Simply saying that the reason recorded without application of mind on fallacious assumption, could not prove the genuineness of the trade/business of the appellant. The genuineness of the trade made by the appellant could only be proved by furnishing substantial valid documents. As the appellant had huge credit and subsequent cash withdrawals in the bank account during the year under concerned, notices u/s 142(1) of the IT Act were issued, calling for details during the course of assessment proceedings. However, the appellant instead of submitting the same, was non-responsive. And when a final call was made by the AO by issue of a show cause notice, the appellant became responsive with insufficient details. Further, the appellant was given opportunity to furnish remaining details called for vide notices u/s 142(1) of the IT Act in respect of huge credits in the bank account and subsequent cash withdrawals, in the form of a show cause notice, but unfortunately, the appellant failed to furnish. In fact the appellant did not have any details & document in his possession which could be furnished as a substantial proof for consideration either before the AO or before the appellate authority, because the being aggrieved by the order of the AO, the appellant the filed the present appeal with only written submissions with respect to revised grounds of appeal with various case law, as submission, followed by original grounds of appeal claimed under Form -35.

The appellant's intention is only to hide the findings for which the case was reopened, by simply questioning/challenging the reopening of the assessment. There is a provision u/s 147 incorporated in the Income Tax Act, that if any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or re-compute the loss or the depreciation allowance or any other allowance or deduction for such assessment year.

In the appellant case there was information that the appellant's bank accounts were mainly credited through RTGS and subsequently followed by cash withdrawals, and 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari thus, made high value transaction and accordingly, as per provision of the Income Tax Act, the case was reopened for verification after following the due procedure.

After reopening of the case, a notice u/s 148 of the I T Act, dated: 30/03/2021 was issued and served upon the appellant, requiring the appellant to file a return of income within 30 days, for which the appellant was non- complaint during the course of the assessment proceedings. Subsequently, notice u/s 142(1) of the I T Act was also issued in various dates by the AO under principle of natural justice, requesting the appellant to furnish the ITR filed in response to the notice u/s 148 of the I T Act and to explain the sources of the credits in the bank account, but the appellant denied for the submission just by being non-complaint to the notices issued. The appellant become responsive only when show cause notice was issued by the AO, with insufficient submission. The appellant was further given time to submit remaining information which were called for, vide notices u/s 142(1) of the I T Act including show cause notice by the AO during the course of the assessment proceedings. However, the appellant failed to submit the same.

The AO, decided the case by keeping in mind the nature of business of the appellant. As the appellant was engaged in the business of trading of paddy, rice, other bi- product and transport, having credits of Rs. 8,31,02,597/- in the bank account, 5% of total credits, which arrived at Rs.41,55,130/-, was considered as reasonable income earned during the year by the appellant in absence of sufficient submission of the appellant and added back to income of the appellant by the AO.

The AO, had no option but to pass the order u/s 147 r.w.s 144 r.w.s 1448 of the I T Act on the basis of insufficient submission of the appellant and other material available on record.

The appellant has not submitted any substantial details/documents with respect to the subject matters on huge credits and subsequent followed by cash withdrawals, 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari except written submission with regard to reopening of assessment which was raised under revised grounds of appeal, during the course of appellate proceedings. Therefore, the undersigned sees no reason to interfere with the orders of the Assessing Officer. Hence the appeal of the appellant is dismissed.

In the result, the appeal is dismissed.

8. Dissatisfied with the aforesaid decision by the Ld. CIT(A), assessee preferred to carry the matter before the Tribunal, hence the present appeal, which is under consideration before us.

9. At first, we shall be adverting to the additional ground of the appeal raised by the Ld. AR on behalf of the assessee, assailing the issue regarding illegality in framing of assessee u/s 147 r.w.s. 144B in absence of notice u/s 143(2), raising the contention that dehors a notice u/s 143(2) the impugned assessment made becomes invalid and liable to be quashed.

10. On this issue, in rebuttal Ld. Sr. DR, have furnished a report from Ld. AO, stating that the issue raised by the Ld. AR that in absence of notice u/s 143(2) the order passed is invalid has been duly acclaimed by the Ld. AO during the assessment stage itself that the assessee has not filed any return in response to notice u/s 148, whereas while submitting the letter 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari along with copy of original return filed on 09.03.2018, assessee mentioned that “the copy of return of income filed in response to notice u/s 148 along with computation and financial statement are enclosed herewith”, however, there was no mention that the copy of return of income filed may be treated as return filed in response to notice u/s 148. Under such circumstances, since there was no return filed in response to notice u/s 148, therefore the Ld. AO was not obliged to issue notice u/s 143(2) of the Act, hence, the assessment made u/s 147 r.w.s. 144B dated 26.03.2022 was a valid assessment. In view of such facts, it is requested that the additional ground raised by the assessee, should not be considered, the same shall be rejected. The copy of report submitted by the Ld. Sr. DR is extracted hereunder for the sake of completeness of facts:

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari 11. We have considered the rival submissions, perused the material available on record and the contentions raised by the concerned parties. On perusal of the facts on record, we observed that the assessee was non- responsive at various stages during the assessment proceedings, as well as before the Ld. CIT(A). The first response was submitted by the assessee after almost one year i.e., on 08.03.2022, after the issuance of notice u/s 148 on 30.03.2021. On perusal of letter of assessee dated 08.03.2022, it is apparent that the assessee has mentioned at point no. 2 of the said letter, “the copy of return of income filed in response to notice u/s 148 along with computation and financial statement are enclosed herewith”. However, admittedly, there was no return filed by the assessee in response to notice u/s 148. The copy of return enclosed with the letter was the original return u/s 139 dated 09.03.2018 declaring total income of Rs. 49,810/-, but there was no averment by the assessee that such return should be treated as return in response to notice u/s 148. Under such circumstances, as there was no return in response to notice u/s 148 filed by the assessee, it was not obligatory upon the Ld. AO to issue the notice u/s 143(2). In backdrop of such facts and circumstances, we find substance in the assertions of the revenue, accordingly, we reject the additional ground raised by the Ld. AR in the present case. In result, additional ground no. 1 of the assessee stands dismissed.

12. Ground No. 1 & 4: Challenging the validity of reopening assessment of the concluded assessment and the approval granted u/s 151, based on change of opinion.

12.1 At the outset, Ld. AR submitted that the assessment for the AY 2016-17 was completed in the case of assessee and reopening was done based on same material, without any new or fresh information, accordingly, the basis of reopening was ‘change of opinion’, which is not permissible under the settled principle of law. Ld. AR placed his reliance on various judgments, listed as under: reopening of concluded assessment made u/s143(3) wherein sales of Rs.8,37,26,439 u/s 44AB has been examined/ accepted by the AO which ultimately includes alleged deposits/ credits into bank of Rs.8,31,02,597; there is no new/ fresh material possessed by the AO; it is merely 'change of opinion' on the self-same material available on record;

12.3 We have considered the rival submissions, perused the material available on record and judicial pronouncements relied upon.

12.4 In the present case, the original assessment u/s 143(3) had come to be completed on 08.12.2018 and a brief assessment order was passed by the Ld. AO by accepting the return income of the assessee. We further have looked into the notice u/s 142(1) issued by the Ld. AO and replies of the assessee before the Ld. AO during the original assessment proceedings, from where it is not transpired that the issue regarding large cash deposits and withdrawals are being enquired into. As certain information is brought to the knowledge of the Ld. AO by the investigation 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari wing by their reported on 10.03.2021 (extracted supra), wherein certain suspicious transactions were reported during the AY 2013-14 up to 2017- 18. As such this new information came to the knowledge of Assessing Officer much after completion of the assessment u/s 143(3) dated 08.12.2018, such information constitutes fresh material, on which the Ld. AO needs to be acted in accordance with the mandate of law, therefore, the reopening was done on the basis of new material brought on record by the Investigation Wing of the department. Further, in absence of any investigation, examination or inference by the Ld. AO in the original assessment qua the basis of reopening, the action of Ld. AO cannot be held illegal as merely on the basis of ‘change of opinion’. As it is held that the formation of reasons to believe by the Ld. AO are correct and in accordance with the mandate of law, the approval granted u/s 151(2) cannot be held as invalid for the reason that there was no the application of mind by the sanctioning authority. We, thus, unable to persuade and concur with the contention raised by the Ld. AR, consequently, ground no. 1 & 4 of the present appeal of the assessee has been rendered as dismissed.

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari 13. Ground no. 2 & 3: Addition on an independent issue which is not part of the reasons recorded or there is no live length/ nexus between the information of deposits into bank and the formation of belief. Therefore, the jurisdiction assumed u/s 147 would be invalid.

13.1 Ld. AR on the aforesaid issue submitted that the reopening was done based on the issue of “unverifiable/ unexplained deposits / credit into bank”, whereas the additions are made on the issue of undisclosed business income. It was the submission that there was no addition on the very issue, which was the basis for reopening, the addition was made on an independent issue of business income which is not the part of reasons recorded, therefore, the same is not permissible in the eyes of law. Ld. AR placed his reliance on the judgment in the Rajasthan High Court in the case of Ramsingh (2008) (Raj), Prosperous Buildcon Pvt. Ltd. (2023) (Delhi HC).

13.2 Ld. AR further submitted that there is no live link / nexus between the information of deposit into bank and formation of belief alleging escaped income of Rs.8,31,02,597/-. It is the submission that the receipt in bank are from debtors against accounted sales, it is only reason to suspect merely to verify the deposit / RTGS credit into bank, therefore, 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari there is no live link between the information and the formation of belief which is precondition, sine qua non for assuming jurisdiction u/s 147. Ld. AR further argued that the Ld. AO has only referred to the information but there was clear absence of formation of Bonafide belief on his part that the income had escaped assessment, there was no application of mind by the Ld. AO qua the information before arriving at the conclusion that income has escaped assessment. Ld. AR placed his reliance on following judgments: deposits/ RTGS credits into bank, which is related to receipts from debtors against accounted sales; it is 'reason to suspect' merely for verifying the deposits/ RTGS credits into bank' & 'formation of believe' for alleged escaped income of Rs.8,31,02,597; in absence of pre-requisite/ pre-condition which is sine qua non for assuming jurisdiction u/s147; it is for mere verification in absence of any tangible material in his possession; he made conclusion that it is unexplained, based on no material; on his possession; an AO at the stage of reopening of a concluded assessment u/s147 is not required to conclusively prove escapement of income, but the statutory obligation so cast upon him i.e., formation of bona-fide belief on the basis of material available before him that the income chargeable to tax had escaped assessment cannot be lost sight of;

8. Well Trans Logistics India (P) Ltd (2024) (Del HC) (2024) 166 taxmann.com 72 Lakhmani Mewal Das (1976) (SC)-relied on Meenakshi Overseas (P) Ltd (2017) (Del HC)-relied on Rajesh Jhaveri Stockbrokers (2007) (SC)- relied on Raymond Woolen Mills (1999) (SC)- distinguished

24. We may note that the Assessing Officer after reproducing the information received from DDIT, (Investigation) Unit, drew the conclusion of escapement of income. In the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 IR 500 (SC), the Supreme Court had explained that expression "reason to believe" would mean justification to know or suppose that income had escaped assessment. While, it is correct that it is not necessary for the Assessing Officer to finally ascertain whether income had escaped assessment, nonetheless, the Assessing Officer must have sufficient cause to believe that it has.

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari (2023) 148 taxmann.com 184 13. Parmanand Gupta (2023) (Raipur-Trib) (2023) 156 taxmann.com 551 14. Paresh Babubhai Bahalani (2023) (Guj HC) (2023) 156 taxmann.com 517 I Raymond Woolen Mills (19fi9) (SWC)-distinguished 15. Rajhans Processors (2023) (Raj HC)(2023) 149 taxmann.com 29; Raymond Woolen Mills (19 ) (SC)-distinguished Touchstone Holdings (P) Ltd (2022) (Del HC)-distinguished

16. Touchstone Holdings (P) Ltd (2022) (Del HC) (2022) 142 taxmann.com 336 Raymond Woolen Mills.(] 99 ) (SC)- relied 17. Jugal Kishore Paliwal (2022) (CG HC) (2022) 140 taxmann.com 336 Raymond Woolen Mils (1999) (SC)- relied 13.3 Per contra, Ld. Sr. DR submitted that the addition was made on the basis of huge transactions of deposits and cash withdrawals in the bank account of the assessee, which are the basis forming the reason to believe for reopening of assessment therefore, it cannot be said that the addition was made on a new issue as the estimation of income was on the basis of such credit entries in the bank of assessee only. Ld. Sr. DR further submitted that during the assessment proceedings and also before the investigation wing of the department, the assessee was non-compliant therefore, there was a on failure on the part of assessee to explain such transactions, Ld. AO had rightly made the addition by estimating the income of assessee at 5% of such credits.

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari 13.4 We have considered the aforesaid contentions of both the parties, perused the material available on record and the case laws relied upon by the assessee. As the addition was made based on credit entries in the bank account of the assessee, which are the suspicious transactions reported by the Income Tax Officer (Inv.), Raipur. The Ld. AO had requested the assessee time and again to furnish necessary information and explanation qua these transactions, however, the assessee failed to substantiate the same under such circumstances, a plausible view considering the assessee’s nature of business was taken by the LD. AO by estimating the income of the assessee, therefore, it cannot be held that the addition was made on an independent issue alien to the very basis for formation of belief or there was no live link between the information and the formation of belief, while recording the reasons for reopening. In such circumstances, we do not find any substance in the contention raised by the Ld. AR, thus, Ground No. 2 & 3 of the appeal of the assessee are rejected.

14. Ground No. 5: Regarding sustaining the addition of Rs. 41,55,130/- on adhoc basis on 5% of deposits / RTGS credit into bank account, which relates to receipt from debtors against accounted / disclosed sale in the books of assessee.

14.1 On merits, Ld. AR submitted that the assessment u/s 147 r.w.s. 144 r.w.s. 144B was completed by estimating the income of the assessee at 5% of deposits / RTGS credits in the bank account of the assessee to the tune of Rs.8,31,02,597/- without any reasonable basis. It was the submission that in assessee’s own case for AY 2014-15 which was assessed u/s 143(3) on 29.11.2016 the GP was estimated of 3% of the total turnover of Rs.10,02,02,884/- against the GP rate of Rs. 2.64% shown by the assessee. It was the alternate submission by Ld. AR that if the reopening is held to be validly opened then also the addition cannot be made on that count because the average GP of the assessee as per history in assessee’s own case was less than the GP already declared by the assessee in the relevant year. To substantiate such facts Ld. AR furnished before us a chart showing financial information of the assessee for AYs 2013-14 to 2017-18, the same is culled out as under:

14.2 Ld. AR submitted that, even if the GP is estimated at 5%, the same needs to be reduced to the extent, the same has been declared by the assessee in its return of income. For AY 2016-17 such GP shown by the assessee was Rs.25,63,351/- and the GP worked out by Ld. AO was Rs. Rs. 41,55,130/-, therefore, the addition was to be made only for the difference i.e., for Rs. 15,91,779/- 14.3 Based on financial information extracted (supra), it was the submission that the addition of 5% made by the Ld. AO, cannot exceed past 3 years average Gross Profit % (GP%) of the assessee, which was also accepted by the revenue in scrutiny assessment, wherever applicable. Such contention is raised by the Ld. AR based on various judgments by the Hon’ble High Courts and the coordinate benches Tribunals including the jurisdictional bench of Tribunal at Raipur. Ld. AR placed his reliance on the following case laws: on merits- addition cannot be made/sustained, since GP rate shown is better than the income shown/ assessed by the revenue in scrutiny assessment made u/s143(3) in past years in assessee's own case

4. We find no merit in the aforementioned submission made by the learned counsel. A perusal of the order of the Tribunal shows that what it in effect finds is that neither the exemplars pertaining to the country liquor dealer of Allahabad nor those which concerned other country liquor dealers of Lucknow, could, in the circumstances of the case, provide a proper basis for assessing the profits earned by the petitioner. Account to it, applicant's profits could properly be worked out in the light of its assessment in earlier years. In this view of the matter, no question of the Tribunal either ignoring any relevant material or its relying upon an irrelevant material arises. The findings recorded by the Tribunal in this regard are findings of fact based on appraisement of material on record and they do not appear to be vitiated by any error of law."

30. Mohan Sukumaran (2020) (Raipur-Trib) (2020) 34 NYPTTJ 942; ITA no. 62/RPR/2013

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari 31-3-10 31-3-11 31-03-12 31-03-13 31-3-14 AY10-11 AY11-12 A.Y.12-13 AY13-14 AY14-15 Sales of 3,12,33,449 32,57,36,624 46,88,63,846 52,95,15,913 59,28,42,427 cigarette & tobacco Sales of 6,64,57,045 6,43,70,340 8,27,54,937 9,97,38,393 1,08,8,16,426 other products -Discount (4,09,223) 7,01,740 12,40,700 13,47,913 19,49,102 Total sales 37,83,81,271 38,94,05,225 55,03,78,083 62,79,06,393 69,97,09,751 Gross profit 58,97,879 60,02,818 83,43,446 96,11,100 1,06,75,021 GP rate % 1.56% 1.54% 1.52% 1.53% 1.53% Accepted Accepted Accepted Under Accepted by by by consideration by revenue revenue revenue revenue in in in scrutiny scrutiny scrutiny assessment assessment assessment u/s.143(3) u/s.143(3) u/s.143(3) dt.19-12-12 dt.20-2-15 dt.15-11-16 We, thus, on the basis of the aforesaid facts are of the considered view that the gross profit rate of the assessee could have safely been taken by the A.O at 1.54% i.e. average gross profit rate of the last three years i.e. A.Y. 2010-11 to 2012-13. Accordingly, in terms of our aforesaid observations the A.O is herein directed to restrict the addition by adopting the overall gross profit rate of the assessee @1.54% of its total sales of Rs.62,79,06,393/-. Thus, the ground of appeal No.1 is partly allowed in terms of our aforesaid observations.

14.4 Ld. Sr. DR on the other hand vehemently supported the orders of revenue authorities and have requested to uphold the same.

14.5 After a thoughtful consideration, to the contentions raised by the petitioner and the respondent, perusal of the material available on 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari record and case laws relied upon by the Ld. AR. We find substance in the contention raised by the Ld. AR, referring to various judgments that the best ratio for estimation of profit / income of an assessee would be the rate of GP of assessee’s own case to adopt the average GP rate from the preceding 3 years, which is not disputed by the revenue while completing the assessment of the assessee for the years which are picked up for scrutiny assessment, whereas in present case the rate of 5% adopted by the Ld. AO was without any basis. Under such factual matrix of the present case, as the credits in the bank account of the assessee, without any iota of doubt are treated as business receipts of the assessee, which are less than the turnover shown by the assessee in the respective assessment years, therefore, the contention of assessee that the receipts pertain to regular and accounted sales of the assessee as well as from the debtors cannot be distrusted without any cogent material contradicting the same, found to be acceptable. However, the assessee failed to furnish any explanation qua the credit entries in his bank accounts, that whether such bank doubtful transactions are duly accounted for in the books of the assessee and all such entries reflects assessee’s explained / accounted turnover / sales or not. Although the bank accounts are available with the Ld. AO during the reopening assessment, but Ld. AO was unable to decide the nature of transactions in absence of any explanation by the assessee, 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari therefore, the impugned transactions are subject matter of verification. Before us, Ld. AR has furnished copies of bank statements maintained with various banks having large entries of transactions and as observed all such transactions are subject to verification with the audited accounts of the assessee, therefore, in all fairness, this issue needs to be restored to the files of Ld. AO for examination, verification and re-adjudication based on material on record and if Ld. AO found it correct that the credit entries in the bank account are duly incorporated in the books of assessee as recorded / accounted transactions and profit generated from such transactions is offered for taxation than there was no reason for estimation, however, in case in a different situation, if the estimation has to be adopted the same should be in the range of average profits of the assessee in preceding 3 years to the relevant AY, but in any case it should not be less than the returned income declared by the assessee.

14.6 Regarding, computational errors as pointed out by the Ld. AR, since the same are consequential in nature, and the matter is restored back to the file of Ld. AO, the same is directed to be considered while framing the consequential assessment order and computing the assessable income, therein.

159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari 14.7 Needless to say, reasonable opportunity of being heard shall be provided to the assessee in the set aside assessment proceedings. for the AY 2016-17 is partly allowed for statistical purposes.

For AY 2015-16 having identical issues, except the addition in this year was made for entire deposits of Rs.3,59,78,500/-, whereas in other years the addition was made at 5% of the total credits in the bank account, it is to be mention that there should be consistency in the approach of Ld. AO while dealing with the transactions of similar nature undertaken by the assessee may be in different years, thus, the credit entries representing bank deposit in AY 2015-16, should also been treated at par, as they are considered for the AY 2016-17 and 2017-18. Further, for AY 2015-16 also the entries in bank account are subject to verification to examine that the same represents accounted sales of the assessee and the same needs to be added qua the 159 & 160/RPR/2024 Pradeep Kumar Agrawal vs ITO, Ward- Dhamtari estimated income of the assessee as has been directed by us for AY 2016- 17 and 2017-18, by adopting the rate of GP in terms of various judgments relied upon, on a fair basis i.e., the average GP rate of the assessee in preceding 3 years, however, if the income so computed falls below the declared income of the assessee, then returned / declared income of the assessee shall be the assessed income of the assessee.

15.1 The issues, therefore, in AY 2015- 16, shall be disposed of in terms of our aforesaid observations in conjoint reading with the observations and decision in for the AY 2016-17, wherein our findings shall apply mutatis mutandis to the grounds of appeal in . Resultantly, is partly allowed for statistical purposes. for AY 2017-18, having identical issues, which are disposed of in terms of our observations and decision in for the AY 2016-17, wherein our findings shall apply mutatis mutandis to the grounds of appeal in ITA No. 160/RPR/2024. Resultantly, the same is partly allowed for statistical purposes.

159 & 160/RPR/2024 of the assessee for the AY 2015-16, 2016-17 & 2017-18 respectively, are partly allowed for statistical purposes.

Order pronounced in the open court on 16/01/2025.