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Facts
The assessee made an unexplained cash deposit of Rs.11,97,100/- in their bank account for Assessment Year 2012-13, leading to the reopening of assessment under Section 147 based on AIR information. The assessee contested the reopening, arguing that the sanction for reassessment was granted mechanically without independent application of mind by the PCIT.
Held
The Tribunal found that the reasons recorded by the AO constituted borrowed satisfaction from AIR information, and the sanctioning authority failed to apply independent mind or identify any tangible material suggesting escaped income. Consequently, the Tribunal held that the reassessment proceedings were void-ab-initio and quashed them.
Key Issues
Whether reassessment proceedings initiated under Section 147, based on borrowed satisfaction (AIR information) and lacking independent application of mind by the sanctioning authority, are legally valid.
Sections Cited
Section 147, Section 133(6), Section 148, Section 143(1), Section 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, DELHI
Before: MS. MADHUMITA ROY
The instant appeal filed by the assessee is directed against the order passed by the Ld. CIT(A) NFAC, Delhi, dated 30.03.2022
The appeal is barred by limitation by 271 days an application for condonation has been filed by the assessee along with affidavit narrating the assessee to not file the appeal in time due to prolong ailment from 25.05.2022 to 24.02.2023, in support of the same the medical documents of the assessee has been placed on record, perusal of which the plea taken by the assessee seems to be genuine and, therefore, the delay is condoned.
The issue involves addition of Rs.11,97,100/- on unexplained cash deposit in the bank account maintained with Oriental Bank of Commerce as the assessee failed to furnish any explanation regarding the source of such cash deposit the addition was made against the assessee.
Before us, it is the case of the assessee that the case was reopened solely on the basis of AIR information that the assessee made cash deposit of Rs.11,97,100/-. In this connection, the Ld. AR has drawn our attention to page 1 of the paper book containing the reasons recorded by the ITO, Ward-3(2) Bulandshahar, in reopening the assessment under Section 147 of the Act, paragraph 6 whereof clearly demonstrates that during the inquiries made under Section 133(6), non filing of cogent explanation by the assessee to Tej Singh substantiate the deposit of Rs.11,97,100/- in the account of the assessee suggests that the assessee has no valid explanation to justify the above cash funds deposited in his account and as the amount is much higher to the threshold limit of basic exemption and seamlessly pave the way for coming to the conclusion and belief that the said amount has escaped assessment for which action under Section 147 of the Act has become due, and hence reopening was made. Such reason recorded was served by the PCIT dated 28.03.2019 which is also appearing at page 2 of the same only with the noting that in view of the reasons recorded by the AO, I am satisfied that this is a fit case for issue of notice under Section 148 of the Act. The Ld. Counsel for the assessee joins issue here, as the action for sanction was without application of mind and this was done in a mechanical manner the same is not sustainable in eyes of law, and, therefore, the reassessment proceeding is void-ab-initio and thus, liable to be quashed as argued by him. In this regard, he has relied upon the judgment passed by the Hon’ble Madhya Pradesh High Court in the case of M/s Goyanka Lime and Chemicals ltd. Vs. CIT, Jabalpur passed in of 2012, a copy whereof has been submitted before us.
On the other hand, the Ld. DR relied upon the order passed by the authorities below.
It is found that paragraph 6 of the reason recorded is nothing but borrowed satisfaction on the basis of AIR information and Tej Singh furthermore, no independent application of mind is evident from the note given by the hither authority while granting sanction to the reasons recorded by the Ld. AO. The judgment relied upon by the Ld. A.R in the case of Gopal Chand Mundhra and Sons Vs. ITO, Ward-55(5) New Delhi, in and others passed by the Coordinate Bench has also been considered, in support of the submission made by the Ld. AR that there is no tangible material mentioned which could form the basis of reason to believe of escaping assessment by the assessee. On identical situation the Hon’ble Court while quashing the reassessment proceeding observed as follows:
“25. At this stage it requires to be noted that since the original assessment was processed under Section 143 (1) of the Act, and not Section 143 (3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was after the expiry of four years from the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment.”
The Ld. D.R has not been able to controvert such submissions made by the Ld. A.R.
Thus, having regard to the entire aspect of the matter, when the reason has been recorded by the Ld. A.O solely on the basis of AIR information and further sanction of the same made by the concerned authority does not show any independent application of mind and furthermore when no tangible material which could form the basis for reason to believe that income has escaped assessment,
With the aforesaid observation the reassessment proceeding is, therefore, quashed.
Assessee’s appeal is thus, allowed.
Order pronounced in the open court on 29.11.2024