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Facts
The appellant, a non-filer for AY 2012-13, had cash deposits of Rs. 24,92,670/- in his bank account. The AO reopened the assessment based on AIR information, treating the deposits as escaped income and made an ex-parte assessment of Rs. 26,21,634/- as income due to non-compliance with notices. The CIT(A) dismissed the appeal. The appellant argued the deposits were business receipts and sought consistency with AY 2011-12, where similar deposits were assessed at 8% of sales.
Held
The Tribunal noted the AO's inconsistent approach, where for AY 2011-12, cash deposits were treated as sales with an 8% income assessment, but for AY 2012-13, the entire deposits were treated as income without new material. The Tribunal ruled that the AO could not deviate from the previous year's method without contrary facts and directed the AO to assess the income for AY 2012-13 at 8% of the total cash deposits.
Key Issues
1. Validity of the reopening of assessment and service of notices. 2. Appropriate method for taxing cash deposits in the bank account of a non-filer, considering prior assessment consistency.
Sections Cited
142(1), 151, 147, 148, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI C. N.PRASAD & SHRI AVDHESH KUMAR MISHRA
This appeal of the Assessment Year [In short, the ‘AY’] 2012-13, preferred by the appellant/assessee, challenges an order dated
1 of 8 29.12.2023, of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [In short, the ‘CIT(A)’] by questioning, vide initial and revised grounds of appeal, the legality of reopening of the assessment and also the taxability of Rs.26,21,634/-.
2. The relevant facts, in brief, are that the appellant/assessee deals in mobile phone accessories. During the relevant year the Assessing Officer [In short, the ‘AO’], based on the AIR information, reopened the case of the assessee on the reasoning that the cash deposits aggregating to Rs. 24,92,670/- made by the appellant/assessee, who was non-filer of the income tax return, in his bank account in the relevant year, was nothing but the income escaped assessment.
3. After reopening the assessment, the AO issued various notices u/s 142(1) of the Act as detailed in para 4 of the assessment order. However, the appellant/assessee failed to ensure compliance of any of the statutory notices. Hence, the AO made ex-parte assessment treating the entire deposits aggregating to Rs. 26,21,634/- made by the appellant/assessee in his bank account in the relevant year as income. The appeal of the appellant/assessee was dismissed by the CIT(A). Hence, he appealed before the Tribunal.
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The Ld. Authorised Representative of the appellant/assessee (In short, ‘AR’) submitted the cash flow chart of the appellant/assessee and put emphasis on the fact that the appellant/assessee deposited cash aggregating to Rs.25,02,670/- during the relevant year (every month); spanning from 4th April, 2011 to 31st March, 2012. It was contended by the Ld. AR that the pattern and frequency of cash deposits and withdrawals into/from bank account were such which buttressed the claim of the appellant/assessee that the said cash deposits were nothing but the business receipts/proceeds in cash. It was further submitted by the Ld. AR that the cash deposits and withdrawal into/from bank account were Rs.25,02,670/- and Rs.25,20,000/- during the relevant year.
4.1 It was claimed that the business of the appellant/assessee was small; therefore, the appellant/assessee was not mandated by the law to maintain books of account. The maximum cash deposit on one day was Rs. 83,000/- on 19.09.2011. Most of the cash deposits in the bank account were below Rs. 50,000/- on one day and the cash were deposited in every month of the financial year. The Ld. AR, emphasizing on various noting in the format of recording the reasoning for reopening the assessment by the AO and approval of 3 of 8 the same under section 151 of the Act by the PCIT, contended that the reopening was mechanical in nature as section 147(a) of the Act mentioned in the reopening format by the AO was not inexistence since 1988 onward.
4.2 Further, it was contended by the Ld. AR that the AO was not sure of the quantum of cash deposits in the bank account and that was why he mentioned the sum/cash deposit in bank account might vary in assessment. The Ld. AR also claimed that the AO had not carried out any field inquiry before reopening the assessment for ascertaining the truth. It was also contended by the Ld. AR that the AO had failed to serve any notice under section 148 and 142(1) of the Act on the appellant/assessee as the address on which notices sent were not the correct address on or after the date of issue of notices. On these facts the genuineness of reopening of the assessment was challenged by the Ld. AR.
4.3 Alternatively, it was also argued by the Ld. AR that the cash deposits made in the bank even on peak basis did not go beyond Rs.2,00,000/- on a single day as the deposits and withdrawals into/from bank account were regular on day-to-day basis. Hence, the cash deposits, on peak basis, also could be lesser than the taxable income. Thus, it was contended by the Ld. AR that the 4 of 8 appellant/assessee did not file its return of income as he was not having the taxable income.
4.4 The Ld. AR further contended that the appellant/assessee’s case of the AY 2011-12 was reopened on the similar reasoning (cash deposits in the bank account) under section 147 of the Act. The reopened assessment of the AY 2011-12 was completed under section 143(3) r.w.s. 147 & 148 of the Act vide order dated 16.12.2018 determining the income at Rs.4,48,910/- by treating the cash deposit in bank account as sales. The Ld. AR thus prayed that when the cash deposits in bank account of the AY 2011-12 was treated as sales and income imbedded therein was assessed @ 8%& odd by the AO then the same logic, at most, needed to be applied in this year also as no contrary material had been brought on the record by the AO. The Ld. AR admitted that he would not press the legal ground i.e. reopening the assessment, if the income would be determined @ 8% of the cash deposits as done in the reopened assessment of the preceding year in similar facts and circumstances by the AO.
The Ld. Sr. DR placing reliance on the findings of the AO and the CIT(A) prayed for dismissal of the appeal.
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Heard both the parties at length and perused the material available on record.
We find force in the arguments and contentions of the Ld. AR. We are surprised to see two different findings of the AO on similar sets of facts in reopened assessments of the appellant/assessee; one in the AY 2011-12 and another in the 2012-13. The assessments of these two years; AY 2011-12 and 2012-13 were reopened on the similar reasoning that the cash deposits in bank account were nothing but the income escaping assessment in absence of any return of income filed by the appellant/assessee. However, the AO treated cash deposits in the bank account as sales and assessed the income embedded therein at Rs.4,48,910/- in AY 2011-12, whereas in the AY 2012-13 entire cash deposits as income without bringing any material on the record to strengthen the finding therein.
In the interest of justice and considering all the afore-stated observations, we are of the considered opinion that the AO, during the AY 2012-13, cannot deviate from his stand taken in the reopened assessment proceedings of the preceding year; AY 2011-12without bringing contrary facts on the record. We, therefore, direct the AO to work out the income of the appellant/assessee @ 8% on his total
6 of 8 cash deposits in his bank account(s) in the relevant year; AY 2012-13 and assess it accordingly.