SH. ATAR SINGH,FARIDABAD vs. ITO WARD-1(1), FARIDABAD
Before: SHRI YOGESH KUMAR U.S. & SHRI AMITABH SHUKLA
PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal, Delhi (‘Ld. CIT(A)/’NFAC’ for short), dated 25/02/2025for the Assessment Year 2012-13. 2. The grounds of appeal are as under:- “1.0 That, on the facts and in the circumstances of the case, the disallowance, imposition of tax, and interest with reference thereto, as well as the quantification of taxable income and tax liability, are unjustified, erroneous, and unsustainable, and it is prayed that necessary directions be issued to the Learned Assessing Officer (Ld. AO) to grant appropriate relief fin accordance with the law.
0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without considering the fact that no reasons to believe recorded by the Ld. AO u/s 148 of the Act has been provided to the appellant.
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3.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld.
AO without considering the fact that proceedings u/s 148 is also not justifiable since mere cash deposit in bank account does not amount to escaped income.
0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without appreciating the fact that mere deposit of cash, information of which are received from Annual Information Return (i.e. AIR) could not be the basis for re-opening of assessment proceedings u/s 147 of the Act.
0 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred without substantiate the fact that no approval accorded u/s 151 of the Act by the Ld. AO has been provided to the appellant.
0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without appreciating the fact that section 69A of the Act is not applicable in this case.
0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact that ex-parte order has been passed without providing reasonable opportunity to the appellant.
Brief facts of the case are that, the Assessee is an agriculturist. Assessment proceedings u/s 147/148 of the Income Tax Act, 1961 ('Act' for short)were initiated based on the AIR Information that the Assessee deposited cash of Rs. 95,23,000/- in his saving bank account. An approval u/s 151(1) of the Act came to be issued on 26/03/2019 by the Pr. Commissioern of Income Tax, Faridabad. An assessment order came to be passed u/s 147/144 of the Act on 3 10/12/2019, wherein the Ld. A.O. made addition of Rs. 1,02,73,000/- by treating the cash deposits out of undisclosed source of the Assessee. Aggrieved by the assessment order dated 10/12/2019, Assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) vide order dated 25/02/2025, dismissed the Appeal filed by the Assessee. As against the order of the Ld. CIT(A) dated 25/02/2025, Assessee preferred the present Appeal on the grounds mentioned above.
The Ld. Counsel for the Assessee vehemently submitted that the reasons to believe recorded on 15/03/2019 by the A.O. is without application of mind, therefore, the same is invalid. Further, the Ld. Assessee's Representative drawn our attention to the ‘Reasons to Believe’ and submitted that there is a clear contradiction at Para 1 and para 3 of the reasons to believe wherein one hand, it was stated that the ‘Assessee has not filed any return of income’, on the other hand, it was mentioned that ‘income declared by the Assessee does not commensurate with the cash deposit mentioned’. The Ld. PCIT has given approval on the ground that the Assessee has not filed the return of income. Once return was not filed, A.O. cannot state that the ‘income declared in the return of income does not commensurate with the cash deposit’. Further submitted that A.O. has relied on AIR data indicating cash of deposit of Rs. 95,25,000/-, however, A.O. has not independently analyzed the entries before forming belief that ‘income has escaped assessment’. It is entirely plausible that the cash
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Sh. Atar Singh Vs. ITO deposits could arise from various sources unrelated to the income of the Assessee such as loan or advances, gift, thus submitted that there was no ‘live link’ or rational connection between material and the belief of escarpment of income. The Ld. Assessee's Representative relied on the following decisions and sought for allowing Ground No.
2.0 and 4.0 of the Assessee.
a) Sumer Singh Dagar Vs. ITO (ITA No. 1634/Del/2024) dated30/04/2025
b) Shri Karan Khurana Vs. ITO (ITA No. 1783/Del/2019) dated
17/03/2021
Per contra, the Ld. Departmental Representative submitted that before recording the reasons, A.O. made requisiteenquiry, however, the Assessee has replied to any of the notices issued by the A.O. before recording the reasons. Further submitted that the reasons have been recorded after making due enquiry, further submitted that there is no merit in the contention of the Assessee. Thus, sought for dismissal of Ground No. 2.0 and 4.0 of the Assessee.
We have heard both the parties and perused the material available on record. The A.O. recorded the reasons to believe on 15/03/2019 and reopened the assessment proceedings against the Assessee. The copy of the reasons recorded are produced in the Paper Book at Page No. 2 to 3 which is reproduced as under, for the sake for ready reference:-
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15/03/2019 at para 1 it has been mentioned that the A.O. has stated that ‘the Assessee has not filed any return of income for the Assessment Year 202-13. In the absence of ITR for the year under consideration the nature of transactions activity of the Assessee, if any, cannot be ascertained’. However, in Para 3, the A.O. mentioned that ‘income declared by the Assessee does not commensurate with the cash deposit’, there is a clear contradiction in the reasons recorded. Ld.
A.O. was not sure, as to whether, the Assessee has indeed field return of income or not. Further, A.O. relied on the AIR data indicating the cash deposit of Rs. 95,23,000/- and nothing is mentioned regarding independent analysis carried out by the A.O. before forming belief that 7
Sh. Atar Singh Vs. ITO income has escaped assessment. Thus, the reasons recorded were not only wage but also lack specific details such as, nature of transaction or any tangible material linking the deposits to undisclosed income, no ‘live link’ or rational connection are reflected in the reasons recorded.
The Co-ordinate Bench of the Tribunal in the case of Sumer Singh Dagar Vs. ITO(supra) held as under:-
“5. It can be seen from the assessment order and reasons recorded u/s 147 of the Act, the A.O. made basis on the data of AIR which indicating alleged cash deposits. It can be seen from the reasons recorded except relying on the data available with the ITD system, A.O. has not made independent anaylization of the entries before forming belief that income has escaped assessment. The identical issue came up before the Co-ordinate
Bench of the Tribunal in the case of Mahavir Prasad (supra). In ITA no. 924/Del/2015 vide order dated 09.10.2017 for assessment year 2007-08, had quashed such re-assessment proceedings by observing as under:
After going through the reasons recorded by the ITO, Ward-2, Rewari, am of the view that there is no nexus between the prima facie inference arrived in the reasons recorded and information; the information was restricted to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee; that even the communication dated 24.1.2012 could not be made a basis to assume juri iction in view of the fact that such an enquiry letter is an illegal enquiry letter and thus cannot be relied upon; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without juri iction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and these are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed.”
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6. In view of the above discussion, the reassessment proceedings initiated by the AO are held to be void. Since Assessee succeeds on this legal ground i.e. validity of reassessment proceeding, the grounds on merit become academic in nature and therefore are not being adjudicated.”
The Co-ordinate Bench of the Tribunal in the case of Shri Karan Singh Khurana (supra) has taken identical view in following manners:- “16. We have considered the rival submission. Hon’ble Punjab & 180 ITR 319 held as under:
“Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get juri iction to make the reassessment.”
Hon’ble Delhi High Court in the case of Pr. CIT Vs. SNG Developers Ltd., [2018] 404 ITR 312 (Del.) held as under:
“Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not meet the statutory conditions. As already held by the Appellate
Tribunal, there was a repetition of at least five accommodation entries and the total amount constituting the so-called accommodation entries would therefore, not work out to Rs.95,65,510. It was unacceptable that the Assessing Officer persisted with his "belief" that the amount had escaped assessment not only at the stage of rejecting the assessee’s objections but also in the reassessment proceedings, where he proceeded to add the entire amount to the income of the assessee. Therefore there was non-application of mind on the part of the Assessing Officer. The Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) and holding that the reopening of the assessment was bad in law.”
Hon’ble Delhi High Court in the case of Shamshad Khan Vs. ACIT [2017] 395 ITR 265 (Del.) held as under:
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“Held, allowing the petition, that the form for recording the reasons for initiating the proceedings under section 148 of the Act for obtaining approval of the Commissioner itself proceeded on the erroneous basis that the quantum of income which had escaped assessment was Rs.28,75,000 whereas the assessee had filed returns showing income of merely Rs.20,56,145 and it was on this basis that the Additional Commissioner and the Commissioner granted their approval for reopening the assessment. Even though the assessee highlighted this fundamental error at the initiation of the case by stating that his income was mentioned as Rs.20,56,145 instead of Rs.69,71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income i.e. Rs.69,71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting Rs.20,56,145
for Rs.69,71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed.”
Hon’ble Bombay High Court in the case of Siemens Information Systems Ltd. Vs. ACIT & Others [2007] 293 ITR 548 (Bom.) held as under:
“The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisions of section 10A as amended by the Finance Act,
2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999- 32 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition : Held, allowing the petition,
(i) that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable
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Sh. Atar Singh Vs. ITO was the law after the amendment and not the law in respect of which the petitioner had filed the return for the year 1999-
2000. This by itself clearly demonstrated that there was total non-application of mind on the part of the authority and consequently, the notice based on that reason would amount to non-application of mind.
(ii) That the income derived by the assessee from an industrial undertaking to which section 10A applies could not be included in the total income of the assessee. Therefore, the petitioner was right in filing the return by excluding the income in terms of section 10A.”
1 The crux of the above judgments and the judgment of the Tribunal relied on the above had been that in case, incorrect, wrong and non-existing reasons are recorded by the AO for reopening of the assessment and that AO failed to verify the information received from Investigation Wing, the reopening of the assessment would be unjustified and is liable to be quashed.
2 In the present case, the AO recorded wrong facts on many count in the reasons recorded for reopening of the assessment i.e. AO recorded incorrect amount of Rs. 58,40,171/- credited in HSBC account, Noida despite he has admitted in the assessment order that it was Rs. 30,74,006/-. The AO in the reasons also recorded incorrect fact that no assessment has been completed in this case u/s 143(3) but in the reason itself AO recorded that earlier reassessment has been done u/s 147/148 read with section 143(3) of the Act. The AO also incorrectly recorded that sanction for reopening of assessment is required under proviso to section 151(1) of the Act despite such proviso does not exist in the statute as it was amended in 2015. The AO, therefore, recorded wrong, incorrect and non-existing reasons for reopening of the assessment. It makes clear that there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. The AO has recorded incorrect amount which escaped 34 assessment. The reasons failed to demonstrate the live link between the alleged tangible material and the formation of belief that income chargeable to tax has escaped assessment. The decisions relied upon Ld. Counsel for assessee in the cases of Pr. CIT Vs. Meenakshi Overseas (P) Ltd. 395 ITR 677 (Del.), Pr. CIT Vs. RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. CIT vs. G&G Pharma India Ltd. [2016] 384 ITR 147 (Del.) and Signature Hotels P. Ltd. Vs. ITO (supra) squarely apply to the facts and circumstances of the case. Considering the facts and circumstances of the case, in the light of the above discussion, and decisions referred to in the order, we are of the view that reopening of the assessment is invalid and bad in law and that sanction/approval granted is also without any 11 Sh. Atar Singh Vs. ITO application of mind. Therefore, the reopening of the assessment cannot be sustained in law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly all the additions stand deleted.”
In view of the above, as the A.O. has recorded contrary facts in the reasons recorded, A.O. has not made independent analysis of the entries before the forming belief that the ‘income has escaped assessment’, the reasons recorded were being vague and lack of specific details and in the absence of live link between the material and the belief of escapement of income, by relying on the decisions of the Tribunal (supra), we find merit in Ground No. 2.0 and 4.0 of the Assessee. Accordingly, we set aside the assessment order and order of the Ld. CIT(A) by allowing Ground No. 2.0 and 4.0 of the Assessee.
Since, we have allowed the ground No. 2.0 and 4.0 of the Assessee, other grounds of Appeal requires no adjudication.
In the result, Appeal of the Assessee is partly allowed. Order pronounced in the open court on 19th December, 2025 (AMITABH SHUKLA) JUDICIAL MEMBER Date:- 19 .12.2025 R.N, Sr.P.S*