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Income Tax Appellate Tribunal, BANGALORE BENCH “ C ”
Before: SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : These two appeals by the assessee are directed against separate orders of the CIT (Appeals) dt.31.1.2012 and 21.2.2012 for the Assessment Years 2004-05 and 2006-07 respectively.
First I take up the appeal for the A.Y. 2004-05 where the assessee has filed the following concise grounds :
“ 1. The orders of the authorities below in so far as they are against
2. The learned CIT[A] is not justified in upholding the re-opening of the assessment u/s.147 of the I.T. Act, 1961 over-ruling the objections of the appellant for the re-opening of the assessment under the facts and in the circumstances of the appellant's case.
3. Without prejudice to the above, the learned CIT[A] is not justified in upholding the assessment passed u/s. 144 of the I.T. Act, 1961 under the facts and in the circumstances of the appellant's case.
4. Without prejudice to the above, the learned CIT[A] is not justified in sustaining the addition of a sum of Rs.3,26,0501- being the cash deposited in HDFC Bank on the ground that the explanation of the appellant that his wife had made the deposits could not be accepted as she could not have saved the amounts based on her Income-tax return under the facts and in the circumstances of the appellant's case.
5. The learned CIT[A] is not justified in sustaining a sum of Rs.4,2O,800/- being 50% of the addition of Rs.8,41,600/- made by the A.O. in respect of the cash deposited on various dates in Karnataka Bank, Saraswathipuram, Mysore holding the same to represent unexplained investment of the appellant under the facts and in the circumstances of the appellant's case.
6. The learned CIT[A] is not justified in sustaining a sum of Rs.54,195/- being 50% of the adhoc addition of Rs.1,09,831/- made by the A.O. as sundry income from insurance and hostels, etc. under the facts and in the circumstances of the appellant's case. 7. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s.234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled. 8. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
Ground No.1 is general in nature and does not require any specific adjudication.
Ground No.2 is regarding validity of reopening of assessment. The assessee is an individual and its main source of income is agency commission from insurance besides the assessee derives income from running a hostel for working women. The assessee filed his return of income on 20.12.2004 declaring an income of Rs.2,50,977. The return was processed under Section 143(1) of the Income Tax Act, 1961 (in short 'the Act'). A survey was conducted in the premises of one M/s. Sukhee Constructions and Developers Pvt. Ltd. on 21.1.2006 in which the assessee was a Director. The survey reveals that the assessee had bank accounts in Karnataka Bank and HDFC Bank. Subsequently the Assessing Officer reopened the assessment by issuing a notice under Section 148 dt.5.4.2007. In response to the said notice, the assessee vide his letter dt.16.4.2007 requested that the return filed on 22.12.2004 treated as return filed in response to notice under Section 148 of the Act. The assessee also requested that a copy of the reasons recorded may be provided. The reasons recorded for reopening of assessment were furnished to the assessee. assessee challenged reopening of the assessment before the CIT (Appeals) but could not succeed.
Before the Tribunal, the ld. AR of the assessee submitted that non- disclosure of bank account would not amount to escapement of income assessable to tax. He has further contended that the Assessing Officer was having no record or material to show that the amount deposited in the bank is income assessable to tax. Therefore the Assessing Officer had no reason to believe that income assessable to tax has escaped assessment merely because there was a deposit in the bank account. The learned Authorised Representative has relied upon the decision of Hon'ble jurisdictional High Court in the case of C.M. Mahadeva Vs. CIT 49 ITCL 340 (Kar.) and submitted that under no law the assessee was required to disclose the bank account and deposit in the return of income.
6. On the other hand, the ld. DR has submitted that the assessee had not disclosed the bank account itself therefore the assessee failed to disclose the true and correct fact necessary for assessment. Even the bank account was not reflected in the abstracts of cash flow for the year end 31.3.2004 and also does not show any interest income that would have accrued on these accounts. Therefore there is a complete failure on the part of the assessee to disclose a true and correct fact relevant for the assessment and hence the reopening is justified.
I have considered the rival submissions as well as the relevant material on record. It is undisputed fact that bank account with HDFC Bank was not disclosed by the assessee in the return of income. This bank account was detected during the survey under Section 133A and also detected the cash deposit in the bank account. Therefore a tangible material was available with the Assessing Officer in the shape of cash deposit in the undisclosed account on the basis of which the Assessing Officer could very well form the belief that income assessable to tax has escaped assessment. The decision of Hon'ble jurisdictional High Court in the case of C.M. Mahadeva Vs. CIT (supra) is on different footing on the issue of reopening on the basis of undisclosed investment which was not required to be disclosed in the return of income.
Further the Assessing Officer in the said case stated in the reasons recorded for reopening that the matter required further investigation. On those particular is not permissible in such a case as it would give rise to fishing and roving enquiry. There is no quarrel on the point that the provisions of section 147 / 148 cannot be used for the purpose of investigation and find out if there was any lacuna in the accounts. Therefore the said decision could not help the case of the assessee. The assessee has not disclosed the bank account in the return of income wherein cash deposit was detected by the Assessing Officer in the survey proceedings. Hence, the reopening is justified.
Ground No.3 is regarding the assessment framed under Section 144 of the Act.
The learned Authorised Representative of the assessee has contended that the Assessing Officer framed assessment under Section 144 of the Act though the assessee filed necessary details. He has further contended that the Assessing Officer did not allow an appropriate opportunity of hearing to the assessee to represent the case. Therefore the ex-parte assessment is not sustainable.
On the other hand, the ld. DR has submitted that the Assessing Officer has recorded that the despite notice issued under Section 142(1), the assessee furnished cash flow statement for the year ending 31.3.2002, 31.3.2003 and 31.3.2004. Even rough cash book was produced by the assessee and therefore the assessee has not complied with the notice issued by the Assessing Officer under Section 142(1) of the Act. He has relied upon the orders of the authorities below and submitted that the CIT (Appeals) has granted opportunity by issuing a remand order.
I have considered the rival submissions and relevant material on record.
The Assessing Officer has recorded in paras 7 & 8 of the assessment order that despite the notice and various queries made under Section 142(1), the assessee did not furnish the necessary details and only filed rough cash book for the period 1.4.2003 to 31.3.2004. Further it is noticed that the CIT (Appeals) issued remand order and the assessee was given an opportunity to represent the case in the remand proceedings. Therefore no grievance is left for not giving alleged opportunity of hearing to the assessee. Accordingly, this ground of the assessee is dismissed.
Ground No.4 is regarding sustaining the addition of Rs.3,26,050 on account of cash deposit in the bank. The assessee has maintained bank income. The Assessing Officer found that the cash deposit in the bank account does not reflect in the abstracts of cash flow statements for the year ending 31.3.2004 as well as cash book for the F.Y. relevant to A.Y. under consideration.
The Assessing Officer noticed that the assessee has included sources for all the cash credits made in his bank account with Karnataka Bank but no cash withdrawals are reflected in respect of the deposit made in HDFC Bank account.
Accordingly, the Assessing Officer made the addition of aggregated cash of deposit of Rs.3,26,050 in the HDFC Bank account. On appeal, the CIT (Appeals) has confirmed addition made by the Assessing Officer.
Before the Tribunal, the ld. AR has submitted that the assessee filed confirmations to the effect that the amount deposited in the bank belongs to his wife and source of the said amount is the sale of the residential property vide sale deed dt.31.3.2004. He has referred the return of income filed by the assessee’s wife and submitted that she had shown the availability of source in the return of income. Thus the ld. AR has submitted that when the assessee has explained the source of deposit as the amount belongs to wife of the decisions :
(i) Dy. Supt. Of Police, Chennai Vs. K. Inbasagaram reported in 282 ITR 435 (SC).
(ii) H K Bahadur Vs. Union of India 345 ITR 95 (Del)
On the other hand, the ld. DR has relied upon the orders of the authorities below and submitted that the assessee failed to disclose and explain the source of the cash deposited in the bank account. Therefore the Assessing Officer is justified in making the addition.
Having considered the rival submissions as well as the relevant material on record, it is noted that an amount of Rs.3,26,050 was found deposited in the HDFC Bank. The assessee explained that this amount belongs to his wife however it was not explained for what reason/purpose and on what occasion the said amount belonging to the wife was deposited in the bank account of the assessee in cash. The decisions in the case of Dy. Supt. of Police, Chennai (supra) pertains to a public servant charged under Prevention of Corruption Act and therefore the principle laid down by the Hon'ble Supreme Court under the Criminal Jurisprudence is not applicable in the case of addition of income on account of cash deposited in the bank account when the primary onus is on the H K Bahadur (supra), the source of the amount was duly explained by the wife of the assessee as it was her independent source of income. Therefore the decisions relied upon by the learned Authorised Representative would not help the case of the assessee. Accordingly, this ground of the appeal of the assessee is dismissed.
For the Asst. Year 2006-07, the assessee has raised the following concise grounds :
“ 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT[A] is not justified in holding that the assessment order passed by the learned A.O. was an order passed u/s. 144 rws 143[3] of the Act and that the notice issued u/s.148 of the I.T. Act, 1961 reopening the assessment proceedings for the year under appeal were dropped and hence, the order passed was valid under the facts and in the circumstances of the appellant’s case.
3. Without prejudice to the above, the learned CIT[A] is not justified in upholding the assessment passed u/s. 144 of the I.T.Act, 1961 under the facts and in the circumstances of the appellant's case.
4. Without prejudice to the above, the learned CIT[A] is not justified in sustaining a addition of Rs.5, 15,0001 - out of the original addition of Rs.27,97,3011 - considered as unexplained cash deposits into bank accounts by totally overlooking the cash flow statements produced by the appellant showing sufficient funds available under the facts 11 & 757/Bang/2012 and in the circumstances of the appellant's case.
5. The ld. CIT(A) is not justified in sustaining a sum of Rs.2,78,800 while estimating the income from real estate transaction under the facts and in the circumstances of the appellant’s case.
Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s.234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled.
7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
The assessee has challenged the validity of assessment order passed under Section 144 r.w.s. 147 of the Act. The learned Authorised Representative of the assessee has submitted that original assessment order was passed by the Assessing Officer under Section 144 however, subsequently the A.O. passed an order under Section 154 and thereby converted the assessment from ex-parte to the assessment passed under Section 143(3) r.w.s. 147 of the Act. The learned Authorised Representative has contended that since the assessment was passed ex-parte under Section 144, the same cannot be amended under not sustainable and liable to be dismissed.
On the other hand, the ld. DR has submitted that the Assessing Officer has rectified the mistake which has occurred in the memo of assessment order.
The mistake rectified by the Assessing Officer comes under the purview of section154 of the Act. He has relied upon the orders of the authorities below.
I have considered the rival submissions as well as the relevant material on record. Originally the Assessing Officer has passed the assessment order dt.29.12.2008 under Section 144 r.w.s. 147 of the Act. Subsequently, the Assessing Officer has passed a corrigendum under Section 154 dt.27.2.2009 whereby the mistake of wrong typing of section in the Memo of the assessment order was rectified from section 144 r.w. section147 section 144 of the Act only. Similarly, the corresponding amendments were carried out in para 2 of the assessment order relating to the assessment in pursuant to the proceedings 147/148 the Assessing Officer stated in the corrigendum that the proceedings under Section 147/148 were dropped and the case was selected for scrutiny under Section 143(3) of the Act. Therefore it is apparent from the record that the Assessing Officer initially passed the assessment order being reassessment certain mistakes vide Corrigendum dt.27.2.2009 that the assessment was a scrutiny assessment and not a reassessment and therefore instead of section 144 r.w.s. 147, the assessment was passed under Section 144 of the Act. Since the assessment was passed ex-parte and therefore the assessee could not represent the case before the Assessing Officer. Therefore in the facts and circumstances of the case as well as in the interest of justice, the matter is set aside to the record of the Assessing Officer for granting one more opportunity of hearing to the assessee. Further the addition sustained in the earlier year would be considered as source of deposit in the year under consideration.
Accordingly, the Assessing Officer is directed to redo the assessment de novo after considering the addition sustained in the earlier year as the source of the deposit in the bank for the year under consideration.