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Facts
The assessee did not file an income tax return, but later filed one admitting income from running lorries and agricultural activities. The Assessing Officer (AO) reopened the assessment based on information about a cash deposit in the assessee's bank account. The AO made an addition of Rs. 17,59,504/- as unexplained investment.
Held
The Tribunal held that the income offered on a presumptive basis under Section 44AE for lorries should be accepted, and no books of accounts are required. Similarly, agricultural income should be accepted as there were no adverse findings. The claim of past savings was also deemed acceptable. The addition for unexplained asset was restricted.
Key Issues
Whether the addition of Rs. 17,59,504/- as unexplained investment under Section 69 is justified, considering the assessee's explanation of sources for cash deposits and the reopening of assessment based on allegedly borrowed satisfaction.
Sections Cited
69, 148, 147, 44AE
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL & HON’BLE SHRI MANU KUMAR GIRI
(िनधा�रणवष� / Assessment Year: 2013-2014) Annadurai Balakrishnan Vs. The Income Tax Officer, 5/95, Periathottam, Ward 2(5) Oricherry Pudur P.O., Erode Bhavani, Erode 638 315. [PAN: ANIPA 8909M] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Appellant by : Shri. M. Karunakaran, Advocate ��यथ� क� ओर से /Respondent by : Shri. K. Karthikeyan, IRS, Addl. CIT. सुनवाई क� तार�ख/Date of Hearing : 15.10.2024 घोषणा क� तार�ख /Date of Pronouncement : 04.11.2024 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member)
This appeal of the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2013-14, vide order dated 28.12.2023.
The assessee has raised the following grounds of appeal:-
1. The learned National Faceless Appeal Centre (NFAC) erred in confirming the addition of Rs. 17,59,504/- as unexplained investment under section 69 of the Act.
2. The appellant submits that the assessment was re-opened u/s 148 as there was unexplained cash deposit in the bank account to the extent of Rs. 31,25,000 but the assessing officer has not made any addition towards unexplained cash deposit at all but made an addition of Rs. 17,59,504 under section 69 as unexplained investment in an asset.
3. The appellant submits that it is well settled law that if no addition is made on the basis of the reasons to believe recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 of the Act to make an addition on any other issue not included in the reasons to believe for reopening the assessment. 4. The learned NFAC is not justified in holding that that the AO has only changed the name of the cash deposited into asset while making the addition and therefore the claim of the appellant is not acceptable 1. The learned National Faceless Appeal Centre (NFAC) erred in confirming the addition of Rs. 17,59,504/- as unexplained investment under section 69 of the Act. 2. The appellant submits that the assessment was re-opened u/s 148 as there was unexplained cash deposit in the bank account to the extent of Rs. 31,25,000 but the assessing officer has not made any addition towards unexplained cash deposit at all but made an addition of Rs. 17,59,504 under section 69 as unexplained investment in an asset. 3. The appellant submits that it is well settled law that if no addition is made on the basis of the reasons to believe recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 of the Act to make an addition on any other issue not included in the reasons to believe for reopening the assessment. 4. The learned NFAC is not justified in holding that that the AO has only changed the name of the cash deposited into asset while making the addition and therefore the claim of the appellant is not acceptable especially when he accepts that there was a change in the finding of the AO. 5. The appellant therefore submits that the addition of Rs. 17,59,504/- made under section 69 of the Act is liable to be deleted as the assessing officer has not made any addition towards alleged unexplained cash deposit in the bank account for which the assessment was re-opened. 6. The learned NFAC erred in observing that the appellant had questioned the re-assessment on the ground of change of opinion but actually the appellant had challenged the re-assessment as it was based on "borrowed satisfaction". 7. The appellant submits that the assessing officer has re-opened the assessment as he had AIR information that cash was deposited in the bank account but the assessing officer has not independently applied his mind and formed any belief that the said cash deposit represented income much less escaped income within the meaning of section 147 before issue of notice u/s 148 of the Act. 8. The re-assessment made u/s 148 is liable to be cancelled as not valid as no assessment can be re-opened based on borrowed satisfaction as per the settled law on the subject. 9. The lower authorities below erred in not accepting the source for the cash deposited in the bank out of income derived from plying of three lorries of Rs. 5,58,000 shown before depreciation.
10. The appellant submits that M/s Sakthi Sugars Ltd. who have availed the transport services from the appellant had given the details of freight charges paid which alone was offered for tax.
11. The Assessing officer having accepted that one lorry stood in the name of the appellant ought to have allowed the income attributable thereto and he should not be imagined that the lorry would have been sold during the year for denying the income from the lorry owned by the appellant. 12. The appellant submits that the other two lorries were taken on hire from the original owners and the income derived from these two lorries were much available with the appellant for making the deposits. 13. The authorities below erred in not even considering the income from lorries shown in the return of income. 14. The authorities below ought to have accepted the past savings from agricultural income claimed of Rs. 5,50,000 especially when the assessing officer has accepted the agricultural income for the current year as earning of agricultural income is not disputed. 15. The appellant submits that he has given a reply to the notice on 27/11/2019 explaining the sources for the cash deposits but the assessing officer without calling for any further details completed the assessment in haste on 06/12/2019 and disbelieved the source of Rs. 8.25 lakhs representing amount received on sale of jewellery belonging to the appellant's wife. 16. The appellant hereby undertakes to produce the proof for sale of jewels by the appellant's wife which may be accepted and addition deleted. 17. In any view of the matter, the closing balance in the savings bank account of the appellant cannot at all be treated as unexplained investment u/s 69 of the Act. 18. The appellant therefore prays that the addition of Rs. 17,59,504/- made under section 69 may be deleted and justice rendered.
As is evident, the sole issue that arises for our consideration is addition made by Ld. AO as unexplained asset for Rs.17.96 Lacs.
Brief facts are that the assessee did not file return of income. Pursuant to the receipt of information that the assessee deposited cash of Rs.31.25 Lacs in his savings bank account, the case was reopened and notice u/s 148 was issued on 29.03.2018 wherein the assessee was required to explain the source of the same. The assessee filed return of income manually on 16.09.2019 admitting an income of Rs.1.80 Lacs u/s 44AE from running of lorries and agricultural income of Rs.2.07 Lacs. The source of cash deposit was stated to be as under: - No. Particulars Amount (Rs.) 1. Lorry Hire Income Rs.5,58,000/- 2. Jewel Loan Income Rs.4,91,400/- 3. Agricultural income Rs.3,99,000/- 4. Wife Jewel Sale Rs.8,25,000/- 5. Past year agricultural Rs.5,50,000/- income accumulated Total Rs.28,23,400/- In support of lorry income, the assessee furnished registration number of three lorries. However, only one lorry was in the name of the assessee and for the two lorries, there was no proof of ownership. Accordingly, the depreciation as claimed by the assessee for Rs.3.78 Lacs was rejected. The agricultural claim was restricted to the extent of Rs.2.07 Lacs as returned by the assessee. The assessee could not furnish proof for sale of jewellery and therefore, the claim to the extent of Rs.8.25 Lacs was rejected. Since the assessee availed loan, the claim of accumulated savings could not be accepted. The assessee had savings balance of Rs.27.96 Lacs as on 28.02.2013 out of which the claim to the extent of Rs.9.99 Lacs was accepted and the remaining amount of Rs.17.96 Lacs was held to be unexplained asset for the assessee. The income was assessed accordingly. The Ld. CIT(A) confirmed the action of Ld. AO against which the assessee is in further appeal before us.
In our considered opinion, when the income is offered on presumptive basis u/s 44AE, depreciation is deemed to be granted to the assessee whether it is claimed or not. Therefore, the same could not have been disallowed by Ld. AO. The