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Assessee represented by Shri Rajesh C. Shah, C.A. Department represented by Shri Vinod Kumar, Sr. DR Date of Institution of Appeal 27/08/2023 Date of hearing 23/10/2023 Date of pronouncement 06/11/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 25/08/2023 for the Assessment Year (AY) 2012-13. The assessee has raised following grounds of appeal: “1. The ld. CIT(A) has erred in confirming the reopening of the case u/s 147 of the Act. The ld. AO has also erred in reopening of the case.
2. The ld. CIT(A) has erred in justifying reopening of the case under explanation 2 to clause (a) of Section 147 of the Act on assumption that the assessee has not filed return of income, whereas the assessee has filed return of income on 19/03/2023.
3. The ld. CIT(A) has erred in confirming the ld. AO has erred in making addition of Rs. 13,21,000/- on account of cash deposit in the bank.
4. The ld. CIT(A) has erred in confirming and ld. AO has erred in making addition of Rs. 30,34,250/- on account of explained investment.
Vijay Ramsingh Goyal Vs ITO 5. The appellant reserves the right to add, alter, amend or withdraw any grounds of appeal
.”
2. Brief facts of the case are that the case of assessee was reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act) on the basis of information in ITD System. Information was received that the assessee has purchased property of Rs. 30,42,250/- and made a cash deposit of Rs. 13,21,000/- in his bank account, during the period relevant of A.Y. 2012-13. The assessee was issued notice under Section 133(6) for seeking certain information about source of deposits and investment in property. No response was made by assessee to such notice. Thus, on the basis of information with the Assessing Officer, he has a reason to believe that the income of assessee of Rs. 43,65,250/- (30,24,250 + 13,21,000) has escaped assessment within the meaning of Section 147 of the Act. The Assessing Officer obtained prior approval of ld. Pr.CIT concerned and issued notice under Section 148 of the Act dated 30/03/2019 through e-mail. In response to notice under Section 148, the assessee filed return of income on 29/04/2019. The assessee was served with the notice under Section 143(2) of the Act for scrutiny of return of income on 20/05/2019. The assessee asked for reasons recorded on 22/06/2019. The Assessing Officer noted that the reasons recorded were provided to the assessee. The Assessing Officer thereafter proceeded for assessment in pursuance of notice under Section 148 of the Act. The Assessing Officer noted that the assessee was served several notices to Vijay Ramsingh Goyal Vs ITO explain the facts about the transaction of deposit in the bank as well as purchase of property at Udhna on 25/10/2011 at Rs. 30,34,250/-. No reply was furnished by the assessee. The assessee filed objection on 26/11/2019 against reopening. Such objection was disposed of on 06/12/2019 by way of speaking order. The assessee furnished some home loan certificate with his reply dated 30/11/2019. However, no further details were furnished by the assessee. The Assessing Officer further noted that bank account with Bank of India was not disclosed by assessee in his return of income. The Assessing Officer in absence of any explanation about the deposit in bank account treated the same as income of assessee. Similarly, no explanation was given about the investment in property of Rs. 30,34,250/-. The entire purchase consideration was treated as ‘capital gain’ and added to the income of assessee.
3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee challenged the validity of reopening and issuance of notice under Section 148 of the Act and the additions in the assessment order. The assessee filed detailed written submissions as recorded in para 4 of order of ld. CIT(A). The assessee in his submission submitted that the Assessing Officer erred in passing non-speaking order on his objection. The assessment was reopened on incorrect fact that no return of income was Vijay Ramsingh Goyal Vs ITO filed, whereas the assessee has filed return of income and proof was furnished before the Assessing Officer, copy of such return of income was furnished. To support such contention, the assessee relied on the decision of Hon'ble Jurisdictional High Court in Mumtaz Haji Mohmad Memon Vs ITO, copy of Delhi Tribunal in Kesav Saran Vs ACIT in dated 22/04/2022, Mumbai Tribunal in ITO Vs Champaklal Mathurbhai Metha in ITA No. 2253/Mum/2022 dated 25/11/2022. On merit, the assessee by referring the reasons recorded wherein the Assessing Officer noted that the notice under Section 133(6) was issued to the assessee on 20/09/2019 and that the assessee has not submitted any reply. The assessee submitted that such notice was not received by him. No independent mind was applied on AIR information. As no proceeding was pending before the Assessing Officer, when he issued notice under Section 133(6) of the Act, therefore, such enquiry letter was not valid in the eyes of law. Thus, the assessee was not required to respond to invalid letter of enquiry. The deposit in the bank per se cannot be an income of assessee. It is the mere suspicion of Assessing Officer based on incorrect fact that income of assessee is chargeable to tax as escaped assessment. To support such contention, the assessee relied on decision of SMC Bench of Delhi Tribunal in the case of Tajendra Kumar Ghai. On addition of Rs. 13,21,000/-, the assessee submitted that he was living in a small town in Haryana and decided to shift to Surat and he has Vijay Ramsingh Goyal Vs ITO wind up his business in Haryana, the cash deposit in bank account represent his collection received on account of closing of business. The major part of deposit was on account of sale of agricultural land of Rs. 9.70 lacs in cash. Copy of sale deed executed during relevant period was furnished. The said property was in the form of agricultural land situated in a small village and was not covered under capital asset under Section 2(14) of the Act. The assessee was not under obligation to maintain the cash book in his case, he was filing return of income under Section 44AD of the Act. On second addition on investment in property of Rs. 30,24,250/-, the assessee submitted that out of total investment, Rs. 20.00 las was from housing loan from bank for which necessary sanction letter was issued, copy of which was filed. Copy of sale deed of agricultural land and evidence of reimbursement of loan was provided. On the basis of such submission, the assessee stated that reopening is bad in law as well as no addition can be made and prayed to delete all the additions.
The ld. CIT(A) after considering the submission of assessee, upheld the validity of reopening by taking a view that the Assessing Officer was having an information that the assessee purchased a property of Rs. 30,24,250/- and also made cash deposit in his bank during the period under consideration. No return of income was filed, thus the assessee was identified as non-filer in the system of department. Before issuing Vijay Ramsingh Goyal Vs ITO show cause notice, the Assessing Officer issued notice under Section 133(6) on 20/09/2018 which was not responded by assessee. Thus, the Assessing Officer had reason to believe that income of assessee has escaped assessment within the meaning of Section 147. Further notice under Section 148 was duly served. The ld. CIT(A) by referring the decision of Hon'ble Apex Court in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR 0030 (SC) dated 23/05/2007 held that the Assessing Officer on the basis of material available with him which has direct nexus with the factum of income escaping assessment was justified in reopening the assessment.
On addition of deposit in cash and investment in property, the ld. CIT(A) held that in absence of submission, the Assessing Officer added Rs. 30,34,250/- by treating as capital gain. No reply about the deposit in bank was given. Before the Assessing Officer, the assessee has not filed complete submission explaining source of cash deposit and source of purchase of property nor any supported evidence was filed. Even before him, the assessee has not filed application under Rule 46A of the Income Tax Rules, 1962 (in short, the Rules) for admission of additional evidence nor explained the fact whether his case falls under sub-clause (1) of Rule 46A of the Rules. The assessee has not controverted the finding of Assessing Officer, thus he did not file any reason to interfere with the Vijay Ramsingh Goyal Vs ITO speaking order of Assessing Officer and confirmed the addition. Further aggrieved, the assessee has filed present appeal before this Tribunal.
I have heard the submission of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue and have perused the orders of the lower authorities carefully. Ground No. 1 and 2 of the appeal relates to validity of reopening. The ld. AR of the assessee submits that the copy of reasons recorded by the Assessing Officer is filed at page No. 7 and 8 of the paper book. In para 2, 4, 5 and 6 of the reasons recorded, the Assessing Officer repeatedly mentioned that the assessee has not filed return of income. Such assertion of Assessing Officer is not correct. The assessee is/was regularly filing his return of income. Copy of return of income for A.Y. 2012-13, filed physically is placed on record. In para 8 of reasons recorded, the Assessing Officer recorded that the provisions of Clause (a) of Explanation-2 of Section 147 are applicable to the facts of this case and the assessment under consideration is deemed to be case where income chargeable to tax escaped assessment. Such application of proviso is not correct. The assessee before the Assessing Officer, filed copy of acknowledgement of regular return of income filed under section 139(1). The assessee also raised objection against the reopening. In the objection as well, the assessee raised such issue that the assessee is not a non-filer of return of income. Even before the ld. CIT(A), the assessee Vijay Ramsingh Goyal Vs ITO raised this issue and furnished copy of return of income, however, the ld. CIT(A) ignored such fact and adjudicated the issue against the assessee. The ld. AR of the assessee submits that clause (a) of Explanation-2 of Section 147 deals with situation where no return of income has been filed by assessee, however, the assessee is regularly filing return of income therefore, there was no application of such provisions. The reasons recorded itself is not correct, therefore, the action initiated by the Assessing Officer is bad in law and the assessment order passed on such wrong assessment is void ab initio. To support such contention, the ld. AR of the assessee relied upon the decision of Hon'ble Gujarat High Court in the case of Mumtaz Haji Mohmad Memon Vs ITO in Special Civil Appliction No. 21030 of 2017 dated 21/03/2018, copy of Delhi Tribunal in Kesav Saran Vs ACIT in dated 22/04/2022, Mumbai Tribunal in ITO Vs Champaklal Mathurbhai Metha in ITA No. 2253/Mum/2022 dated 25/11/2022.
On the merit of addition, which relates to grounds No. 3 and 4 of the appeal, the ld. AR of the assessee submits that the assessee has sold agricultural land at his native place and furnished copy of sale deed which clearly shows that the assessee has received Rs. 9.70 lacs in cash and other remaining amount in his bank account represents the deposit of savings from his business activities. On the addition on account of unexplained investment, the ld. AR of the assessee submits that out of Vijay Ramsingh Goyal Vs ITO total investment of Rs. 30,34,250/-, the assessee obtained loan of Rs. 20.00 lacs from bank, copy of disbursement of loan was furnished to the Assessing Officer. The assessee explained that source of investment in the property was from the sale proceed of agricultural land and Rs. 20.00 lacs from housing loan, sale proceed of agriculture land at Rs. 9.70 lacs, and other small savings, thus the assessee has fully substantiated Rs. 30.34 lacs. The ld. AR of the assessee submits that the assessee has also furnished copy of his bank pass book showing that he is regularly making payment of installments of housing loan. The ld. AR of the assessee submits that the assessee has good case on merit.
On the other hand, the ld. Sr. DR for the revenue submits that the Assessing Officer during the assessment clearly, while recording the reasons of reopening, noted that no return of income was filed. Copy of return of income shown by the assessee clearly shows that the assessee obtained only acknowledgement by manipulating the record. The assessee may be directed to produce copy of original ITR acknowledgment. The ld. Sr. DR for the revenue submits that at the time of recording reasons, sufficiency of reason is not to be recorded, prima facie view of Assessing officer is sufficient to have make a belief that income of assessee has escaped assessment. On the merit of addition, the ld. Sr. DR for the revenue supported the order of Assessing Officer and ld. CIT(A).
Vijay Ramsingh Goyal Vs ITO 9. On the objection of ld. Sr. DR for the revenue, the assessee was directed to show original acknowledgment of return of income for the impugned assessment year. In compliance of direction of Bench, the ld. AR of the assessee has brought the original acknowledgement of return of income for A.Y. 2012-13 alongwith return of income for four preceeding assessment years, original of which were shown to the ld. Sr. DR for the revenue and copy of which was again filed by the ld. AR of the assessee on record.
I have considered the rival submissions of both the parties and perused the record carefully. I have also perused the orders of the lower authorities. I find that main addition relates to the investment in the property of Rs. 30.34 lacs. I find that the assessee has filed copy of reimbursement letter of housing loan of Rs. 20,12,882/-from Axis Bank. Further the assessee has sold land at his native place of Rs. 9.70 lacs. Thus, the assessee has substantiated the source of purchase of property. Therefore, the addition on account of unexplained investment in property is deleted. In the result, the ground No. 4 of the appeal is allowed. So far as addition of Rs. 13,21, 000/- on account of bank deposits are concern, I find that the assessee has sold land at his native village of Rs. 9.70 lacs, copy of sale deed is already filed before lower authorities. No adverse evidence against such sale consideration is brought on record by assessing officer. The assessee is regularly filing return of income from Vijay Ramsingh Goyal Vs ITO several past years, therefore, the contention of past savings from business cannot be ruled out. Therefore, considering the difference of amount of Rs. 3.51 lacs, which may be from past saving, no addition on account of deposits in bank account is liable to be sustained. In the result, the ground No. 3 of the appeal is allowed.
Considering the facts that I have allowed full relief to the assessee on the merits of the additions, therefore, consideration and adjudication on the issue related to the reopening has become academic.
In the result, this appeal of assessee is allowed. Order announced in open court on 06th November, 2023.