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Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “NFAC/Ld. CIT(A)”] dated 10.06.2022 for assessment year 2012-13, which in turn arises from the addition made by the Income Tax Officer, Ward-3(3)(1), Surat / Assessing Officer in assessment order passed under section 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 26.11.2019. The assessee has raised the following grounds of appeal:-
(A.Y 12-13) Bhavesh Bhuva “1. On the facts and circumstances of the case, the learned CIT(A), NFAC has grossly erred in passing the impugned appellate order on an ex-parte basis, by erroneously holding that the appellant is not interested in pursuing the appeal, when the fact is that the appellant has made detailed submissions in Form No.35 itself, which ought to have been considered by the learned CIT(A), NFAC while passing the impugned order. Therefore, the appellate order of the learned CIT(A), NFAC being passed on an ex-parte basis, needs to be quashed as being erroneous, illegal and bad-in-law.
2. Without prejudice to the aforesaid ground of appeal, the appellant even otherwise raises the following independent grounds of appeal.
(i) On facts and circumstances of the assessee and in law, the learned CIT(A), NFAC has grossly erred in upholding the erroneous act of the IDTO of re-opening the case of the appellant for the year under consideration by issuing notice u/s 148 of the Act, which is absolutely illegal and bad-in- law, requiring outright annulment. (ii) That on facts and circumstances of the case and in law, the learned CIT(A), NFAC grossly erred in confirming the additions of Rs.23,63,650/- as made by the ITO in respect of the cash deposits made in the regular bank account of the appellant, by treating the same as unexplained money u/s 69, which is absolutely erroneous and bad-in-law and needs to be deleted. (iii) That on facts and circumstances of the case, the learned CIT(A), NFAC grossly erred in confirming addition of Rs.4,26,470/- as made by the ITO in respect of the credits in the regular bank account of the appellant, which is absolutely erroneous and bad-in-law and needs to be deleted. (iv) That on facts and circumstances of the case, the learned CIT(A), NFAC grossly erred in confirming addition of Rs.1,527/- as made by the ITO in respect of the bank interest in the regular bank account of the appellant, which is absolutely erroneous and bad-in-law and needs to be deleted.
The appellant craves leave to add, amend, alter, substitute, modify in any or all the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing.” 2
Brief facts are that assessee is an individual, engaged in trading activities. The case of assessee was re-opened on the basis of information available on ITS data based that assessee has made cash deposit of Rs.23,63,650/- in his bank account maintained with ICICI Bank. The assessee has not filed his Return of Income for assessment year 2012-13. The assessing officer issued notice under section 133(6) of the Act to assessee for furnishing necessary details about such deposit. The Assessing Officer recorded that assessee has not responded to such notice. The Assessing Officer on the basis information received in ITS data formed his opinion that he has reason to believe that the income of assessee has escaped assessment to the extent the said deposit within meaning of section 147 of the Act. The Assessing Officer after recording reasons issued notice under section 148 of the Act on 31.03.2019. The Assessing Officer further noted that despite servicing notice, the assessee has not responded, nor filed return of income, therefore Assessing Officer decided to make assessment under section 144 of the Act. Accordingly, a final show cause notice issued on 01.11.2019. The assessing officer 3 (A.Y 12-13) Bhavesh Bhuva recorded that in response to such notice, the assessee filed his return of income for impugned assessment year on 19.11.2019 declaring income of Rs.1,76,260/-. The assessee proceeded for assessment and noted that the assessee explained that he made cash deposited in ICICI bank, which was cash withdrawal from his bank account on various dates. The explanation of assessee was not accepted by the Assessing Officer. The Assessing Officer recorded that assessee has shown income from partnership firm in Jay Maa Khodiyar Enterprises, where he has received interest and salary of Rs. 56,201/- and assessee’s business income of Rs.1,50,361/- but nature of business is not disclosed. All the withdrawal by assessee through ATM, though credit entry in the bank is through cash only. The Assessing Officer extracted the relevant portion of bank statement in the assessment order on page-4 and made addition of entire cash deposits of Rs.23,63,650/-. The Assessing Officer also noted that there are other credits of Rs.4,26,470/- in ICICI bank account. The assessing officer was also added Rs.4,26,470/- to the total income of assessee. The Assessing Officer further found that assessee has earned (A.Y 12-13) Bhavesh Bhuva interest income of Rs.923/- and Rs.604/- totalling to Rs. 1,527/-, which was not disclosed by assessee. Thus, Assessing Officer also added such interest income to the total income of assessee.
3. Aggrieved by the addition and action of re-opening, the assessee filed appeal before Ld. CIT(A). The appeal of assessee migrated before NFAC/Ld. CIT(A). Before NFAC/Ld. CIT(A) the assessee filed detailed written submission. The submission of assessee are recorded in para-4 of order of ld CIT(A). In his submissions, the assessee clearly and categorically submitted that he had duly return of income for AY 2012-13 on 30.03.2012 with ITO ward 9(1) Surat and that notice under section 148 is based on wrong factual premises that no return of income is filed. The assessee also explained the facts on merits of the addition.
After considering the submission of assessee NFAC/Ld. CIT(A) upheld the validity of reopening as well as addition made by Assessing Officer in the re-assessment order. While upholding the validity of re-opening assessment held that Assessing Officer followed the due procedure mandatory (A.Y 12-13) Bhavesh Bhuva under section 147 r.w.s. 148 of the Act and proper reasons were recorded with appropriate approval from higher authority. The assessee participated in re-opening proceedings but no objection was raised before the Assessing Officer. Therefore, the contention of assessee in objecting validity of re-opening is after-thought.
On merit of the addition, the NFAC/Ld. CIT(A) held that assessee has not furnished requisite details at the re- opening stage. Therefore, NFAC/Ld. CIT(A) has no reason to interfere with the addition made by Assessing Officer in re- assessment order. Further aggrieved, the assessee has filed present appeal before Tribunal.
I have heard the submission of Ld. Authorized Representative (Ld. AR) for the assessee and Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue. The Ld. AR for the assessee submits that Assessing Officer in the reasons recorded noted that assessee has not filed his return of income and he was identified as non-filer. Further, on verification of AIR information available in the system, it is noticed that assessee has deposited cash of Rs.23,63,650/- in assessee’s saving bank account in ICICI (A.Y 12-13) Bhavesh Bhuva bank. And that due to non-filing return of income, the source of cash deposit was escaped assessment. And such notice was issued by Income Tax Officer Ward-(3)(3)(1) and assessee has furnished return on 31.03.2013 within due date prescribed under section 139(1) of the Act. Therefore, reasons recorded are incorrect. The Assessing Officer made re-opening for verification of cash deposit. The reasons recorded was erroneous being based on the fact that assessee has not filed his return of income, in fact, the assessee has filed his return, which was duly acknowledged by the Department and assessee has disclosed his bank income in his return of income filed in the balance-sheet as on 31.03.2012. Thus, the re-opening is not valid. And subsequent action initiated on invalid re-opening is void-ab- initio.
To support such submission, Ld. AR for the assessee relied upon the judgment of Hon'ble jurisdictional High Court in the case of Sunrise Education Trust vs. Income-tax Officer (Exemption) [2018] 90 taxmann.com 74 (Guj). ITO Vs Lakhmani Mewal Das (1976) 103 ITR 043-SC, Mumtaz Hazi Mohd Memon Vs ITO in SCA No. 21030 of 2017 Guj, Amar (A.Y 12-13) Bhavesh Bhuva Jewells Ltd Vs DCIT (2018) 92 taxmann.com 4 Guj, Bir Bahadur Singh Chauhan Vs ITO (2015) 68 SOT 197 Delhi and Sapna Chauhan Vs ITO in & 138/Agra/2018.
The Ld. AR for the assessee submits that even the assessee she has a good case on merit that re-opening is not valid. On the merit of additions, the Ld. AR for the assessee submits that entire credits in the bank account of assessee by way of cash or other credit cannot be added to the income of assessee as there are credit as well as withdrawal in the bank statement. Thus, only reasonable profit on such transactions being a part of turnover can be added. The ld AR for the assessee submits that a reasonable profit @ 5% may be added. In alternative and without prejudice the submission of Ld. AR for the assessee that if the addition of presumptive tax under section 144 is not added then a peak credit entry which was at Rs.2,61,447/- can only be added. In other alternative and without prejudice submissions Ld. AR for the assessee submits that section 69A of the Act is not applicable on the facts of the present case. To support of her submissions, the ld AR for the assessee relied on the (A.Y 12-13) Bhavesh Bhuva decisions in S R Venkata Vs CIT (1980) 48 CCH 0619 (Ker HC), ACIT Vs Baldev Raj Charia & other 121 TTJ 366 (Delhi), Om Prakash Nahar Vs ITO 135 taxmann.com 377 (Delhi) and CIT Vs Trupati Construction Co. 55 taxmann.com 308 (Guj) and PCIT Vs Inderjeet Tomar Tax Appeal No. 908 of 2015 (Delhi).
On the other hand, Ld. Sr-DR for the Revenue supported the order of lower authorities and submits that before re- opening assessment Assessing Officer issued notice under section 133(6) of the Act for explaining the source of such credit but assessee not responded against such notice. The assessee has not disclosed his source of credit in his bank account. The ld Sr DR for the revenue submits that the assessee has not filed any objection at the time of assessment, now the assessee is precluded to raise such objection against the validity of reopening. On the merit of the additions, the Ld. Sr-DR for the Revenue inviting attention to the Bench that page-4 of assessment order would submit that credit / deposit in the bank were at out- station as reflected in the bank statement itself, the cash as deposited at Dharuhera, Salem, Agraharam, Stree, (A.Y 12-13) Bhavesh Bhuva Mahbubnagar, Jamkhandi, Villupuram, Adoni and Damini Creation and all the withdrawal made through ATM in Surat. Thus, the assessee cannot take the plea that deposits were from cash withdrawal. On the objection of Ld. AR for the assessee on the validity of re-opening, the ld Sr DR for the revenue submits that assessee neither furnished his return of income in response to notice issued under section 148 of the Act nor responded by disclosing that assessee has already filed his return shown by the assessee was physical form and was not being with the Assessing Officer at the time of recording reasons and issuing notice under section 148 of the Act. On the merit of addition, the Ld. Sr- DR for the Revenue submits that since assessee failed to disclose the source of deposit and credit as well as offered the interest income by filing return of income in response to notice issued under section 148 in time and further during assessment failed to substantiate about the nature and source of credit. Therefore, all the additions made by Assessing Officer and subsequently confirmed by NFAC/Ld. CIT(A) are justified and may be upheld.
(A.Y 12-13) Bhavesh Bhuva 10. In short rejoinder, Ld. AR for the assessee submits that no proceeding was pending before Assessing Officer at the time of issuing notice under section 133(6), therefore, the assessee was not under legal obligation to respond such notice, though assessee has already filed his return of income and again filed in response to notice issued under section 148 of the Act on 19.11.2019. The Ld. AR for the assessee submits that Co-ordinate Bench of Agra Tribunal in the case of Sapna Chauhan Vs. Income Tax Officer in dated 22.03.2019, while considering the objection of Department that similar objection was not raised before the Assessing Officer and which cannot be taken at the appellate stage, held that question of jurisdiction is not a matter of acquiescence the proprietary of notice under section 148 based upon “reasons recorded” is not dependent upon the objection or no objection of the assessee at the stage of assessment / re-assessment if reasons recorded, independently can withstand the test of judicial scrutiny only such reasons will confer jurisdiction to issue notice and frame assessment in pursuance thereto. It was also held that if reasons recorded upon being (A.Y 12-13) Bhavesh Bhuva challenged at any stage of proceedings falls to withstand the test of judicial scrutiny, in that eventuality, upon such recorded reasons, no valid notice can be issued and any assessment framed consequent thereto even taking shelter of ‘no objection’ from the assessee could save the assessment from being held to be declared void-ab-initio and the objection of Revenue was rejected.
I have considered the submissions of both the parties and have gone through the orders of lower authorities carefully and also perused the case law cited by Ld. AR for the assessee. I find that Assessing Officer made re-opening assessment on the basis of information available on ITS data that assessee has made cash deposit of Rs.23,63,650/- in bank account with ICICI Bank. I further find that assessee has not responded to the notice under section 133(6) of the Act and fact remain the same that the Assessing Officer re-opened the case of assessee on the basis of information that assessee has made cash deposit in the reasons recorded that assessee has not filed return of income for AY 2012-13. I find that before ld CIT(A), the assessee specifically stated that he has filed return of (A.Y 12-13) Bhavesh Bhuva income for AY 2012-13 on 30.03.2013 and the bank accounts were disclosed. The ld CIT(A) has not given any specific finding on such submissions.
The Hon’ble Apex Court in ITO Vs Lakhmani Mewal Das (supra) held that there must be a live link between the material coming to the notice of Income Tax Officer notice and formation of his belief that there has been escapement of assessees income from the assessment in particular year because of failure of to disclose fully and truly all the material facts. Further, the Jurisdictional High Court in Sunrise Education Trust Vs ITO (supra) also held that assessing officer in reasons recorded erroneous reasons, proceeded on erroneous footings that the assessee did not file return of income for the year under consideration, which was duly acknowledged by department, such re-assessment notice is not permissible.
The ld Sr DR for the revenue at the time of making submissions raised his objection that assessee neither furnished his return of income in response to notice issued under section 148 of the Act nor responded by disclosing that assessee has already filed his return shown by the (A.Y 12-13) Bhavesh Bhuva assessee was physical form. No doubt such fact is missing in the assessment order, however, before ld CIT(A), the assessee specifically pleaded such fact, which is duly recorded in sub-para 4.7 of par 4 of his order.
I find that division bench Agra Tribunal in the case of Sapna Chauhan Vs. Income Tax Officer (supra) while considering similar objection of revenue that if such objection was not raised before the Assessing Officer and which cannot be taken at the appellate stage, held that question of jurisdiction is not a matter of acquiescence the proprietary of notice under section 148 based upon “reasons recorded” is not dependent upon the objection or no objection of the assessee at the stage of assessment / re-assessment if reasons recorded, independently can withstand the test of judicial scrutiny only such reasons will confer jurisdiction to issue notice and frame assessment in pursuance thereto. It was also held that if reasons recorded upon being challenged at any stage of proceedings falls to withstand the test of judicial scrutiny, in that eventuality, upon such recorded reasons no valid notice can be issued and any assessment framed consequent thereto even taking shelter