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Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI A. D. JAIN
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH: AGRA
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER
I.T.A No. 109/Agra/2017 (ASSESSMENT YEAR-2008-09)
Sunil Kumar Saraswat, Vs..ITO-1 (3) (4), 1466/4, Seth Bara, Behind Holi Mathura. Gate, Mathura. PAN No.AYBPS7769P (Assessee) (Revenue)
Assessee by Shri M. M. Agarwal, AR. Revenue by Shri Waseem Arshad, Sr.DR.
Date of Hearing 13.09.2017 Date of Pronouncement 26.09.2017
ORDER This is assessee’s appeal for Assessment Year 2008-09, taking the following grounds: “1. Because on due consideration of the facts, circumstances of the case, submissions made before him and cited precedents, learned 'CIT (Appeals)' has grossly erred in upholding the validity of initiation of proceedings under section 148 of the 'Act'.
Because learned 'CIT (Appeals)' failed to appreciate that there was no valid reason assigned by the 'AO' in the purported 'reasons to believe' and the reasons recorded by the 'AO' were based on conjectures, surmises and in
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bad faith. The proceedings so initiated were illegal, bad in law and without jurisdiction.
Because, learned 'CIT (Appeals)' while upholding the validity of assessment proceedings under section 148 of the 'Act' on the basis of reason of deposits of Rs. 1,760,000/- in saving bank account grossly erred in ignoring the binding precedents in following cases
a) Praveen Kumar Jain vs. ITO (Order dated 17.12.2015 in ITA no. 1331/Del/2015 (ITAT, Delhi)
b) Bir Bahadur Singh Sijwali vs. ITO reported as (2015) 68 SOT 197 (Delhi -Trib)
c) Amrik Singh vs. ITO reported as (2016) 159 ITD 329 (Amritsar -Trib) referred and relied upon before him on the issue.
Because, learned 'CIT (Appeals)' has erred in not appreciating that no addition was made by the 'AO' under section 68/69 towards deposits in saving bank account, which was the sole reason for initiating proceedings under section 148, no other addition (as made by the 'AO') could validly be upheld in light of binding precedents cited before him and the distinction drawn by him on this score was not valid and justified.
Because in the facts and circumstances of the learned 'CIT (Appeals)' has erred in confirming addition of Rs.
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2,061,930 towards alleged commission income estimated by the 'AO' at the rate of 1% against the income disclosed in the books of accounts.
Because while doing so, learned 'CIT (Appeals)' failed to appreciate that income declared by the 'appellant' was
a) Duly supported by books of accounts and such books of accounts were duly produced before the 'AO' during the course of assessment proceedings
b) the 'AO' had made due verification of transactions recorded in the books of accounts by making independent enquiries by issuing summon under section 131(1) of the 'Act'
c) and such books of accounts were not rejected by the 'AO' and neither any defects nor any discrepancy was noticed by the 'AO'.
Because, learned 'CIT (Appeals)' has wrongly and without any material held that books of accounts were prepared after issuance of notice dated 28.03.2015 issued under section 148 of the 'Act'.
Because the order dated 12.01.2017 passed by the 'CIT (Appeals)' is wrong, illegal, against principal of natural justice and bad in law.
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The appellant craves and leaves to his right to add, delete, alter, substitute or modify any or all the grounds of appeal at any suitable time.
Apropos ground nos. 1 to 4, the AO recorded the following reasons (APB- 15) to believe escapement of income: "Information of non-PAN AIR through CIB has been received that assessee has deposited cash in his saving account involving an amount of Rs.17,60,000/-. The assessee has not filed his return of income. So the said transaction not disclosed before the department. Therefore, I have reason to believe that deposit of cash in his s/ b account / income has escaped assessment and to assess it by invoking the provisions of section 147, issuance of notice u/s 148 is considered necessary, after having approval from Additional Commissioner of Income Tax Range-3 Mathura.”
Before the ld. CIT(A), the assessee relied on the following case laws: “a) Bir Bahadur Singh Sijwali vs. ITO reported as (2015) 68 SOT 197 (Delhi -Trib) (APB, 16 to 20).
b) Amrik Singh vs. ITO reported as (2016) 159 ITD 329 (Amritsar -Trib) (APB, 21 to 34).
c) Praveen Kumar Jain vs. ITO Order dated 17.12.2015 in ITA no.1331/Del/2015 (ITAT, Delhi) (APB 35 to 44).”
The ld. CIT(A), however, has held as under:
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“I find that the appellant had not filed any return of income for the impugned A.Y. and on receipt of the information that as much as Rs. 17,60,000/- had been deposited by the appellant in his saving bank account, the A.O. had reopened the assessment proceedings, Hence, as regards the first objection, it becomes evident that a specific and undeniable piece of information of deposit of a big sum of cash by the appellant, a non-filer of return of income, was available with the A.O. and so the reason to believe that income had escaped assessment was in no way based on conjectures or surmises. It is true that mere cash deposit in a bank account cannot constitute a reason to believe that income had escaped assessment. However, in the impugned case, the fact of huge cash deposit in bank account was accompanied by an additional fact that the appellant had not, perhaps never filed his return of income. Under such a situation, I am of the view that the reasons cannot be held to be illegal.”
The ld. Counsel for the assessee has reiterated the stand taken by the assessee before the ld. CIT(A). It has been submitted that the CIT (Appeals) has grossly erred in dismissing the grounds without even looking into the facts and ratios laid in the cited cases whereas the issue of cash deposit in bank account in case of non filer of return was squarely covered by the cited decisions and the
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learned CIT (Appeals) ought to have quashed the assessment on the said ground itself. The ld. DR has contended that in “Sijwali” (supra), there was nothing to 6. suggest that the assessee was into some business; that however, in the present case, the assessee is admittedly carrying on business. 7. I have heard both the parties and have perused the relevant material on record. In “Sijwali” (supra), the reasons were recorded as follows: “During the financial year 2007-08, the assessee has made transaction of Rs. 10,24,100/- (deposits in cash) in his saving bank account but no return of income was filed by the assessee. As such, it was reason to believe that there is an escapement of income at Rs.10,24,100/- on the part of the assesses. Therefore, in the light of the above fact that the income chargeable to tax for the assessment year 2008-09 has escaped assessment within meanings of section 147 of the Income tax Act, notice was issued under section 148 on 14.9.2009 which was served upon the assessee through his counsel Sri Arun kumar Agarwal, Advocate, on 14/09/2009.” 8. The Tribunal quashed the reopening proceedings, holding, as under: “8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating
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to Rs 1.0,24,100 have been made in the bank account of the assessee, the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income winch has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we do not have the liberty to examine these reasons on the basis of am/ other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs.10,24,100/- has escaped assessment of income because the assessee has Rs 10,24,100/- in his bank account but then such in opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be
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resorted lo only to examine the facts of a case, no matter how desirable Shut be, unless there is u reason to believe, rather than suspect, that an income has escaped assessment.” As in “Sijwali” (supra), herein also, the transaction was of cash deposit in 9. bank. In the present case too, as in “Sijwali” (supra), no return was filed. Thus, “Sijwali” (supra), is squarely applicable. It makes no difference that the assessee is carrying on business. The reasons are to be seen as they are. In “Sijwali” (supra), referring to “Hindustan Lever Ltd. vs. R B Wadker”, 268 ITR 332 (Bombay), it has been held that the reasons recorded for reopening the assessment are to be examined on a stand alone basis and nothing can be added to the reasons. It was also observed that the reasons must point out to an income escaping assessment and not merely need of an enquiry which may result in detection of an income escaping assessment. It was observed that it is necessary that there must be something which indicates, even if it does not establish, the escapement of income from assessment; that it is only on that basis that the AO can form a prima-facie belief that an income has escaped assessment; that merely because some further investigations have not been carried out, which, if made, could have led to detection of an income escaping assessment, this cannot be reason enough to hold the view that the income has escaped assessment; and that there has to be some kind of cause and effect relationship between the reasons recorded and the income
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escaping assessment. The observations of the Hon’ble Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), were reproduced, as under: “the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that then; has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same lime we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment."
It was further observed as follows: “8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating to Rs. 10,24,100/- have been made in the hank account of the assessee, but the mere fact that these deposits have been made
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in a bank account does not Indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we do not have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se. in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs.10,24,100/- has escaped assessment of income because the assessee has Rs.10,24,100/- in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment.”
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The Tribunal concluded thus: “but then in the ease before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen is existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. There cannot be any, and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment, in our humble understanding, cannot be drawn.” Now, in keeping with “Bir Bahadur Singh Sijwali” (supra), this information 12. cannot form a valid basis for initiation of assessment proceedings under section 147 of the I.T. Act. As observed in “Bir Bahadur Singh Sijwali” (supra), the mere fact that the deposits had been made in the bank account does not indicate that these deposits constitute income which has escaped assessment. 13. Thus, it was a mere suspicion of the AO, that prompted him to initiate assessment proceedings under section 147 of the Act, which is neither countenanced, nor sustainable in law. Too, the AO proceeded on the fallacious
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assumption that the bank deposits constituted undisclosed income, over-looking
the fact that the source of the deposits need not necessarily be the income of the assessee. That being so, in keeping with “Bir Bahadur Singh Sijwali” (supra), the reasons recorded to initiate assessment proceedings under section 147 of the Act
and all proceedings pursuant thereto, culminating in the impugned order, are
cancelled. Ground Nos. 1 to 4 are, accordingly, accepted.
In view of the above, none of the remaining grounds survives for
adjudication.
In the result, the appeal is allowed.
Order pronounced in the open court on 26/09/2017.
Sd/- (A.D. JAIN) JUDICIAL MEMBER Dated 26/09/2017 *AKV* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR