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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, Honble & DR. ARJUN LAL SAINI, Honble
आदेश / O R D E R Per Dr. A. L. Saini, AM: The captioned appeal filed by the assessee pertaining to assessment year 2009-10, is directed against the order passed by Learned Commissioner of Income Tax (Appeals), which in turn arises out of an assessment order passed by Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 13.10.2016. 2. Grounds of appeal raised by the Assessee are follows: 1. The Ld. CIT(A) erred in upholding the validity of notice u/s 148. 2. The CIT(A) further erred in upholding the addition of Rs. 18,12,564/- as alleged unexplained cash deposit in Punjab National Bank Account. The assessee craves leave to add, amend or alter the aforesaid grounds of appeal at the time of hearing, if the need arise.
ITA No. 387/SRT/2019 A.Y. 2009-10 Ashish Ajit Singhai 3. Succinct facts are that during the assessment proceedings on the basis of the AIR information, the assessing officer noticed that assessee had deposited cash of Rs.18,12,564/- in PNB saving bank account No. 3102000100096387 and had not filed any return of income for AY 2009-10. The case was reopened by issuance of notice u/s 148 on 29.01.2016 and served on the assessee. The assessee submitted a return of income on 24.08.2016 in compliance of notice u/s 148 of the Act. The assessing officer found that the assessee had deposited cash of Rs. 18,12,564/- in the PNB Saving bank account and no return of income was filed. The assessing officer held that assessee failed to prove the source of the cash credit or failed to produce any proof of existence of business of cloth trading in the name of M/s Mahalaxmi Silk Mills, as claimed. The assessing officer found that the account was opened in the name of the assessee and not in the M/s Mahalaxmi Silk Mill nor any bills for purchase or sales could be produced during the assessment proceedings. Therefore, assessing officer made addition of Rs.18,12,564/- u/s 68 of the Act.
On appeal, Learned CIT(A) confirmed the action of the assessing officer. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
Shri Manish J. Shah, Learned Counsel for the assessee, submits that reassessment proceedings should not be initiated solely on the basis that assessee has deposited cash in his bank account. The cash deposited in the bank account may be out of sale of investments, sale of property, and past savings. The assessing officer should conduct preliminary enquiry before issue of notice under section 147/148 of the Act. Thus, Ld. counsel for the assessee submitted that reasons recorded by the assessing officer is not valid in the eye of law. Therefore, initiation of reassessment proceedings is itself bad in law and hence the same should be quashed.
On the other hand, Mrs. Anupama Singla, Learned DR for the Revenue vehemently argued that assessee did not file any return of income in compliance to notice u/s 148 of the Act within the statutory period of 30 days. The assessee submitted a return of income on 24.08.2016 i.e. after 6 months of the stipulated
ITA No. 387/SRT/2019 A.Y. 2009-10 Ashish Ajit Singhai period as provided in the notice u/s 148 of the Act. This return of was an invalid return as it was filed beyond the prescribed time limit. The assessing officer found that the assessee had deposited cash of Rs.18,12,564/- in the PNB Saving bank account and no return was filed. The assessing officer held that the assessee failed prove the source of the cash credit or failed to produce any proof of existence of business of cloth trading in the name of M/s Mahalaxmi Silk Mills as claimed. Therefore, reasons recorded by the assessing officer is valid and hence order passed by the assessing officer should be upheld.
We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. Since the assessee has challenged the reopening proceedings under section 147 of the Act, therefore, first of all, we should analyse the reasons recorded by the assessing officer. We note that the reasons for reopening u/s 147 of the Act is available in assessee`s paper book page no. 3, which are reproduced below:
“As per the AIR information the assessee has deposited cash of Rs.14,88,628/- in his saving bank A/c. Therefore the sources of deposits in his saving bank A/c are to be verified. A letter for Verification issued on 17.11.2015 & 04.02.2016 to the assessee, but no reply received. Even further, notice u/s 133(6) was issued to the assessee after obtaining approval from the competent authority, no reply from the assessee received till date. In view of the above facts, I have reason to believe that the above cash deposits in his saving bank A/c has escaped assessment for A.Y. 2009-10 by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary in the return of income. Therefore, notice 148 r.w.s. 147 of the Income Tax Act, 1961 is to be issued for the assessment year 2009-10.”
We have gone through the above reasons recorded by the Assessing Officer and noted that there is no infirmity in the reasons recorded by the assessing officer. The Ld. Counsel argued before us that reasons recorded by the assessing officer is only for “verification”. However, we do not agree with Ld. Counsel and observed that from the above, reasons recorded it is evidently clear that letters were issued by the Assessing Officer for preliminary enquiry but the assessee has not replied. After conducting the preliminary enquiry, the Assessing Officer concluded that cash
ITA No. 387/SRT/2019 A.Y. 2009-10 Ashish Ajit Singhai deposited in his saving bank account has escaped assessment for assessment year 2009-10. Therefore, we note that Assessing Officer, did preliminary enquiry by issuing letters and that does not mean that reasons were recorded by the assessing officer for “verification” only. Section 147 of the Act authorizes and permits an Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that the said income for any assessment year has escaped assessment. The expression 'escaped assessment' clearly connotes a very basic postulate that the income for a particular assessment year went unnoticed by the Assessing Officer and because of it not being noticed by him for any reason, it escaped assessment. The meaning of the expression 'escaped assessment' is so simple and straight that it does not leave anyone in doubt that power under section 147 could be invoked by the Assessing Officer if it is a case of escape of assessment of income for a particular year. The provisions of section 147 require that the Assessing Officer should have 'reason to believe' that any income chargeable to tax has escaped assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words 'reason to believe’ cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes or from any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such income had escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. A belief though justified for the purpose of initiation of the proceedings under section 147, may ultimately stand altered after the hearing and while reaching the conclusion on the basis of the intervening enquiry. At the stage where he finds a cause or justification to believe that such income has escaped assessment, the Assessing Officer is not required to base his belief on any final adjudication of the matter. Therefore, we dismiss the ground
ITA No. 387/SRT/2019 A.Y. 2009-10 Ashish Ajit Singhai raised by the assessee in respect of challenging the validity of reassessment u/s 147 of the Act. 9. Coming to the merits of the case, we note that assessee is a small trader and deposited cash into his back account to the tune of Rs.18,12,564/- Since the assessee’s case pertains to assessment year 2009-10, therefore by applying the provisions of section 44AF of the Act, the net profit rate of 5% on presumptive basis should be applied. We note that assessee has admitted that cash deposited by him pertains to his retail business. Hence, considering cash deposit in bank account, as if, it is total turnover of assessee; the net income has to be determined under section 44AF of the Act. For that we rely on the judgment of co-ordinate bench in the case of Vijay H. Lilawala vs. ITO in ITA No. 2044/Ahd/2016 order dated 12.02.2020 wherein it was held as follows: “6. Being aggrieved, the assessee filed an appeal before this Tribunal. The Ld. counsel submitted that the assessee is a retail traders of plastic bag having turnover of Rs.21,55,084/-. The assessee is very small retail dealer in plastic bag and after death of his brother in a car accident as on 03-03-2013 and his family facing complete financial crises and somehow managing affairs of the family. Therefore, it was contended that total transactions appeared in the bank account cannot be added instead of profit embedded therein can be added. The Id. counsel drawn out attention to bank account statement referred at paper book page 1, 2, 3 & 4, We show that credit and debits as well as the debits are appearing in the name of various business concerns. We suggest that the assessee was engaged in retail business more over the entire deposits in the bank account can credit balance can be added which is at Rs.68016.00 crore as on 27/11/2007, whereas the assessee has already declared income of Rs. 108289 in the return of income in net profit @5% which is net profit. Therefore placing reliance on the decision of ITAT, Ahmedabad in the case of Ramilaben B, Patel vs. ITO (2018) 100 taxmann.com 325 (Ahmedabad) submitted that the bank statement is not considered as books of account and therefore any sum have been credit business cannot be treated unexplained cash credit. The Ld. counsel further place reliance on the decision of Hon'ble Gujarat High Court in the case of CIT v. Pradeep Shantilal Patel [42 taxmannxom 2] wherein it was held that where the assessee admitted that cash deposits pertained to his retail business butdetails and nature of business were not forthcoming from record of assessee, net income had to be determined under Section 44AF.
Per contra, the Id. Sr. DR supported the order of the lower authorities.
ITA No. 387/SRT/2019 A.Y. 2009-10 Ashish Ajit Singhai 8. We have heard the rival submissions and perused the relevant material available on record. We find that the sum of Rs.20,38,261/- found credited in the assessee's bank account which were claimed to be sales receipt of plastic bag. On going through the details of bank account, it is not seen that there are cash deposits as well as cash withdrawals and withdrawals appeared in the name of various business concerns, in such case, the addition of entire amount cannot be added as held by Hon'ble Gujarat High Court in the case of CIT v. Pradeep Shantilal Patel (supra). Since, the assessee has already disclosed an amount of Rs.1,08,289/- on the total turnover of Rs.21,28,2.61/- which is NP rate of 5% on presumptive basis, being no books case, which is more than peak credit balance appeared in the account of the assessee. Therefore, we are of the considered opinion that the addition made by the assessing officer is not sustainable. In view of this fact, the addition made by the AO is deleted. Accordingly, this appeal of the assessee is allowed.” 10. We note that assessee stated that cash deposits pertained to his retail business, therefore, assessing officer is directed to compute the income of the assessee at the rate of 5% of the cash deposited into bank account on presumptive basis, under section 44AF of the Act. 11. In the result, Assessee’s appeal is allowed to the extent indicated above.
The order announce on 06/01/2022 as per Rule 34(5) of Income tax (Appellate Tribunal) Rules1963.
Sd/- Sd/- PAWAN SINGH Dr. A. L. SAINI (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) सुरत/ Surat, �दनांक Dated: 06/01/2022 Rajesh Kumar, Sr.PS(on tour)/SS Copy of order sent to- Assessee/assessing officer/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order // TRUE COPY // Assistant Registrar, Surat