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2023 (10) TMI 562 - HC - Income Tax


Issues Involved:
1. Whether the Tribunal misdirected itself on facts and in law regarding the addition of Rs. 2,50,000/- as unexplained cash deposit.
2. Validity of the reopening of assessment under Section 147 of the Income Tax Act, 1961.
3. Determination of presumptive profit from trading in equity and commodities.

Summary:

1. Misdirection by the Tribunal on Unexplained Cash Deposit:
The High Court admitted the appeal to consider whether the Tribunal misdirected itself by directing the addition of Rs. 2,50,000/- as unexplained cash deposit without considering the appellant/assessee's losses in equities and commodities trading. The appellant/assessee had initially failed to file his Return of Income (ROI) and was later served notices under Sections 133(6), 148, and 142(1) of the Income Tax Act, 1961. The Assessing Officer (AO) accepted part of the cash deposit as explained but added Rs. 5,82,385/- as unexplained income. The CIT(A) and Tribunal reduced this addition, but the High Court found that the Tribunal did not fully consider the AO's findings.

2. Validity of Reopening of Assessment:
The CIT(A) upheld the reopening of the case under Section 147, noting that the AO had reasonable grounds based on significant cash deposits and share transactions. The appellant/assessee had not objected to the reassessment proceedings during the assessment stage. The Tribunal also dismissed the appellant/assessee's objections regarding the legality of the reopening, maintaining that the AO had recorded substantial transactions and non-filing of ROI.

3. Determination of Presumptive Profit:
The AO initially noted a presumptive profit of Rs. 1,59,127/- from share transactions but did not sustain this after considering the appellant/assessee's claimed losses. The CIT(A) adjusted the presumptive profit rate from 8% to 5%, which the Tribunal upheld. However, the High Court noted that the AO had seemingly dropped the proposed addition for presumptive profit after evaluating the appellant/assessee's reply, a detail overlooked by both the CIT(A) and Tribunal.

Conclusion:
The High Court answered the question of law in favor of the appellant/assessee, setting aside the Tribunal's order. The matter was remanded to the Tribunal for a de novo examination, emphasizing the need to consider the AO's findings in paragraph 5 of the assessment order. The appeal was disposed of with instructions for the parties to act based on the digitally signed copy of the order.

 

 

 

 

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