2005 (7) TMI 570 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147(a).
2. Applicability of section 69 for reopening an assessment.
3. Addition under section 69 without obtaining an explanation from the legal heirs.
4. Confirmation of additions due to alleged bank deposits.
5. Link between the assessee and the bank deposits.
6. Credibility of the ex-employee's statement regarding the deposits.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147(a):
The assessee initially contested that the CIT(A) erred in holding the reopening of the assessment under section 147(a) as valid. However, during the hearing, the assessee's counsel did not press this ground, and it was dismissed as not pressed.

2. Applicability of Section 69 for Reopening an Assessment:
The assessee argued that section 69, being a deeming provision, enables the Assessing Officer to make additions but should not be used to reopen an assessment. The Tribunal examined the nature of section 69 and concluded that it is a deeming provision requiring strict construction. The Tribunal referenced the Pune Bench decision in Smt. Rajabai B. Kadam v. Asstt. CIT, which emphasized that the burden of proof lies on the deceased assessee to explain the source of investments, and this burden does not shift to the legal heirs.

3. Addition under Section 69 without Obtaining an Explanation from the Legal Heirs:
The assessee contended that the addition under section 69 was made without obtaining an explanation from the deceased assessee. The Tribunal noted that the legal heirs could not be held liable to explain transactions they were not involved in or aware of. The Tribunal emphasized that section 69 requires an explanation from the original assessee, not the legal heirs, and thus, the addition made without such an explanation was not justified.

4. Confirmation of Additions Due to Alleged Bank Deposits:
The CIT(A) confirmed the additions made by the Assessing Officer based on alleged bank deposits in fictitious names. The Tribunal found that the Assessing Officer relied heavily on the statement of the ex-manager, Shri D. Ramachandran Nair, who claimed the deposits were made on behalf of the deceased assessee. However, the Tribunal determined that the legal heirs were not connected to these transactions and could not be expected to provide information about them.

5. Link Between the Assessee and the Bank Deposits:
The Tribunal examined the evidence and found that there was no direct link between the legal heirs and the bank deposits. The Assessing Officer's conclusion that the deposits were benami and belonged to the deceased assessee was based on the ex-manager's statement and other circumstantial evidence. The Tribunal held that the legal heirs could not be forced to explain transactions they were not aware of, and thus, the addition was not sustainable.

6. Credibility of the Ex-Employee's Statement Regarding the Deposits:
The Tribunal noted that the legal heirs were given an opportunity to cross-examine the ex-manager but declined, citing the lapse of time. The Tribunal found that the reliance on the ex-manager's statement without corroborative evidence and without giving the legal heirs a fair opportunity to contest the statement was not justified. The Tribunal emphasized the need for strict construction of deeming provisions and concluded that the addition based on the ex-manager's statement was not sustainable.

Conclusion:
The Tribunal concluded that the addition of Rs. 21,98,000 as unexplained investments and Rs. 34,440 as interest on bank deposits made by the deceased assessee under sections 69 and 69A was not justified and liable to be deleted. The appeal was partly allowed, and the additions were deleted.