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2017 (1) TMI 1496 - AT - Income TaxReopening of assessment - A.O. come to a conclusion based on such AIR information that cash deposits have been made in his bank account that income assessable to tax had escaped assessment - Held that - There is no nexus or live link between the material which had come to the notice of the Assessing officer and the formation of his belief that there was escapement of income by the assessee which may be assessable to tax. Merely by mentioning the income of the assessee in the assessment year and the investment made by him for the purchase of residential property it cannot be concluded that the difference would automatically be the income which had escaped assessment. See Pravin Kumar Jain vs. ITO 2016 (3) TMI 90 - ITAT DELHI - Decided in favour of assessee
Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961. 2. Addition under Section 69 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Reopening of Assessment under Section 148 of the Income Tax Act, 1961: The primary issue in this case was whether the Assessing Officer (A.O.) was justified in reopening the assessment based on AIR information that certain bank deposits were found in the assessee's account. The A.O. recorded reasons that income subject to tax had escaped assessment and issued a notice under Section 148 of the Income Tax Act, 1961. The Tribunal examined whether the A.O. could form a belief that income had escaped assessment solely based on AIR information without any further enquiry or application of mind. The Tribunal referred to several judicial precedents, including the case of Pravin Kumar Jain vs. ITO, where it was held that reopening of assessment based on incorrect assumptions or without verifying the material information available with the A.O. is invalid. The Tribunal emphasized that the A.O. must have tangible material and a legitimate reason to believe that income assessable to tax had escaped assessment. Mere receipt of information about cash deposits in a bank account does not establish a direct nexus or live link between the material and the belief that income had escaped assessment. The Tribunal also cited the case of Munni Devi vs. ITO, where it was held that there must be credible, cogent, and relevant material to form a reason to believe that cash deposits represented income of the assessee. The Tribunal concluded that the reasons recorded by the A.O. in the present case were without application of mind and were based on mere suspicion, which is not sufficient for reopening an assessment under Section 148. 2. Addition under Section 69 of the Income Tax Act, 1961: The second issue was the addition of ?9,15,000/- made by the A.O. under Section 69 of the Income Tax Act, 1961, treating the deposits in the assessee's bank account as unexplained investments. The assessee contended that the amount in question was the sale proceeds of ancestral agricultural land and provided evidence, including an affidavit and details of the sale transaction. The first appellate authority (Ld.CIT(A)) found inconsistencies in the assessee's claim, noting that the value of the sale consideration disclosed in the registered sale deed was much less than the amount mentioned in the unregistered agreement. Consequently, the Ld.CIT(A) rejected the affidavit and other evidence produced by the assessee and confirmed the addition. The Tribunal, however, focused on the validity of the reopening of the assessment and found that the reopening was invalid due to lack of application of mind and proper enquiry by the A.O. As a result, the Tribunal did not delve into the merits of the addition under Section 69 and quashed the reopening of the assessment. Conclusion: The Tribunal allowed the appeal by the assessee, holding that the reopening of the assessment was bad in law as the reasons recorded were without application of mind to the material on record. Consequently, the addition made under Section 69 was also set aside. The order was pronounced in the open court on 23rd January, 2017.
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