2016 (2) TMI 1159 - AT - Income Tax

Reopening of assessment - reasons to believe - unexplained cash deposits - vague information - non independent application of mind - Held that - A bare perusal of the reasons recorded for issuance of notice u/s 148 of the Act shows that the only material available before the AO was the AIR information of the assessee having deposited an amount of 11.60 lakhs in his savings bank account. Remarkably the reasons recorded did not even mention the bank in which such savings bank account was maintained. The assessee as available from the first page of the assessment order was issued a notice u/s 148 of the Act in pursuance to the aforesaid reasons. The assessment order under section 143(3) of the Act is dated 25.03.2013. The assessee had filed the return of income on 05.10.2005 and it had been stated in response to the notice u/s 148 of the Act that this return be treated as having been filed in response to this notice. The factum per se of deposits in the bank account of the assessee could not be made the basis for holding the view that income had escaped assessment over-looking that the sources of the deposits need not necessarily be the income of the assessee; and that as such the reasons recorded were not sufficient to believe escapement of income; that rather they were reasons to suspect escapement of income which was not enough for issuance of a notice u/s 148 of the Act.- Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening the case based on vague information.
2. Jurisdictional issues regarding the reopening of the case.
3. Failure on the part of the assessee in submitting the return.
4. Non-supply of reasons recorded during reassessment proceedings.
5. Applicability of section 292BB of the Act.
6. Opportunity to produce evidence during appellate proceedings.
7. Capacity of the purchaser to give biana.
8. Registration of biana agreement.
9. Assistance in obtaining bank account statement for the previous assessment year.

Issue 1: Validity of Reopening Based on Vague Information:
The AO issued a notice u/s 148 based on information that the assessee had deposited a significant amount in a savings account without providing PAN. The Tribunal found the reasons recorded by the AO insufficient to believe in the escapement of income, as the mere fact of cash deposits did not automatically imply unreported income. Citing a relevant case, the Tribunal concluded that the reasons did not establish that the deposits constituted unreported income, especially without evidence of the source of the funds. Consequently, the Tribunal held the reasons invalid, annulling all subsequent proceedings.

Issue 2: Jurisdictional Issues Regarding Reopening:
The Tribunal considered the jurisdictional aspect crucial, as it goes to the root of the matter. The AO's reasons for reopening the case were found to lack legal merit, leading to the cancellation of the assessment order and subsequent proceedings. The Tribunal emphasized the importance of valid reasons and proper jurisdiction in reopening cases to prevent arbitrary actions by tax authorities.

Issue 3: Failure in Submitting Return and Jurisdiction:
The assessee argued that the return was submitted to the proper jurisdictional authority, challenging the reopening and reassessment after four years. The Tribunal found merit in this argument, highlighting the significance of jurisdiction and timely submission of returns. The reassessment was deemed liable to be quashed due to these procedural irregularities.

Issue 4: Non-Supply of Reasons During Reassessment:
The Tribunal noted the failure to provide the reasons recorded during the reassessment proceedings, which were only disclosed during the appellate stage. This lack of transparency was considered a violation of procedural fairness, leading to the annulment of the assessment order and subsequent decisions.

Issue 5: Applicability of Section 292BB:
The Tribunal addressed the applicability of section 292BB of the Act in curing irregularities, emphasizing that it was not applicable for the relevant assessment year. This legal clarification played a role in the decision to quash the reassessment.

Issue 6: Opportunity to Produce Evidence During Appellate Proceedings:
The Tribunal highlighted the importance of providing a reasonable opportunity to produce evidence, which was not adequately granted during the reassessment proceedings due to time constraints. This procedural deficiency led to the decision to annul the reassessment.

Issue 7: Capacity of the Purchaser to Give Biana:
The Tribunal considered the necessity of proving the purchaser's capacity to give biana, emphasizing the need for proper verification before making additions to the income. The failure to provide this opportunity was deemed a procedural flaw, resulting in the quashing of the addition.

Issue 8: Registration of Biana Agreement:
The Tribunal discussed the significance of registering the biana agreement and the implications of non-registration on the assessment process. The lack of registration and examination of witnesses were considered procedural deficiencies, leading to the deletion of the addition to income.

Issue 9: Assistance in Obtaining Bank Account Statement:
The Tribunal highlighted the importance of providing assistance in obtaining relevant documents, such as bank account statements, to support the assessee's claims. The failure to assist in this matter was considered a procedural lapse, impacting the assessment process and contributing to the decision to annul the proceedings.

Overall, the Tribunal's detailed analysis focused on procedural irregularities, jurisdictional issues, and the importance of adherence to legal requirements in tax assessments, resulting in the cancellation of the reassessment and subsequent orders.