2015 (11) TMI 486 - AT - Income Tax

Re-opening of the assessment - Held that - In the case on hand, the Assessing Officer reopened the assessment in respect of the income on account of advance given by the assessee for purchase of land and an addition of ₹ 1 Crore was made by the Assessing Officer on this account while passing the re-assessment order. However the learned CIT (Appeals) deleted the said addition of ₹ 1 Crore made by the Assessing Officer which was the reason for initiation of proceedings under Section 147 of the Act and the Assessing Officer has accepted the finding of the learned CIT (Appeals) and not preferred any appeal before the Tribunal. Therefore, the Assessing Officer accepted the explanation furnished by the assessee in respect of their income. In view of the above, we hold that the additions sustained by the learned CIT (Appeals) in the impugned order i.e. (i) ₹ 2,98,176 on account of negative cash balance and (ii) ₹ 4,50,000 on account of cash deposits in the bank account would not now survive since they are made not on grounds on which the assessments were reopened. These two additions at (i) and (ii) are accordingly deleted.- Decided in favour of assessee.

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Additions/Disallowances made by the Assessing Officer.
3. Deletion of certain additions by the CIT (Appeals).
4. Sustained additions by the CIT (Appeals).
5. Legality of interest charged under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The assessee filed a return of income for Assessment Year 2008-09, which was processed under Section 143(1). A survey under Section 133A revealed that the assessee had entered into a transaction involving a sale deed and had paid an advance of Rs. 2,27,78,130 to a landowner, which was not reflected in the assessee's balance sheet. The Assessing Officer initiated proceedings under Section 147, believing that the failure to disclose this investment led to income escaping assessment. The notice under Section 148 was issued, and the assessee complied by filing the return. The assessee did not initially request the reasons for reopening but later challenged the reopening before the CIT (Appeals), who upheld the reopening. The Tribunal found that the Assessing Officer had material to believe that income had escaped assessment, thus justifying the reopening.

2. Additions/Disallowances by the Assessing Officer:
The Assessing Officer made several additions/disallowances, including:
- Interest and other expenses disallowed: Rs. 12,62,778
- Vehicle maintenance expenses disallowed: Rs. 1,89,402
- Negative cash balance: Rs. 2,98,176
- Loans not confirmed: Rs. 2,03,13,256
- Excess asset: Rs. 9,50,000
- Cash deposit with no source: Rs. 4,50,000
- Advance to Mohammed Ahmed: Rs. 1,00,00,000
- Credit in bank account: Rs. 1,00,00,000

3. Deletion of Certain Additions by the CIT (Appeals):
The CIT (Appeals) deleted several additions made by the Assessing Officer, including:
- Interest and other expenses disallowed: Rs. 12,62,778
- Vehicle maintenance expenses disallowed: Rs. 1,89,402
- Loans not confirmed: Rs. 2,03,13,256
- Excess asset: Rs. 9,50,000
- Advance to Mohammed Ahmed: Rs. 1,00,00,000
- Credit in bank account: Rs. 1,00,00,000

4. Sustained Additions by the CIT (Appeals):
The CIT (Appeals) sustained two additions:
- Negative cash balance: Rs. 2,98,176
- Cash deposit in bank account: Rs. 4,50,000

The Tribunal found that the basis for reopening the assessment (advance to Mohammed Ahmed) was deleted by the CIT (Appeals), and the Revenue did not appeal this deletion. Therefore, the Tribunal held that the sustained additions of negative cash balance and cash deposit would not survive since they were not the grounds on which the assessment was reopened. These additions were accordingly deleted.

5. Legality of Interest Charged under Sections 234A, 234B, and 234C:
The assessee denied liability for interest under Sections 234A, 234B, and 234C, but this issue became academic due to the deletion of the sustained additions.

Conclusion:
The Tribunal allowed the assessee's appeal for Assessment Year 2008-09, deleting the sustained additions and holding that the reopening of the assessment was justified based on the material available to the Assessing Officer. The issue of interest under Sections 234A, 234B, and 234C was rendered academic.

← Previous Next →