2018 (6) TMI 1655 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained deposit under section 69A - HELD THAT - A.O. merely noted in the reasons that since there is an information available on ITD System of the Department that assessee has made cash deposits of ₹ 14,75,000/- in his Bank Account, therefore, income chargeable to tax has escaped assessment. Deposit in the bank account per se cannot be the income of the assessee. This is a mere suspicion of the A.O. based on incorrect fact that income chargeable to tax has escaped assessment and accordingly, quashed the reopening of the assessment. See TAJENDRA KUMAR GHAI C/O M/S. RRA TAXINDIA VERSUS ITO 1 (5) RUDRAPUR 2017 (6) TMI 491 - ITAT DELHI - Appeal of the assessee is allowed.

Summary

Issues:
1. Reopening of assessment based on cash deposit in bank account.
2. Addition of unexplained deposit under section 69A of the I.T. Act.
3. Challenge to the reopening of assessment.
4. Legal validity of the reopening of the assessment.

Analysis:
1. The appeal pertains to the reopening of the assessment based on a cash deposit in the bank account. The Assessing Officer (A.O.) issued a notice under section 148 for reopening the assessment, citing a cash deposit of ?14,75,000 in the assessee's account. The A.O. treated this deposit as an unexplained deposit under section 69A of the I.T. Act, leading to an addition of the same amount to the assessee's income.

2. The assessee contended before the Ld. CIT(A) that the cash deposit was explained by the nature of his work as a Maulvi for Arabic Religious and Teacher, receiving money for safekeeping from individuals for pious purposes. The assessee withdrew and returned the deposited amounts to the lenders. However, the Ld. CIT(A) dismissed the appeal, questioning the credibility of the lenders and the necessity for them to deposit money in the assessee's account.

3. The primary challenge in the present appeal was against the reopening of the assessment and the subsequent addition. The counsel for the assessee argued that the reopening was unjustified as the mere cash deposit did not establish that taxable income had escaped assessment. Reference was made to a previous ITAT order in a similar case, where the Tribunal quashed the reopening based on identical facts.

4. Upon thorough consideration, the ITAT Delhi Bench concurred with the assessee's argument. The Tribunal held that the A.O.'s decision to reopen the assessment solely based on the cash deposit lacked sufficient grounds to establish tax evasion. Citing precedents, the Tribunal emphasized that a mere deposit in a bank account does not automatically imply undisclosed income. Consequently, the Tribunal set aside the orders of the lower authorities, declaring the reopening of the assessment as legally flawed and deleting the addition made during reassessment.

In conclusion, the ITAT allowed the appeal, ruling in favor of the assessee and quashing the reopening of the assessment along with the addition of ?14,75,000 to the income.