2019 (2) TMI 1708 - AT - Income Tax

Reopening of assessment - unexplained cash deposit - sufficient reasons for forming reason to believe that income has escaped assessment - HELD THAT - On perusal of the reasons, it is clear that with regard to the cash deposit in F.Y.2007-08 relevant to assessment year 2008-09, the letter of verification of financial transaction was issued on 26/12/2014 to verify the genuineness of the transaction but the assessee has not responded to the same. On this aspect, the Ld. AR stated that there was change of address and the assessee did not receive any notice or letter as such and therefore, was not able to respond. Re-enquired whether the change of address was communicated by the assessee to the Department, the Ld. AR submitted that change of address was not communicated to the Department by the assessee. Furthermore, coming back to the reasons recorded, the assessee was required to furnish details of sources of the financial transaction along with copies of documents in support of his claim. This was also not done by the assessee. Further, in the reasons recorded, it is stated on verification of AST data, that the assessee has not furnished his return of income for the assessment year 2008-09. The assessee has not offered the amount of ₹ 16.04 Lakh for taxation. In view of above, the Assessing Officer has reason to believe the amount of ₹ 16,04,400/- escaped the assessment within the meaning of section 147 of the Act. So far as the grounds on merits are concerned, the assessee contends that the entire receipts/cash deposits are considered as income, without considering the income/profit embedded in the receipts/cash deposits. The fact that the assessee has carried two businesses in that year has not been considered by the CIT(Appeals). CIT(Appeals)/Ld. AO has not brought any material on record to justify that the above receipts are net income of the assessee. That for verification of this aspect, it was prayed by the Ld. AR of the assessee that the matter may be restored to the file of the Ld. CIT(Appeals). We are of the considered view that the grounds on merits needs to be adjudicated after detailed factual verification through a speaking order by the Ld. CIT(Appeals). - Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues: Reopening of assessment under section 147/148 of the Income Tax Act, 1961 based on reasons recorded by the Assessing Officer and consideration of legal grounds and merits of the case.

Analysis:
1. Reopening of Assessment: The appeal before the Appellate Tribunal stemmed from the order of the Ld. CIT(Appeals) for the assessment year 2008-09. The main contention raised by the assessee was whether the reasons recorded for reopening the assessment by the Assessing Officer constituted a valid "reason to believe" that income had escaped assessment as required under sections 147/148 of the Income Tax Act. The reasons for reopening included the deposit of a significant amount in the assessee's bank account, failure to respond to verification requests, and non-filing of the return of income for the relevant assessment year. The Tribunal examined the reasons recorded and concluded that the Assessing Officer was justified in reopening the assessment due to the assessee's non-compliance and failure to offer the deposited amount for taxation.

2. Legal Grounds: The assessee argued that the entire receipts/cash deposits were considered as income without accounting for the profit embedded in them. It was contended that the assessee operated two businesses during the year, which was not duly considered by the authorities. The assessee requested a detailed verification of the income and profits associated with the receipts, urging the matter to be sent back to the Ld. CIT(Appeals) for a comprehensive review. The Tribunal noted the absence of material justifying the treatment of the receipts as net income and decided that a detailed factual examination was necessary to determine the merits of the case.

3. Decision: The Tribunal partially allowed the appeal for statistical purposes, setting aside the order of the Ld. CIT(Appeals) on the grounds of merits. The case was remanded to the First Appellate Authority for a fresh adjudication, emphasizing the need for a speaking order based on factual verification and compliance with the principles of natural justice. The Tribunal's decision highlighted the importance of a thorough examination of the merits of the case to ensure a fair and just outcome.

In conclusion, the judgment addressed the validity of reopening the assessment based on the reasons recorded by the Assessing Officer and emphasized the necessity of a detailed factual verification to determine the actual income and profits associated with the disputed receipts. The Tribunal's decision underscored the importance of adhering to legal principles and ensuring a comprehensive review of the case to uphold fairness and justice in tax matters.