2019 (3) TMI 1712 - AT - Income Tax

Reopening of assessment - addition u/s 68 - HELD THAT - A perusal of the notice issued under section 148 shows that the notice has been issued in a very casual manner - Similarly a perusal of the bank account maintained with Vijaya Bank account no. 004427 shows that an amount of Rs. 2, 50, 000/- was by way of clearing of Cheque No. 719443 and not cash deposit. If the same is excluded from the total deposits made during the year from the two bank accounts then there is no such cash deposit of Rs. 4, 97, 452/- in the two bank accounts maintained by the assessee. Therefore find force in the argument of assessee that the reasons recorded are either vague reasons or not based on any application of mind. In any case the assessee has explained the source of each deposit made both in cash as well as in cheque and therefore even on merit also no addition is called for. Therefore set aside the order of the learned CIT(A) and direct the AO to delete the addition - Decided in favour of assessee

Summary

Issues Involved:
1. Legality of the reassessment proceedings under Section 148 of the Income Tax Act.
2. Justification of the additions made by the Assessing Officer (AO) on account of unexplained cash deposits.

Issue-wise Detailed Analysis:

1. Legality of the Reassessment Proceedings under Section 148:

The assessee contended that the AO wrongly assumed jurisdiction under Section 148 without proper appreciation of facts, recording of satisfaction, and requisite approval as per Section 151. The Tribunal observed that the notice issued under Section 148 was issued in a very casual manner, with Clause 3 of the notice being blank, indicating a lack of proper sanction or approval. The Tribunal found force in the argument that the reasons recorded for reopening the assessment were either vague or not based on any application of mind, leading to the conclusion that the reassessment proceedings were not legally justified.

2. Justification of the Additions Made by the AO on Account of Unexplained Cash Deposits:

Assessment Year 2007-08: The AO made an addition of Rs. 4,97,452/- to the total income of the assessee, citing unexplained cash deposits. The CIT(A) upheld the AO's action, noting that the source of cash deposits remained unexplained and that the appellant's explanations were not satisfactory. The Tribunal, however, found that the reasons recorded by the AO were vague and that the deposits were either explained or not properly verified. The Tribunal directed the AO to delete the addition, allowing the assessee's appeal.

Assessment Year 2009-10: The AO reopened the assessment based on information about cash deposits of Rs. 36,82,199/- in the bank account, ultimately making an addition of Rs. 14,33,000/- after partial acceptance of the assessee's explanations. The CIT(A) sustained an amount of Rs. 13,00,000/-, noting that the source of cash deposits remained unexplained. The Tribunal found that the AO and CIT(A) had not verified the reconciliation statement and various sale deeds provided by the assessee. The Tribunal restored the issue to the AO for verification and directed deletion of the addition if the deposits were found to be correctly explained, allowing the appeal for statistical purposes.

Conclusion:

The Tribunal found procedural lapses in the issuance of notice under Section 148 and lack of proper verification of the assessee's explanations for cash deposits. Consequently, the Tribunal allowed the appeals for the respective assessment years, directing the deletion of additions or further verification by the AO.