2017 (3) TMI 1844 - AT - Income Tax

Reopening of assessment u/s 147 - excess deposit in his bank account which has escaped assessment - addition of agriculture income - HELD THAT - AO noted that assessee made excess deposit in his bank account which has escaped assessment, therefore, assessee has not fully and truly disclosed all material facts necessary for assessment in assessment year under appeal. Assessing Officer, however, did not make any addition of excess cash deposit in the impugned re-assessment order. The assessee also produced sufficient evidence on record to prove that Assessing Officer has taken the lesser bank deposit because ₹ 10 lacs deposit have not been considered by the Assessing Officer in the bank account of the assessee. Ultimately, Assessing Officer was satisfied with the explanation of the assessee of bank deposits, therefore, no addition is made. The reasons recorded by the Assessing Officer were, therefore, wholly incorrect and did not lead to anywhere if there is any escapement of income. AO also not recorded any fact in the reasons if agriculture income escaped assessment. Assessing Officer called for the details of agriculture income at original assessment stage and asked for all the evidences in support of declaration of agriculture income - The assessee produced sufficient evidence and material before AO at original assessment stage in support of earning of agriculture income. Therefore, there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment with regard to computation of agriculture income. The Assessing Officer in the reasons for reopening of the assessment has nowhere recorded if assessee has not fully and truly disclosed all material facts for declaring agriculture income. The record, on the other hand, would reveal that assessee disclosed fully and truly all material facts of earning of agriculture income at the original assessment stage. Therefore, all the facts of earning of agriculture income supported by evidences were within the knowledge of Revenue Department/Assessing Officer at the time of making the original assessment. The assessee has, thus, disclosed all the material facts of earning of agriculture income at the original assessment stage. No further material is supposed to have been disclosed by the assessee for earning of agriculture income - Therefore, on mere change of opinion, subsequent Assessing Officer is not competent to initiate proceedings under section 148 - Decided in favour of assessee.

Summary

Issues Involved:
1. Re-opening of assessment under Section 147/148 of the Income Tax Act.
2. Addition on account of 'income from other sources' as against the declared agricultural income.

Issue-wise Detailed Analysis:

1. Re-opening of Assessment under Section 147/148:

The assessee filed a return for the assessment year 2004-05 declaring an income of ?8,41,050/- and agricultural income of ?42 lacs. The assessment was initially completed under Section 143(3) on 27.12.2006, accepting the declared income. However, based on information from the Income Tax Department, a notice under Section 148 was issued on 23.03.2011, suspecting an excess deposit of ?8,50,594/- in the assessee's bank account as undisclosed income.

The assessee challenged the re-opening of the assessment, arguing that all material facts were fully and truly disclosed during the original assessment. The assessee provided evidence of bank deposits and agricultural income, which were accepted by the Assessing Officer (AO) in the original assessment. The AO did not make any addition based on the bank deposits, which was the basis for re-opening the assessment. The re-opening was argued to be a mere change of opinion, which is not permissible under the law as per the Supreme Court's decision in CIT Vs Kelvinator of India (320 ITR 561).

The Tribunal found that the AO did not apply his mind to the material on record and that the reasons for re-opening were incorrect. The AO's reasons for re-opening did not mention any failure on the part of the assessee to disclose material facts. The Tribunal held that the re-opening of the assessment was bad in law, as it was based on a mere change of opinion and not on any new material facts.

2. Addition on Account of 'Income from Other Sources':

The AO made an addition of ?14,97,774/- on account of 'income from other sources' against the total declared agricultural income of ?42 lacs. The assessee provided detailed evidence of agricultural land, crops cultivated, sales, and bank deposits during the original assessment, which were accepted by the AO.

The Tribunal noted that the AO did not record any reasons for considering the agricultural income as undisclosed income in the re-opening notice. The assessee had disclosed all material facts and provided sufficient evidence to support the declared agricultural income. The Tribunal concluded that the AO's action was based on a mere change of opinion without any new material facts, making the re-opening and the subsequent addition unsustainable.

Conclusion:

The Tribunal set aside and quashed the re-opening of the assessment under Section 148, holding it as bad in law due to a mere change of opinion. Consequently, all additions made in the reassessment order were deleted, and the appeal of the assessee was allowed.