2018 (4) TMI 1960 - AT - Income Tax

Reopening of assessment u/s 147 - as per the AIR information the AO noticed that assessee has deposited cash in the saving bank account which was actually the sales which were deposited in cash in the bank account of sole proprietor - HELD THAT - We find that the return of income filed on 30.9.2009 was processed u/s 143(1)(a) of the Act which means that there was no scrutiny of accounts and records of the assessee. Subsequently received information on the basis of AIR received by the Income Tax Department which revealed that during the F.Y. 2008-09 total cash has been deposited in the savings bank account of the assessee held with Union Bank of India Neemuch. This information supported by the material; evidence in the shape of AIR information was sufficient enough for the AO to issue notice u/s 148 - The action taken by the AO further seems to be correct because the alleged cash was deposited in the savings bank account and one cannot ignore the possibility that the income may have been concealed and not duly reflected in the income tax return. We find no infirmity in the findings of CIT (A) confirming the action of the Assessing Officer in issuing notice u/s 148 of the Act and to make the reassessment u/s 147. Estimated disallowance of car expenses mobile expenses travelling expenses and depreciation AND addition for household expenses - HELD THAT - The alleged cash deposit was also duly explained by the assessee through its account books and the AO was satisfied with the information and he has mentioned that the alleged cash was in the nature of sales during the year. AO after failing to make any addition on the count of alleged cash deposit further scrutinised the account books and without pointing out any specific mistake made an ad hoc disallowance of 15% of various expenses treating them to be personal in nature. Similarly addition for household withdrawals was made just for the lack of information to be received by the assessee. In our view to make such disallowances the AO should have made a test check of the bills and vouchers and should have brought on record sample of such expenditure which were personal in nature and had been booked as business expenditure. In the instant case no such finding has been brought on record by the AO. We therefore find no basis for the disallowance made by the Assessing Officer for expenses as well as household withdrawals. Appeal of the assessee stands partly allowed.

Summary

Issues Involved:
1. Validity of notice u/s 148 and reassessment proceedings
2. Addition of expenses and household withdrawals

Issue 1: Validity of notice u/s 148 and reassessment proceedings

The appeal challenged the reassessment proceedings initiated by the Assessing Officer under section 148 of the Income Tax Act for Assessment Year 2009-10. The Assessing Officer noticed cash deposits in the assessee's bank account based on AIR information. The Assessing Officer made certain disallowances and additions, resulting in an increased assessed income. The Commissioner of Income Tax (Appeals) partially upheld the additions. The Tribunal considered the validity of the notice u/s 148 and the reassessment proceedings. The Tribunal found that the information from AIR regarding cash deposits justified the issuance of notice u/s 148. The Tribunal held that the Assessing Officer's actions were correct, considering the possibility of concealed income. Consequently, the Tribunal upheld the Commissioner's decision confirming the reassessment proceedings.

Issue 2: Addition of expenses and household withdrawals

The second issue involved challenging the additions made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals). The Tribunal noted that the Assessing Officer did not find any irregularities in the audited books of accounts and financial statements. The alleged cash deposits were explained as sales by the assessee. The Assessing Officer made ad hoc disallowances of expenses and added an amount for household withdrawals without specific findings or evidence of personal nature expenses. The Tribunal observed that the Assessing Officer should have conducted a thorough check of bills and vouchers before making disallowances. As no specific evidence was presented, the Tribunal found no basis for the disallowances and deletions were made for the alleged additions of expenses and household withdrawals. Consequently, the Tribunal allowed the appeal partially, deleting the contested additions.

This judgment addressed the validity of the notice u/s 148 and the reassessment proceedings, finding them justified based on AIR information. It also analyzed the additions of expenses and household withdrawals, concluding that the Assessing Officer's actions lacked sufficient evidence to support the disallowances. The Tribunal partially allowed the appeal, deleting the contested additions.