2016 (10) TMI 777 - HC - Income Tax

Reopening of assessment - cash deposit in the bank account is much more than the amount of sales shown the return - income escaping assessment - AIR information - Held that - The fact that the petitioner had made sizable cash deposits in the bank accounts was known to the Assessing Officer. There was no failure on the part of the assessee to disclose these material facts called upon by the Assessing Officer. In fact, the Assessing Officer appears to have been convinced that the assessee who was in the business of trading of Gutakha and other provisional items would deal in cash receipts. He would deposit such cash received by him in savings and current accounts and would issue cheques to the creditors. When the scrutiny assessment took into account all such facts, it would be simply not permissible for the department to reopen the issue in the guise that certain cash deposits were unexplained. - Notice issued u/s 148 quashed - Decided in favor of assessee.

Summary

Issues:
Challenge to notice for reopening assessment for assessment year 2009-10 based on cash deposits in bank account.

Analysis:
The petitioner challenged a notice for reopening assessment for the assessment year 2009-10, citing the Assessing Officer's belief that income chargeable to tax had escaped assessment due to cash deposits in the bank account. The petitioner, engaged in trading, had filed a return of income declaring total income. The Assessing Officer had previously scrutinized the return and accepted the income. The reason for reopening the assessment was the cash deposits of a significant amount during the relevant financial year. The petitioner argued that the issue of cash deposits was already examined during the original assessment, with no additions made to the income. The petitioner contended that there was no failure to disclose material facts, making the reopening impermissible.

The department, however, argued that the Assessing Officer had material to believe that income had escaped assessment due to undisclosed cash deposits. The petitioner had not disclosed these deposits during the original assessment. The department sought dismissal of the petition based on this argument. The court noted that the impugned notice was issued beyond the permissible four-year period from the end of the relevant assessment year.

During the original scrutiny assessment, the Assessing Officer had requested specific details from the petitioner, including bank statements. The petitioner had provided the requested documents in response. The Assessing Officer, after verifying the bank statements and discussing the case, accepted the return income as declared. The court observed that the bank accounts and transactions were already before the Assessing Officer during the assessment, with no failure on the part of the petitioner to disclose the material facts. The court emphasized that the Assessing Officer had been aware of the cash deposits and had verified the bank statements during the original assessment.

The court concluded that the department's attempt to reopen the assessment based on the previously examined issue of cash deposits would amount to a change of opinion and was impermissible. Therefore, the court set aside the impugned notice and allowed the petition, disposing of the matter in favor of the petitioner.