2018 (12) TMI 289 - AT - Income Tax

Reopening of assessment u/s 148 - addition on account of cash deposited in the bank account - Held that - A.O. in this case recorded in the assessment order that as per information available on record, assessee has made cash deposit of ₹ 39 lakhs in his bank account and on that basis, A.O. recorded reasons for reopening of the assessment reproduced above. Further, in the reasons, A.O. has recorded about information available with him of cash deposit of ₹ 10 lakhs only. Thus, there is a contradiction in the statement recorded in the assessment order as well as in the reasons above. The A.O. without verifying the information has recorded the reasons for reopening of the assessment. A.O. has not applied his independent mind to the information received in this regard. The deposit in the bank account per se cannot be income of the assessee. It is mere suspicion of the A.O. based on an incorrect fact that income chargeable to tax has escaped assessment. - decided in favour of assessee. Levy of penalty under section 271(1)(c) - A.O. levied the penalty on account of addition made of unexplained cash deposit - Held that - Since the re-assessment have been quashed and addition have been deleted, therefore, penalty proceedings would not survive. Accordingly, set aside the Orders of the authorities below and cancel the penalty.

Issues Involved:
1. Reopening of assessment under section 147/148 of the Income Tax Act, 1961.
2. Addition of unexplained cash deposits in bank accounts.
3. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147/148:
The primary issue in these appeals was the validity of the reopening of assessments under section 147/148. The Assessing Officer (A.O.) received information about significant cash deposits in the bank accounts of the assessees and issued notices under section 148 to initiate reassessment proceedings. The assessees challenged the reopening on several grounds, arguing that mere cash deposits do not justify a presumption of income escaping assessment and that the reasons recorded were vague and based on mere suspicion.

The Tribunal analyzed the reasons recorded by the A.O. and found inconsistencies and lack of independent application of mind. In the case of Shri Inder Jeet, the A.O. mentioned a cash deposit of ?10 lakhs in the reasons for reopening but later referred to ?39 lakhs in the assessment order. Similarly, in the case of Shri Ashok Kumar, the A.O. recorded incorrect facts regarding the amount of cash deposits.

The Tribunal relied on precedents, including the cases of Shri Bhajan Lal and Arvind Yadav, where it was held that reopening based on vague and unverified information is invalid. The Tribunal concluded that the A.O.s in these cases did not have a valid basis for reopening the assessments and quashed the reassessment proceedings.

2. Addition of Unexplained Cash Deposits:
The A.O.s made additions to the income of the assessees based on the unexplained cash deposits in their bank accounts. The assessees argued that the deposits could not be presumed to be income without proper investigation and evidence.

The Tribunal, having quashed the reopening of assessments, held that the additions made in the reassessment orders could not be sustained. The Tribunal emphasized that the deposit in a bank account, by itself, does not constitute income, and the A.O.s failed to establish a nexus between the deposits and any undisclosed income.

3. Levy of Penalty under Section 271(1)(c):
The A.O. levied penalties under section 271(1)(c) for concealment of income based on the additions made for unexplained cash deposits. The assessees contested the penalties, arguing that since the reassessment proceedings were invalid, the penalties should also be canceled.

The Tribunal agreed with the assessees, stating that since the reassessment proceedings were quashed and the additions deleted, the penalty proceedings could not survive. Consequently, the Tribunal set aside the orders of the authorities below and canceled the penalties.

Conclusion:
In summary, the Tribunal allowed the appeals of the assessees, quashing the reopening of assessments under section 147/148, deleting the additions made for unexplained cash deposits, and canceling the penalties levied under section 271(1)(c). The Tribunal's decisions were based on the lack of valid reasons for reopening, inconsistencies in the recorded reasons, and the absence of proper investigation and evidence linking the cash deposits to undisclosed income.

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