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2019 (1) TMI 355 - HC - Income TaxReopening of assessment - unexplained source of fund under Section 68 and cash fund under Section 269SS - Held that - The application of mind of the income tax officer should be that of a prudent and reasonable man. Some material may subsequently be discovered along with other discovery which the income tax authority would use to form the opinion that the assessee was guilty of concealment of income. Furthermore the case of the department cannot be whimsical. On a given set of facts it cannot at one point of time say that there was no concealment of income and at another point of time say, otherwise. There was no scope of change of opinion. The income tax department cannot presume something to have happened five years ago just because in the assessment year 1997-98 the assessee failed to explain its source of fund under Section 68 and cash fund under Section 269SS. It did not mean that it indulged in similar activity in the previous year 1992-93. For all those reasons we feel that the Tribunal was absolutely right in dismissing the appeal against the order of the CIT(A). - decided in favour of assessee
Issues involved:
1. Interpretation of Section 269SS of the Income Tax Act, 1961. 2. Validity of reopening assessment under Section 147 based on contravention of Section 269SS. 3. Application of Section 68 in cases of unexplained cash credits. 4. Judicial precedents on reassessment proceedings. Issue 1: Interpretation of Section 269SS The case involved a substantial question of law regarding the contravention of Section 269SS of the Income Tax Act, 1961. Section 269SS prohibits taking loans or deposits in cash exceeding a specified amount and mandates transactions through account payee cheques. The central issue was whether the contravention of this section could justify the reopening of an assessment under Section 147 of the Act. Issue 2: Validity of reopening assessment under Section 147 In the first case (ITA 454 of 2008), the Income Tax department sought to reopen the assessment for the year 1992-93 due to unexplained cash credits found in the assessment year 1997-98, alleging a violation of Section 269SS. The department argued that the deposits collected during 1992-93 were unexplained. However, the tribunal held that there was no failure on the part of the assessee to disclose material facts during the original assessment. The tribunal found no cogent evidence to support the allegations, leading to the dismissal of the revenue's appeals. Issue 3: Application of Section 68 in cases of unexplained cash credits The relevance of Section 68, which deals with unexplained credits in the books of an assessee, was also highlighted. The department relied on Section 68 in conjunction with Section 269SS to reopen the assessment. However, the tribunal emphasized that the department failed to establish concealment of income or non-disclosure of material facts by the assessee during the original assessment. Issue 4: Judicial precedents on reassessment proceedings Various judicial precedents were cited during the case. The Supreme Court rulings in Phool Chand Bajrang Lal & Anr. and Commissioner of Income-Tax Vs. P. Mohanakala emphasized the importance of specific information and unsatisfactory explanations in reassessment proceedings. The division bench judgments of different High Courts further supported the principle that reopening assessments based on mere suspicion or presumption without valid material is not permissible. The decisions highlighted the need for a prudent and reasonable approach by income tax authorities and emphasized that the department cannot change its opinion whimsically or presume past misconduct based on subsequent discoveries. In conclusion, the High Court of Calcutta upheld the tribunal's decision, emphasizing that the department's attempt to reopen assessments based on alleged violations of Section 269SS lacked sufficient evidence and failed to establish non-disclosure of material facts by the assessee. The judgment reaffirmed the importance of valid grounds and material evidence in reassessment proceedings, dismissing the revenue's appeals in both cases.
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