2019 (3) TMI 1242 - AT - Income Tax

Reopening of assessment u/s 148 - validity of the reopening proceedings - addition u/s 68 - non-filers of return - reopening based on AIR information - non-compliance before the AO and CIT(A) - admission of additional evidence - HELD THAT - The assessee is not a tax payer and has made huge deposits in her bank account maintained with Syndicate Bank. The above information was received from the CIB Kanpur. The Assessing Officer had given due opportunity to the assessee to explain the source, but, there was no compliance for which the Assessing Officer, after recording the reasons and after obtaining due permission from the Pr. CIT, Meerut issued notice u/s 148. Under these circumstances, the reassessment proceedings initiated by the Assessing Officer cannot be held as invalid. If the plea of the assessee that in case of a non-filer of tax returns, assessments cannot be reopened on the basis of AIR information that assessee has made huge cash deposits in the bank account is accepted, then the provisions of section 147 and 148 in the statute will become redundant. Accordingly, the grounds relating to validity of reassessment proceedings are dismissed. Assessee admittedly did not appear before the Assessing Officer. However, before the CIT(A) the assessee explained the reasons for non-appearance which was due to death of the father of the counsel of the assessee. CIT(A) should have accepted the additional evidences filed before him showing that such deposits were out of sale of certain agricultural lands on different dates and could have obtained a remand report from the A.O. Since there was non-compliance before the Assessing Officer and ld.CIT(A) did not accept the additional evidences, therefore, considering the totality of the facts of the case and in the interest of justice, deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate her case. - Appeal filed by the assessee is partly allowed for statistical purposes.

Issues Involved:
1. Validity of the reopening of assessment proceedings under section 148 of the Income Tax Act.
2. Addition of ?20,30,415 under section 68 of the Income Tax Act.
3. Non-compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of Assessment Proceedings under Section 148:

The assessee challenged the validity of the reopening of assessment on the grounds that the notice issued under section 148 was based solely on AIR information about cash deposits, which cannot confer valid jurisdiction. The assessee also argued that the notice was not served in accordance with the law, as it was served on the assessee's daughter, which was disputed.

The Tribunal held that the reassessment proceedings initiated by the Assessing Officer were valid. The Assessing Officer had received information from the CIB Kanpur about significant cash deposits in the assessee's bank account and had given due opportunity to the assessee to explain the source. Since there was no compliance, the Assessing Officer proceeded with the reassessment after obtaining permission from the Principal CIT, Meerut. The Tribunal noted that the decisions relied upon by the assessee were not applicable as they involved different factual scenarios, such as regular filing of income-tax returns by the assessee or reopening on one issue while making an addition on another. The Tribunal concluded that the provisions of sections 147 and 148 would become redundant if the plea of the assessee was accepted. Therefore, the grounds challenging the validity of the reassessment proceedings were dismissed.

2. Addition of ?20,30,415 under Section 68:

The assessee contended that the source of the cash deposits was the sale of agricultural land, and provided sale deeds as evidence before the CIT(A). However, the CIT(A) refused to accept the additional evidence due to the absence of a proper application for admission under Rule 46A of the Income Tax Act. The assessee argued that the addition was arbitrary and unlawful as the source of the deposits was fully explained.

The Tribunal found that the assessee did not appear before the Assessing Officer to explain the source of the deposits. However, the assessee explained before the CIT(A) that the non-appearance was due to the death of the counsel's father. The Tribunal held that the CIT(A) should have accepted the additional evidence and obtained a remand report from the Assessing Officer. In the interest of justice, the Tribunal restored the issue to the file of the Assessing Officer, directing the Assessing Officer to grant one final opportunity to the assessee to substantiate the source of the deposits. The Assessing Officer was instructed to decide the issue as per fact and law after giving due opportunity to the assessee.

3. Non-compliance with Principles of Natural Justice:

The assessee argued that the orders passed by the Assessing Officer and the CIT(A) were in violation of the principles of natural justice, as the assessee was not given a fair opportunity to present her case. The Tribunal noted that the assessee did not appear before the Assessing Officer due to the death of the counsel's father, which was a reasonable cause for non-compliance. The Tribunal directed the Assessing Officer to provide a final opportunity to the assessee to present her case and substantiate the source of the deposits, thereby ensuring compliance with the principles of natural justice.

Conclusion:

The Tribunal dismissed the grounds challenging the validity of the reassessment proceedings but allowed the grounds related to the addition of ?20,30,415 and the principles of natural justice for statistical purposes. The Tribunal restored the issue to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate her case and decide the issue as per fact and law after giving due opportunity to the assessee. The appeal filed by the assessee was partly allowed for statistical purposes.

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