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2019 (4) TMI 1649 - AT - Income TaxReopening of assessment u/s 147 - non independent application of mind by AO - Addition of opening cash in hand - A.O. acted only on the basis of the information received from the Investigation Wing - borrowed satisfaction - no addition based on reasons recorded - HELD THAT - When the closing balance as on 31.3.2008 i.e. the preceding year was considered to be genuine and correct, then there was no reason to doubt the same balance taken by the assessee on 01.04.2008 as opening cash in hand for the year under consideration. In that view of the matter, the addition made by the A.O. and sustained by the CIT(A) deserves to be deleted. A.O. acted upon the information and recorded the reasons that the assessee had deposited a sum in his saving bank account. No addition was made for the said amount and the explanation given by the assessee was accepted, which shows that the A.O. only acted upon the information received by him and did not apply his own mind. As relying on SIGNATURE HOTELS (P) LTD. VERSUS INCOME TAX OFFICER AND ANR. 2011 (7) TMI 361 - DELHI HIGH COURT the re-assessment proceedings were not valid and were liable to be quashed. Viewed from any angle, the addition made by the A.O. and sustained by the CIT(A) was not justified - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Assessing Officer (A.O.) for reopening assessment under Section 147 and issuance of notice under Section 148 of the Income Tax Act, 1961. 2. Sustenance of addition of ?17,25,135/- as unexplained cash deposits. 3. Validity of reopening assessment based on information received from the Investigation Wing. Issue-wise Detailed Analysis: 1. Jurisdiction of the Assessing Officer (A.O.) for Reopening Assessment under Section 147 and Issuance of Notice under Section 148 of the Income Tax Act, 1961: The assessee contended that the initiation of proceedings under Section 147 and issuance of notice under Section 148 by the Income Tax Officer, Ward-5, Khanna, was without jurisdiction. The jurisdiction was transferred from Income Tax Officer Ward-1(2) Rampur (U.P) to Khanna without affording any opportunity to the assessee. The assessee argued that the assessment order passed by Income Tax Officer Ward-4, Khanna, was also bad in law since the Income Tax Officer Ward-5, Khanna, had no jurisdiction. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the A.O.'s action, stating that the A.O. had prima facie reason to believe that the income had escaped assessment due to huge cash deposits in the bank account. The CIT(A) noted that at the time of reopening, the A.O. did not need to prove beyond doubt that the income had escaped assessment, but only needed circumstantial evidence indicating such a possibility. 2. Sustenance of Addition of ?17,25,135/- as Unexplained Cash Deposits: The A.O. received AIR information that the assessee had deposited ?1,06,29,400/- in his savings bank account with Oriental Bank of Commerce, Doraha. The A.O. reopened the case under Section 148 after recording reasons under Section 147. The assessee provided a cash flow statement showing an opening balance of ?17,25,135/-. The A.O. questioned the source of this opening balance, and the assessee explained it as accumulated from personal savings, amounts received from father and two individuals, and net profit. However, the A.O. was not satisfied with the explanation and added the opening cash in hand of ?17,25,135/- to the assessee's income. The CIT(A) upheld this addition, noting that the assessee failed to prove the creditworthiness of the sources of the opening cash in hand. 3. Validity of Reopening Assessment Based on Information Received from the Investigation Wing: The assessee argued that the A.O. acted only on the basis of information received from the Investigation Wing and did not apply his own mind, rendering the reopening unjustified. The CIT(A) disagreed, stating that the A.O. had prima facie reasons to believe that the income had escaped assessment. The Tribunal, however, observed that the A.O. made no addition for the amount of ?1,06,29,400/- mentioned in the information and accepted the assessee's explanation for it. The Tribunal noted that the A.O. only acted upon the information received without independent application of mind, which was not valid for reopening the assessment. Citing the case of Signature Hotels Pvt. Ltd. Vs. I.T.O. & Another, the Tribunal held that reassessment proceedings initiated solely on the basis of information received, without the A.O.'s independent application of mind, were invalid. Consequently, the Tribunal quashed the reassessment proceedings and deleted the addition of ?17,25,135/-. Conclusion: The Tribunal allowed the appeal, holding that the A.O. did not independently apply his mind in reopening the assessment and that the addition of ?17,25,135/- as unexplained cash deposits was not justified. The reassessment proceedings were quashed, and the addition was deleted.
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