2020 (9) TMI 254 - AT - Income Tax

Validity of reopening of the assessment - limitation of the notice issued U/s 148 - unexplained source of cash deposit in the bank account - assessee is an individual and has not filed return of income U/s 139 - as per assessee approval by the competent authority u/s 151 without application of mind - HELD THAT - Notice is dispatched through Speed Post - issuance of notice includes not only the preparation of notice but the notice shall go out of the control of the A.O. and is sent through one of the modes prescribed U/s 282 of the Act. Notice was issued within the period of limitation and was also duly served upon the assessee on the very next day, therefore, the question of limitation does not arise. Further the assessee has complied with the notice by filing the return of income which is only return of income filed by the assessee. Hence, the return of income filed by the assessee in response to notice U/s 148 of the Act is otherwise to be scrutinized by the A.O. Hence, we do not find any substance in the objection raised by the assessee against the limitation of the notice issued U/s 148. Mechanical approval granted by the ld. Pr.CIT - In the case in hand, the assessee has not filed any return of income U/s 139 of the Act and the A.O. received information from the DIT(Inv.), Jaipur regarding the deposit of cash of ₹ 9.19 lacs in the bank account of the assessee that too after an enquiry conducted by the Investigation Wing regarding the source of the said deposit and only when the reply of the assessee was not found to be satisfactory the said information was sent to the A.O. for appropriate steps - when the reasons recorded by the A.O. prima facie lead to the formation of belief that the income assessable to tax has escaped assessment then the ld. Pr.CIT is not required to record separate satisfaction as the reasons itself reveal the satisfaction of the A.O. - Decided against assessee. Unexplained cash deposit u/s 68 - assessee has explained the source of cash deposit in the bank account as the sale proceeds of the land sold by the father of the assessee for consideration - wife of the assessee filed an affidavit claiming that the amount of ₹ 2,72,500/- deposited in the ICICI bank account belongs to her as it is a joint bank account of husband and wife and the said deposit was made by her out of her boutique business receipts - HELD THAT - When the father of the assessee has sold the property in the year 2007 for a consideration of ₹ 53.00 lacs and the assessee is the only legal heir then the possibility of the source of deposit in the bank account of the assessee from the sale proceeds of the property of the father is not ruled out. However, the assessee has not produced the details of the bank account of father to support the fact that there was a withdrawal of cash from the bank account of the father. Therefore, in these facts and circumstances, we find that this issue requires a detailed and proper verification regarding source of deposit. Further to the extent of income declared by the assessee as well as the claim of wife of the assessee regarding the deposit of ₹ 2,72,500/- cannot be rejected. Therefore, to the extent of income declared by the assessee as well as the wife of the assessee has to be considered as source of deposit. Hence, we set aside this issue to the record of the A.O. for proper verification of the facts regarding the source being the sale proceeds of the property sold by the father of the assessee. The assessee is also directed to furnish details of bank account of father of the assessee for the purpose of conducting the proper enquiry by the A.O. by calling the relevant details from the bank. Hence, this issue is restored back to the file of the A.O. Penalty u/s 271F - default on the part of the assessee for non-filing of the return of income - HELD THAT - As we have already set aside the issue of addition made by the A.O. to the record of the A.O. Even otherwise when the explanation of the assessee that his income is below the taxable limit except the deposits made in the bank account is factually correct and is a a bonafide explanation, then, in view of the provisions of Section 273B of the Act, the said explanation is a reasonable cause for default on the part of the assessee and accordingly, the penalty U/s 271F of the Act is not leviable, hence deleted.

Issues Involved:

1. Validity of reopening the assessment and issuance of notice under Section 148 of the Income Tax Act.
2. Addition of ?9,19,000 as unexplained cash deposits under Section 68.
3. Charging of interest under Sections 234A, 234B, and 234C.
4. Imposition of penalty under Section 271F for non-filing of return.

Detailed Analysis:

1. Validity of Reopening the Assessment and Issuance of Notice under Section 148:

The assessee challenged the reopening of the assessment and issuance of notice under Section 148 on the grounds of want of jurisdiction and being barred by limitation. The Assessing Officer (A.O.) issued the notice on 31/03/2016 after receiving information about cash deposits of ?9.19 lakhs in the assessee's bank accounts. The notice was served on 01/04/2016. The A.O. recorded reasons for reopening, which were approved by the competent authority under Section 151. The assessee argued that the approval was mechanical, as the Principal Commissioner of Income Tax (Pr.CIT) merely wrote "YES" without detailed satisfaction.

The Revenue contended that the A.O. had tangible material, including an investigation report, to form a belief that income had escaped assessment. The Tribunal held that the notice was issued within the limitation period and was valid. The approval by the Pr.CIT was not mechanical as the reasons recorded by the A.O. were sufficient to form a belief of escaped income. The Tribunal upheld the reopening of the assessment and the issuance of the notice under Section 148.

2. Addition of ?9,19,000 as Unexplained Cash Deposits under Section 68:

The A.O. added ?9,19,000 as unexplained cash deposits in the assessee's bank accounts. The assessee claimed the source of the deposits was the sale proceeds of land sold by his father and business income. The father had sold the land for ?53 lakhs, but the entire consideration was received through cheques. The assessee failed to produce the father's bank account details to show cash withdrawals corresponding to the deposits. The assessee's wife also filed an affidavit claiming ?2,72,500 as her business income from a boutique.

The Tribunal noted that the possibility of the source being the sale proceeds of the land could not be ruled out but required verification. The Tribunal directed the A.O. to verify the bank account details of the father and the business income of the assessee and his wife. The issue was restored to the A.O. for proper verification.

3. Charging of Interest under Sections 234A, 234B, and 234C:

This issue was deemed consequential and did not require separate adjudication.

4. Imposition of Penalty under Section 271F for Non-filing of Return:

The A.O. imposed a penalty of ?5,000 under Section 271F for non-filing of the return. The Tribunal noted that if the source of deposits was explained and accepted, the assessee's income would be below the taxable limit. The Tribunal held that the explanation provided by the assessee was bona fide and constituted a reasonable cause under Section 273B. Consequently, the penalty under Section 271F was deleted.

Conclusion:

The Tribunal upheld the validity of the reopening of the assessment and issuance of notice under Section 148. The addition of ?9,19,000 as unexplained cash deposits was remanded to the A.O. for verification. The penalty under Section 271F was deleted, considering the reasonable cause provided by the assessee. The appeal related to the addition was partly allowed for statistical purposes, and the appeal related to the penalty was allowed.

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