2020 (9) TMI 958 - AT - Income Tax

Reopening of assessment u/s 147 - non-supply of reasons recorded for issuance of notice u/s 148 - HELD THAT - There is nothing on record and which has been brought to our notice that in the entire assessment proceedings, the assessee objected to the issuance of notice u/s 148 and has sought copy of the reasons so recorded for the reopening the assessment proceedings. We find that there is no prejudice which is caused to the assessee in terms of denial of any opportunity to the assessee to object to the reassessment proceedings by non-supply of the reasons so recorded by the AO where the same were never asked for by the assessee at first place. There is thus no violation of the directives as laid down in the case of GKN Driveshaft 2002 (11) TMI 7 - SUPREME COURT wherein it was held that recorded reasons must be furnished to the assessee when the assessee sought for the said reasons. In the instant case, it is an admitted position that the assessee for the first time applied for the copy of the reasons on 14.11.2019 i.e. after passing of appellate order by ld. CIT(A), Jaipur and the same was provided by the AO to her on 18.12.2019 and therefore, it is crystal clear on facts that the assessee never asked for the copy of the reasons during the entire assessment and appellate proceedings, and therefore, there was no obligation as well as occasion for the AO to supply copy of the reasons to the assessee. In the result, the ground so taken by the assessee is hereby dismissed. Action of the JCIT, Range-04, Jaipur in giving the approval and sanction before issuance of notice u/s 148 - HELD THAT - Review of the reasons so recorded by the AO and perusal of the assessment and other records so submitted by the AO, the JCIT has recorded his satisfaction and endorsed the satisfaction so recorded by the AO and held that it is a fit case for issuance of notice u/s 148. JCIT has gone through the reasoning and the satisfaction so recorded by the AO and finding the same to be in conformity with the provisions of law and the facts and circumstances of the case, has accorded his sanction. We therefore find that it is not a case where the approval has been granted mechanically or without application of mind, rather he has gone through the AO s proposal, his reasoning so recorded in the proposal, the assessment and other records and finding the reasons so recorded to be in conformity with the assessment and other records has accorded his approval. Cash in hand unexplained - HELD THAT - Where the assessee is working out the availability of cash at the start and close of the financial year, such availability is of physical cash in hand and not the cash accrual from business which is not yet realized. Therefore, as far as entries pertaining to cash accruals in respective financial years are concerned, the same needs to be excluded as the effect of the same would be automatically taken in subsequent bank/cash deposits. Subject to such exclusion, we find that the cash summary for the last four years provides a reasonable basis for arriving at the opening cash in hand at the start of the financial year and the explanation of the assessee to that extent therefore found is satisfactory. The matter is accordingly set-aside to the file of the AO for the limited purpose of determination of opening cash in hand after exclusion of entries in respect of cash accruals in the respective financial years and the AO is hereby directed to grant relief to the assessee to the extent of opening cash in hand so worked out by him at the start of the impugned financial year. In the result, the ground is disposed off in light of aforesaid directions.

Issues Involved:
1. Non-supply of reasons for reopening the case.
2. Validity of the sanction for the issuance of notice under Section 148.
3. Legality of reopening the assessment under Sections 147/148.
4. Sustenance of the addition of ?7,14,556 as unexplained investment.
5. Levy of interest under Section 234B.

Detailed Analysis:

1. Non-supply of Reasons for Reopening the Case:
The assessee argued that the Assessing Officer (AO) did not provide the reasons recorded for reopening the case, which should render the reassessment proceedings null and void. The Tribunal found that the assessee never requested the reasons during the assessment or appellate proceedings. The request for reasons was made only after the appellate order was passed, and the reasons were subsequently provided. Therefore, the Tribunal held that there was no prejudice caused to the assessee, and the ground was dismissed.

2. Validity of Sanction for Issuance of Notice under Section 148:
The assessee contended that the Joint Commissioner of Income-Tax (JCIT) gave approval for the notice under Section 148 mechanically without application of mind. The Tribunal found that the JCIT reviewed the proposal, the report from the ITO (I & CI)-II, Jaipur, and other relevant documents before granting approval. The JCIT's endorsement was not mechanical but based on a thorough review. Consequently, this ground was dismissed.

3. Legality of Reopening the Assessment under Sections 147/148:
The assessee argued that the AO had no reason to believe that income had escaped assessment, and the reopening was based on "borrowed satisfaction" from the ITO (I & CI)-II, Jaipur's report. The Tribunal found that the AO independently examined the report, the assessee's return of income, and other documents before concluding that income had escaped assessment. The Tribunal held that the AO's satisfaction was not borrowed but based on tangible information and independent verification. Therefore, the reopening of the assessment was valid, and the ground was dismissed.

4. Sustenance of Addition of ?7,14,556 as Unexplained Investment:
The assessee claimed that the cash in hand was from savings, pin money, and contributions from family members. The CIT(A) restricted the opening cash balance to ?2,00,000, considering the income declared over nine years and household expenses. The Tribunal noted that the assessee provided a cash flow statement for the last four years, including bank withdrawals, deposits, and business cash accruals. The Tribunal directed the AO to verify the cash flow statement, excluding cash accruals not yet realized, and determine the opening cash in hand. The ground was disposed of with these directions.

5. Levy of Interest under Section 234B:
The assessee challenged the levy of interest under Section 234B. The Tribunal noted that no contentions were advanced during the hearing, and the levy of interest is consequential. Therefore, this ground was dismissed.

Conclusion:
The appeal was disposed of with directions to the AO to verify the opening cash in hand while sustaining the addition of ?7,14,556. Other grounds, including the non-supply of reasons, validity of sanction, legality of reopening, and levy of interest, were dismissed.

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