2020 (11) TMI 812 - AT - Income Tax

Reopening of assessment u/s 147 - whether there was prima facie some material on the basis of which the department could reopen the case? - HELD THAT - The reasons to believe would mean cause or justification - at the stage of initiating the proceedings for reopening of assessment by issuing notice, the only question which should bear in mind is as to whether there was relevant material on which a reasonable person could have formed a requisite believe and in our view, the A.O. was well within his right to reopen the assessment on the basis of information received from I CI Wing of the department that the assessee had purchased property in the year under consideration and during the course of enquiries made by I CI Wing of the department, the assessee could not explain the source of investment. In view of the above facts and circumstances, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, accordingly, we uphold the same. Addition u/s 68 - treating the loan taken by the assessee from Smt. Kamla Tahaliyani as bogus - HELD THAT - Cash deposited in the bank account is totally sourced by the cash withdrawals made earlier. Hence, adverse inference drawn by the revenue authorities under these peculiar facts and circumstances is unwarranted. Therefore, in our view, the CIT(A) erred in sustaining the addition without considering this fact that the cash deposited in the bank account was fully sourced from the earlier cash withdrawals from the same bank account, therefore, the findings of the ld. CIT(A) that immediate source of advancing money is unverifiable, are factually incorrect and are perverse. Therefore, keeping in view our above discussion, we direct the A.O. to delete the addition made u/s 68. Addition of advance payment by the assessee against the sale of property from Shri Ram Swaroop Mali - admission of additional evidence - HELD THAT - During the course of argument, the assessee had also placed on record an application dated 21/09/2020 to accept an affidavit as additional evidence under the provisions of Income Tax Appellate Rules, 1963 (in short, the Rules). In the said application, the assessee wants to place on record an affidavit of Shri Chhitar Mali, S/o- Shri Ramswaroop Mali as additional evidence, however, the ld AR has failed to demonstrate as to how the present application filed by the assessee is meeting with the ingredients contained in Rule 29 of the Rules. Therefore, in our view, the present application for accepting the affidavit as additional evidence moved by the assessee deserves to be dismissed and the same is accordingly dismissed. A.O. had believed the source of ₹ 4,89,000/- from the agricultural income of Shri Ramswaroop Mali but in respect of the amount of ₹ 5.11 lacs, the assessee has not placed on record any document in respect of purchase and sale of truck by son of Shri Ramswaroop Mali. The assessee has not placed on record any corroborative evidence, such as, Registration, transfer certificate or any other documents to demonstrate for acquiring and sale of truck by son of Shri Ramswaroop Mali and absolutely no evidence to prove that the said son had given amount to Shri Ramswaroop Mali. In view of the above facts and circumstances, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, accordingly, we uphold the same.

Issues Involved:
1. Legality of the reopening of assessment under Section 147 of the Income Tax Act, 1961.
2. Addition of ?5,00,000 under Section 68 of the Income Tax Act, 1961, treating the loan from Smt. Kamla Tahaliyani as bogus.
3. Addition of ?5,11,000 by treating the advance against the sale of property from Shri Ram Swaroop Mali as bogus.
4. Invocation of the provisions of Section 115BBE of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of the Reopening of Assessment under Section 147:
The assessee challenged the reopening of the assessment under Section 147, arguing that the reasons for reopening were void and illegal, as merely purchasing a property does not lead to an inference that income has escaped assessment. The assessee cited the case of CIT Vs. Maniben Valji Shah, where the Bombay High Court held that reopening for verification of the source of purchase is not permissible. The Revenue argued that the assessment was reopened based on relevant information and documents available with the AO, forming a prima facie belief that income had escaped assessment.

The Tribunal found that the AO had relevant material to form a prima facie belief that income chargeable to tax had escaped assessment. The sufficiency and correctness of the material need not be looked at the initial stage of reopening. Therefore, the Tribunal upheld the order of the CIT(A) on this issue.

2. Addition of ?5,00,000 under Section 68:
The assessee contended that the loan from Smt. Kamla Tahaliyani was genuine, supported by confirmation and bank statements. The AO had treated the loan as bogus due to cash deposits in the creditor's bank account before issuing the cheque. The assessee explained that the cash deposits were sourced from earlier cash withdrawals.

The Tribunal found that the cash deposited in the bank account was sourced from earlier withdrawals, and the adverse inference drawn by the revenue authorities was unwarranted. The Tribunal directed the AO to delete the addition of ?5,00,000 made under Section 68.

3. Addition of ?5,11,000:
The assessee argued that the advance of ?10,00,000 received from Shri Ram Swaroop Mali was genuine, supported by an agreement to sell and statements recorded by the AO. The CIT(A) had sustained the addition of ?5,11,000, stating there was no evidence that the son of Shri Ram Swaroop Mali gave the amount to him.

The Tribunal noted that the assessee failed to provide corroborative evidence for the sale of the truck by the son of Shri Ram Swaroop Mali. Therefore, the Tribunal upheld the order of the CIT(A) on this issue.

4. Invocation of Provisions of Section 115BBE:
The assessee did not press this ground of appeal during the hearing. The Tribunal dismissed this ground of appeal being not pressed.

Conclusion:
The Tribunal partly allowed the appeal, upholding the reopening of assessment under Section 147 and the addition of ?5,11,000, while directing the deletion of the addition of ?5,00,000 under Section 68. The invocation of Section 115BBE was dismissed as not pressed.

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