2020 (12) TMI 345 - AT - Income Tax

Reopening of assessment u/s 147 - wrong, incorrect and non-existing facts - addition on account of cash deposit and addition of income from MCX Business - HELD THAT - Neither assessee has made any investment for purchase of mutual fund in assessment year under appeal nor the A.O. has made any such addition in the assessment year. Therefore, such information received by A.O. was totally wrong, incorrect and non-existing and thus the fact mentioned in the reasons recorded for reopening of the assessment as regards investment made in purchase of mutual fund is wrong, non-existing and incorrect. A.O. has recorded wrong, incorrect and non-existing reasons for reopening of the assessment which is not permissible under Law. As regards the transaction in commodity exchange contract of ₹ 10 lakhs, Learned Counsel for the Assessee referred to para-3.3 of the assessment order in which the A.O. has made addition of ₹ 7,72,461/- on account of profit on the MCX business. A.O. has also mentioned in the same para that in the show cause notice he has mentioned such income at ₹ 11,80,571/- which is appearing at page-3 of the assessment order, but, after examination this figure was also found incorrect and A.O. has ultimately restricted the addition to ₹ 7,72,469/- i.e., for income only but no addition is made of transaction of MCX Investment. A.O. has recorded wrong, incorrect and non-existing facts in the reasons recorded for reopening of the assessment that assessee has made transaction in commodity exchange contract of ₹ 10 lakhs. A.O. in the assessment order has mentioned that assessee has made investment of ₹ 10 lakhs in purchase of mutual funds which fact is also incorrect and is contradictorily recorded in the reasons for reopening of the assessment for ₹ 2 lakhs only. A.O. in the assessment order has also recorded same statement that assessee has made contract in commodity exchange exceeding ₹ 10 lakhs which fact was ultimately found incorrect by the A.O. himself and he has made part addition as against the income mentioned in the show cause notice. In case incorrect, wrong and non-existing reasons are recorded by the A.O. for reopening of the assessment and A.O. failed to verify the information received due to non application of mind to information, reopening of the assessment would be unjustified and is liable to be quashed. Considering the totality of the facts and circumstances of the case and in the light of material on record, we are of the view that reopening of the assessment is illegal and bad in Law and is liable to be quashed. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. In view of the above, there is no need to decide other issues raised in the present appeal which are left with academic discussion only. Accordingly, appeal of the Assessee is allowed.

Summary

Issues Involved:
1. Reopening of the assessment under section 147/148 of the I.T. Act, 1961.
2. Addition of ?59,50,000/- on account of cash deposit.
3. Confirming addition of ?1,50,000/- out of ?9,85,000/-.
4. Addition of income of ?7,72,461/- from MCX Business.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment under Section 147/148 of the I.T. Act, 1961:
The Assessee challenged the reopening of the assessment, arguing that the reasons recorded by the Assessing Officer (A.O.) were based on incorrect and non-existing facts. The A.O. mentioned that the assessee made an investment of ?2 lakhs in mutual funds and had transactions in commodity exchange contracts worth ?10 lakhs. However, the assessee did not make any fresh investment in mutual funds during the relevant period, and no such addition was made by the A.O. The Tribunal noted that the A.O. failed to conduct any investigation on the information received through NMS and recorded incorrect facts, which is not permissible under law. The Tribunal relied on several judgments, including CIT vs. Atlas Cycle Industries and Pr. CIT vs. SNG Developers Ltd., to conclude that reopening based on incorrect and non-existing reasons is invalid. Consequently, the reopening of the assessment was quashed.

2. Addition of ?59,50,000/- on Account of Cash Deposit:
The A.O. made an addition of ?59,50,000/- as unexplained cash deposits in the assessee's bank account. However, since the reopening of the assessment itself was quashed, all subsequent additions, including this one, were also deleted.

3. Confirming Addition of ?1,50,000/- out of ?9,85,000/-:
The Ld. CIT(A) had partly allowed the assessee's appeal by confirming an addition of ?1,50,000/- out of ?9,85,000/-. However, given that the reopening of the assessment was quashed, this addition was also rendered moot and deleted.

4. Addition of Income of ?7,72,461/- from MCX Business:
The A.O. made an addition of ?7,72,461/- on account of profit from MCX business. The Tribunal noted that the A.O. initially mentioned a higher figure in the show cause notice but ultimately restricted the addition to ?7,72,461/-. Since the reopening of the assessment was found to be invalid, this addition was also deleted.

Conclusion:
The Tribunal quashed the reopening of the assessment under section 147/148 of the I.T. Act, 1961, citing that the A.O. recorded incorrect and non-existing reasons without proper investigation. Consequently, all additions made by the A.O. were deleted, and the appeal of the assessee was allowed.