2021 (1) TMI 731 - AT - Income Tax

Reopening of assessment u/s 147 - proceedings initiated on the basis of information that assessee had deposited cash amounting with ICICI Bank and also earned commission payment from Karvat Healthcare Services Pvt. Ltd., in assessment year under appeal and no return have been filed - HELD THAT - The assessee has filed copy of the reply filed before the Ld. CIT(A) in the paper book in which it is clearly explained that A.O. has wrongly assumed that entire cash deposited in the ICICI Bank account was income of the assessee as there are deposits and withdrawals multiple times throughout the year for business purposes. It was also explained that assessee in the business during the relevant year because assessee deals in Hardware, Sanitary and Sanitary-ware at Chawdi Bazar, Delhi. These facts clearly show that total cash deposited in the Bank Account of the assessee with ICICI Bank Ltd., per se may not be the income of the assessee. A.O. has recorded incorrect, wrong and non-existing reasons for reopening of the assessment and also failed to verify the information received by him before recording the reasons for reopening of the assessment. Thus, there was clearly non-application of mind on the part of the A.O. to initiate the re-assessment proceedings. The A.O. would not get assumption of jurisdiction legally to frame the re-assessment under section 147/148. In view of the above, we set aside the Orders of the authorities below and quash the reopening of the assessment. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under section 147/148 of the I.T. Act, 1961.
2. Addition of ?11,07,160/- on account of unexplained money under section 69A of the I.T. Act, 1961.
3. Addition of ?756/- on account of interest earned.

Detailed Analysis:

1. Reopening of 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 A.O. were based on incorrect facts and non-application of mind. The A.O. initiated proceedings under section 147 based on information that the assessee had deposited ?11,07,160/- in ICICI Bank and earned a commission of ?2,533/- without filing a return of income. The Tribunal found that the A.O. recorded incorrect facts, as the actual cash deposits amounted to ?11,49,750/-. The Tribunal cited the case of Shri Abrar Ahmad Qasimi, where it was held that mere cash deposits do not constitute income and quashed the reassessment proceedings. The Tribunal further noted that the A.O. did not verify the information before recording the reasons for reopening, indicating a lack of application of mind. Consequently, the reopening of the assessment was quashed.

2. Addition of ?11,07,160/- on Account of Unexplained Money under Section 69A of the I.T. Act, 1961:
The A.O. made an addition of ?11,07,160/- as unexplained money under section 69A. The Tribunal observed that the A.O. wrongly assumed that the total cash deposited in the bank account was the income of the assessee, without considering the multiple deposits and withdrawals for business purposes. The Tribunal referenced the ITAT Delhi Bench's decision in the case of Shri Abrar Ahmad Qasimi, which held that deposits in a bank account per se cannot be considered income. The Tribunal concluded that the A.O. recorded incorrect facts and failed to apply his mind, leading to the deletion of the addition.

3. Addition of ?756/- on Account of Interest Earned:
The A.O. also made an addition of ?756/- on account of interest earned. However, this issue was not specifically addressed in the Tribunal's detailed analysis. Given that the reopening of the assessment was quashed, all related additions, including this minor interest amount, were also deleted.

Conclusion:
The Tribunal quashed the reopening of the assessment under section 147/148 due to incorrect facts and non-application of mind by the A.O. Consequently, all additions made in the reassessment, including ?11,07,160/- on account of unexplained money and ?756/- on account of interest earned, were deleted. The appeal of the assessee was allowed in full.