2021 (2) TMI 934 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 69A - assessee failed to explain the source of the cash deposits in the bank account - HELD THAT - Assessee explained to AO before recording the reasons of reopening of the assessment that total cash deposited in his two bank accounts out of the sale proceeds of Popular Trees. Still AO has mentioned incorrect amount in the reasons. Ultimately AO accepted that the figure of ₹ 17,69,000/- mentioned in the reason is incorrect because he made addition of ₹ 18,78,400/-in the reassessment order. The assessee also explained that he has several source of income and sale proceeds of Popular Trees were deposited in cash in bank account. Thus, the cash deposit per se may not be income of the assessee. Thus, it is clear that AO has not verified information so recorded. AO in the reasons also mentioned another incorrect fact that he has reasons to believe that income assessed u/s 143(1) has escaped assessment because income assessed u/s 143(1) was at ₹ 1,79,300/- only. AO never mentioned in reasons u/s 148 that he has reasons to believe that income of ₹ 17,69,000/- chargeable to tax had escaped assessment. The reasons are therefore, incorrect and based on no belief of AO. The ingredients of section 147 of IT Act are, therefore, not satisfied. The AO did not apply mind to information. The issue is, therefore, covered by order of ITAT Delhi Bench in the case of Dheeraj Yadav 2021 (1) TMI 731 - ITAT DELHI . Following the same, we set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. - Decided in favour of assessee.

Summary

Issues Involved:

1. Reopening of the assessment under section 148 of the Income Tax Act.
2. Addition of ?18,78,400 under section 69A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment under Section 148 of the Income Tax Act:

The assessee challenged the reopening of the assessment under section 148 of the Income Tax Act. The Assessing Officer (AO) issued a notice under section 148 based on AIR information that the assessee had deposited ?17,69,000 in his savings bank account. The AO issued a letter on 18.08.2015 to verify the source of this cash deposit. The assessee responded on 07.12.2015, explaining that the deposits were from the sale receipts of Popular trees (Agricultural Income). However, the AO did not accept this explanation and recorded reasons for reopening the assessment, stating that the income assessed under section 143(1) had escaped assessment.

The Tribunal found that the AO recorded incorrect facts in the reasons for reopening. The total deposits were actually ?18,78,400, not ?17,69,000. The AO did not verify the information before recording the reasons and failed to apply his mind to the facts of the case. The Tribunal cited the case of Shri Dheeraj Yadav vs. ITO, where it was held that mere cash deposits in a bank account do not per se constitute income. The Tribunal concluded that the reopening of the assessment was based on incorrect and non-existing facts, thus quashing the reassessment proceedings.

2. Addition of ?18,78,400 under Section 69A of the Income Tax Act:

The AO made an addition of ?18,78,400 under section 69A, treating the cash deposits as unexplained income. The assessee contended that these deposits were from the sale of Popular trees, which constituted agricultural income. The Tribunal noted that the AO did not properly verify the source of the cash deposits and relied on incorrect information. The Tribunal referenced the case of Shri Abrar Ahmad Qasimi, where it was held that cash deposits in a bank account do not automatically translate into taxable income.

The Tribunal emphasized that the AO failed to apply his mind and verify the information before making the addition. The Tribunal also noted that the AO mentioned an incorrect amount in the reasons for reopening and did not consider the assessee's explanation regarding the source of the deposits. Consequently, the Tribunal quashed the addition made under section 69A.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the reopening of the assessment under section 148 and deleting the addition of ?18,78,400 under section 69A. The Tribunal reiterated the importance of proper verification and application of mind by the AO before initiating reassessment proceedings and making additions based on incorrect or unverified information.