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2022 (8) TMI 678 - AT - Income TaxReopening of assessment u/s 147 - reliance on information that was received by him from the DDIT - unexplained cash deposits in the various bank accounts of the assessee - Whether reopening of case was without application of mind by the A.O? - HELD THAT - As per mandate of law, the A.O on the basis of the material available before him is obligated to record a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. However, in transpires that in the case before us, through the A.O had referred to the material/information but there is a clear absence of formation of a bonafide belief on his part that the income of the assessee chargeable to tax had escaped assessment within the meaning of section 147 of the Act. We would not hesitate to observe that a perusal of the reasons to believe reveals nothing but the reopening of the case of assessee on the basis of information received by the A.O from the DDIT(Inv.)-III, Raipur. Nothing is discernible from a perusal of the reasons to believe which would reveal any application of mind by the AO qua the material/information before him, on the basis of which he had arrived at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment u/s.147. We though are not oblivious of the settled position of law that an A.O at the stage of reopening of a concluded assessment u/s. 147 of the Act is not required to conclusively prove escapement of income of the assessee from chargeability to tax, but the statutory obligation so cast upon him i.e. formation of bona-fide belief on the basis of material available before him that the income of the assessee chargeable to tax had escaped assessment cannot be lost sight of. Our aforesaid view is fortified by the order of a co-ordinate Bench of the Tribunal i.e. ITAT, C Bench, Mumbai in the case of Chetan Rajnikant Shah 2021 (2) TMI 1053 - ITAT MUMBAI wherein quashed the reopening of the assessment, for the reason that there was failure on the part of the assessee to arrive at an independent and a bonafide belief that the income of the assessee chargeable to tax had escaped assessment, As the A.O in the case before us had clearly failed to apply his mind to the material available before him, and had reopened the case of the assessee by merely referring to the information that was received by him from the DDIT (Inv.)-III, Raipur, therefore, we concur with the claim of the Ld. AR that the A.O had wrongly assumed jurisdiction for dislodging the concluded assessment of the assessee without discharging the statutory obligation that was cast upon him for validly reopening the case of the assessee u/s.147 of the Act. Reopening of the assessment in absence of any failure on the part of the assessee in fully and truly disclosing all material facts necessary for assessment - As the assessee in the case before us had disclosed all material facts necessary for its assessment, therefore, we are of the considered view that the A.O as per the limitation provided in the first proviso to Sec. 147 was divested of his jurisdiction for reopening the concluded assessment of the assessee beyond a period of four years from the end of the relevant assessment year i.e, AY 2008-09. As in the case before us the original assessment had been framed by the A.O vide his order passed u/s.143(3), dated 18.06.2010 therefore, in absence of any allegation on the part of the department that the income of the assessee chargeable to tax had escaped assessment for reason of failure on his part to disclose fully and truly all material facts necessary for assessment, the A.O as per the mandate of the first proviso to Sec. 147 of the Act could not have assumed jurisdiction for reopening the concluded assessment of the assessee beyond a period of four years from the end of the assessment year i.e, beyond 31.03.2013. We, thus, concur with the claim of the Ld. AR that as the A.O had acted in defiance of the first proviso to Sec. 147 of the Act and had wrongly assumed jurisdiction and reopened the case of the assessee beyond a period of 4 years from the end of the relevant assessment year, therefore, the assessment order so passed by him on the said count too cannot be sustained and is liable to be struck down. Reassessment on the basis of Change of opinion - On a perusal of the reasons to believe , it can safely be gathered that the case of the assessee was reopened by the AO on the basis of information received from the DDIT (Inv.)-II, Raipur that certain cash deposits in the bank accounts of the assessee could not be verified. In our considered view, not only the aforesaid details of cash deposits in the bank accounts of the assessee were very much there before the A.O in the course of the original assessment proceedings, but in fact the same had duly been considered and accepted by him as the duly accounted sale proceeds of the assessee. On the basis of our aforesaid deliberations, we are of a strong conviction, that as stated by the Ld. AR, and rightly so, as the case of the assessee had been reopened with a purpose to re-visit the assessment on the basis of a mere change of opinion, which we are afraid is not permissible in the eyes of law, thus, the assessment framed by the AO is liable to be struck down for want of jurisdiction on his part on the said count. As per the mandate of law even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Our aforesaid view is fortified by the judgments of the Hon'ble High Court of Bombay in the case of NYK Lime (India) Ltd. 2012 (2) TMI 283 - BOMBAY HIGH COURT and Purity Tech Textile Pvt. Ltd. 2010 (2) TMI 26 - BOMBAY HIGH COURT . We, thus, in the backdrop of our aforesaid multi-facet observations qua the invalid assumption of jurisdiction by the AO for reopening the concluded assessment of the assessee, quash the assessment framed by him vide his order passed u/ss. 143(3)/147 of the Act, dated 15.03.2016 for want of valid assumption of jurisdiction. Unexplained cash credit u/s.68 -Though the A.O had on the one hand accepted that the amounts in question were the sale proceeds that stood credited in the books of account of the assessee and had brought the profit resulting therefrom as disclosed by the assessee to tax in his hand, but at the same time had held the said amounts as unexplained cash credits within the meaning of section 68 of the Act. Apart from that, the re-characterization of the duly accounted sales of the assessee which were earlier accepted by the AO in the original assessment that was framed by him vide his order passed under Sec. 143(3), dated 18.06.2010, without rejecting his books of accounts under Sec. 145(3) of the Act is beyond comprehension. In sum and substance, the recharacterisation of the duly accounted cash sales of the assessee as unexplained cash credits u/s 68 by the AO without rejection of the books of account of the assessee u/s 145(3) of the Act is beyond comprehension. As stated by the ld. AR, and rightly so, the acceptance of the cash sales as disclosed by the assessee a/w simultaneous re-characterization of the same as unexplained cash credits u/s 68 had clearly subjected the assessee to a double tax jeopardy. Apart from that, we find substance in the claim of the ld. AR that now when in the cases of the assessee for the subsequent years i.e AY 2009-10, AY 2010-11, AY 2013-14 and AY 2014-15, which too were reopened for the same reasons that were communicated to the AO by the DDIT (Inv.)-II, Raipur, no adverse inferences have been drawn, therefore, an inconsistent approach could not have justifiably been adopted for the year under consideration. We find that the AO had accepted the claim of the assessee that the cash deposits in his bank accounts were sourced out of the duly accounted cash sale proceeds. As the facts and the issue involved in the aforementioned succeeding years remains the same as are involved in the case of the assessee before us, therefore, we find no justification on the part of the department in adopting an inconsistent approach. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT We, thus, in terms of our aforesaid observations finding no infirmity in the deletion of the addition made by the AO u/s 68 of the Act, uphold his well reasoned order. Decided against revenue.
Issues Involved:
1. Validity of jurisdiction assumed by the AO for reopening the case under Sec. 147 of the Income-tax Act. 2. Justification of the addition of Rs. 5,22,81,663/- as unexplained cash deposits. 3. Condonation of delay in filing the cross-objection by the assessee. Issue-wise Detailed Analysis: 1. Validity of Jurisdiction Assumed by the AO for Reopening the Case under Sec. 147: (A) Reopening the Case without Application of Mind by the AO: The Tribunal found that the AO reopened the case based on information from the DDIT (Inv.)-III, Raipur, without independent application of mind. The "reasons to believe" merely referred to the information received without forming a bonafide belief that income had escaped assessment. The Tribunal cited the ITAT, Mumbai's decision in Chetan Rajnikant Shah Vs. ITO, emphasizing that reopening based solely on received information without independent verification is invalid. The Tribunal concluded that the AO failed to discharge the statutory obligation for validly reopening the case under Sec. 147. (B) Reopening of the Assessment in Absence of Any Failure on the Part of the Assessee in Fully and Truly Disclosing All Material Facts: The Tribunal noted that the original assessment was framed under Sec. 143(3) and the reopening was beyond four years from the end of the relevant assessment year. The "first proviso" to Sec. 147 requires that reopening beyond four years can only occur if the income escaped assessment due to the assessee's failure to disclose fully and truly all material facts. Since the reopening was not based on such failure, the Tribunal held that the AO acted in defiance of the "first proviso" to Sec. 147. (C) Reassessment on the Basis of "Change of Opinion": The Tribunal agreed with the assessee's claim that the reopening was based on a mere "change of opinion" on the same set of facts considered during the original assessment. Citing the Supreme Court's decision in CIT Vs. Kelvinator of India Ltd., the Tribunal held that reassessment based on a "change of opinion" is not permissible. The Tribunal emphasized that the AO must have fresh material or information to form a belief that income had escaped assessment. 2. Justification of the Addition of Rs. 5,22,81,663/- as Unexplained Cash Deposits: The AO treated the cash deposits as unexplained cash credits under Sec. 68, rejecting the assessee's claim that they were cash sale proceeds due to the inability to provide complete details of the purchasers. However, the CIT(A) observed that the assessee had imported silk yarn from China and sold it to weavers across the country, who deposited cash in the assessee's bank accounts. The CIT(A) noted that the AO accepted the sales in the books of account but re-characterized the same amounts as unexplained cash credits without rejecting the books of account under Sec. 145(3). The Tribunal upheld the CIT(A)'s decision, finding no reason to take a different view. 3. Condonation of Delay in Filing the Cross-Objection by the Assessee: The Tribunal condoned the delay of 1722 days in filing the cross-objection, considering the peculiar circumstances, including the assessee's illness and subsequent death. The Tribunal noted that the delay did not indicate any malafide conduct or lackadaisical approach. The Tribunal also observed that the issue raised in the cross-objection regarding the validity of the jurisdiction assumed by the AO was a legal issue that could be adjudicated based on the record. Conclusion: The Tribunal quashed the assessment framed by the AO for want of valid assumption of jurisdiction. The appeal of the Revenue was dismissed, and the cross-objection filed by the assessee was allowed.
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