2023 (9) TMI 94 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained cash deposits in the bank a/c - assessee filed his return of income u/s 139(4) and the case was selected for limited scrutiny for verification of the cash deposits during the year - HELD THAT - We find in the case of KLM Royal Dutch Airlines 2007 (1) TMI 138 - DELHI HIGH COURT has held that once an inquiry has been initiated by the Assessing Officer, it cannot but result in either the return being accepted as having been correctly computed by the concerned assessee, or in an assessment being conducted and concluded thereon by the Assessing Officer. As in the case of Mohindra Mohan Sirkar 1977 (6) TMI 18 - CALCUTTA HIGH COURT has quashed the re-assessment proceedings holding that it is the duty of the A.O to pass an assessment order and held where the Income Tax Officer acted on the returns filed by the assessee, issued notices u/s 143(2) and heard the assessee u/s 143(3), but, without completing the assessment, he took recourse to reopen the assessment under section 147 by issuing notices u/s 148, then, in that case, the Income Tax Officer acted without jurisdiction in issuing the notices. As in the case of Tarajan Tea Co (P) Ltd Trustees of H.E.H. the Nizam Supplemental Family Trust 1999 (2) TMI 722 - SUPREME COURT has held that AO cannot reopen the assessment on the same reasons which were before him at the time of the original proceedings. Since in the instant case the case of the assessee was selected for limited scrutiny to verify the cash deposit by issuance of notice u/s 143(2) and 142(1) and since the assessee has filed the requisite details, therefore, merely because no order was passed u/s 143(3), the Assessing Officer, in our opinion, cannot issue notice u/s 148 by reopening the assessment for escapement of the very same income which was the subject matter of scrutiny proceedings. We accordingly quash the re-assessment proceedings. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of Reassessment Proceedings under Section 147.
2. Validity of Notice under Section 143(2).
3. Application of Section 69A for Unexplained Cash Deposits.

Summary:

Validity of Reassessment Proceedings under Section 147:
The assessee, a non-resident Anesthesiologist, filed his return of income for AY 2017-18 declaring an income of Rs. 36,11,450/-. The Assessing Officer (AO) observed a cash deposit of Rs. 60 lakhs in the assessee's bank account, which was not declared in the return. Consequently, the AO invoked Section 147 of the I.T. Act to reopen the assessment. The assessee filed objections against the reopening, but the AO rejected these objections, leading to an addition of Rs. 60 lakhs to the total income under Section 69A as unexplained bank deposit. The Dispute Resolution Panel (DRP) upheld the AO's decision, stating that the reopening was justified as the AO had "reasons to believe" that income had escaped assessment.

Validity of Notice under Section 143(2):
The assessee contended that the notice under Section 143(2) was served beyond the prescribed time limit. However, the DRP noted that the time limit for serving the notice was extended to 31st March 2021 due to the COVID-19 pandemic, as per the Gazette of India notification dated 29-09-2020. Therefore, the notice served on 04-11-2020 was within the extended time limit and was deemed valid.

Application of Section 69A for Unexplained Cash Deposits:
The AO applied Section 69A, arguing that the assessee failed to provide tangible evidence to prove that the cash deposit of Rs. 60 lakhs belonged to his late father and brother. The DRP supported this view, stating that the assessee's claim was without legal evidence. The Tribunal noted that once a notice under Section 143(2) is issued, the AO is duty-bound to pass an order under Section 143(3). The Tribunal referred to various judicial precedents, including the Hon'ble Supreme Court's decision in CIT vs. Tarajan Tea Company (P) Ltd, which held that the AO cannot reopen the assessment on the same reasons that were considered during the original proceedings.

Conclusion:
The Tribunal quashed the reassessment proceedings, stating that the AO cannot issue a notice under Section 148 for reopening the assessment on the same set of facts that were the subject matter of scrutiny proceedings. Consequently, the appeal filed by the assessee was allowed.