2024 (5) TMI 910 - AT - Income Tax

Validity of reopening of assessment u/s 147 - reopening beyond period of four years - cash deposits in assessee s bank account - assessee has sold agricultural land and believed that this sale is not taxable - HELD THAT - Assessee has not filed any return of income believing that his income is exempt from tax. Since the AO came to know about the huge cash deposit in assessee s bank account and capital transaction, he has sought approval to reopen the case even though beyond 4 years. As noticed from the record that the AO has taken proper approval and the same was approved by the proper authority. Now the assessee has raised several arguments including the approval process. We are not inclined to accept any of the argument put forth by the Ld AR, most of them are based on presumptions that AO should have completed the assessee one way or the other. Approval process is not complicated in the case of the assessee which required proper application of mind, the fact that the assessee has not filed his return of income and deposited huge cash in his bank account, therefore, the approval was granted to the AO to verify the same. Therefore, we are not inclined to adjudicate on the various issues raised by the assessee on reopening of the assessment. Additions made u/s 68 and u/s 69A - assessment was reopened after lapse of 6 years - Mandate to reopen the assessment - The reason for reopening the assessment was properly explained by the assessee. AO cannot stretch beyond the mandate. We observe that the assessee has not made proper submissions during the reassessment proceedings and appellate proceedings, it does not matter as long as the information is coming from the proceedings. In this case, the AO was satisfied that the assessee owned agricultural land and sold the same during this assessment year. Therefore, the mandate to reopen the assessment was completed by bringing on record the relevant documents to prove the sources of cash deposits. Therefore, the AO cannot travel beyond the mandate, he cannot proceed to make any other additions beyond the reasons recorded to reopen the assessment. Therefore, confirming the other additions beyond the mandate is uncalled for. CIT(A) has proceeded to make the addition u/s 69A instead of section 68, still the sources for cash deposits are already brought on record and Ld CIT(A) has proceeded to sustain the addition due to failure on the part of the assessee to make submission before him and relied on the material available with him. Therefore, in our considered view, once the sources for the cash deposits are brought on record there is no further requirement to go beyond the mandate particularly the assessment was reopened after lapse of 6 years from the relevant assessment year . Accordingly, the appeal filed by the assessee is allowed on the merits.

Summary

Issues Involved:
1. Validity of reopening the assessment u/s 147.
2. Legality of the addition made u/s 68.
3. Legality of the addition confirmed u/s 69A by Ld. CIT(A).
4. Jurisdictional excess by Ld. CIT(A) in enhancing the addition and changing the section.

Summary:

1. Validity of reopening the assessment u/s 147:
The Assessing Officer (AO) initiated reopening of the assessment based on information that the assessee deposited Rs. 42,85,000/- in his bank account without filing a return for AY 2011-12. The AO issued a notice u/s 148 after obtaining approval from the Principal Commissioner of Income Tax (PCIT). The Tribunal found that the AO had proper approval and the reopening was justified due to the significant cash deposits. The Tribunal rejected arguments against the reopening process, emphasizing that the AO acted within his mandate to verify the source of cash deposits.

2. Legality of the addition made u/s 68:
The AO added Rs. 40,96,805/- to the assessee's income u/s 68, treating it as unexplained cash credits. The AO noted discrepancies in the details provided by the assessee regarding the sale of agricultural land and the mode of receipt. The assessee failed to provide adequate proof for the claimed exemptions and the source of the cash deposits. The Tribunal observed that the assessee did not make proper submissions during reassessment and appellate proceedings, but the sources for cash deposits were established as proceeds from the sale of agricultural land.

3. Legality of the addition confirmed u/s 69A by Ld. CIT(A):
The Ld. CIT(A) confirmed the addition but changed the section from 68 to 69A, enhancing the addition to Rs. 42,85,000/-. The Tribunal found that once the sources for cash deposits were established, there was no need to go beyond the mandate of verifying the cash deposits. The Tribunal held that the AO and Ld. CIT(A) could not travel beyond the reasons recorded for reopening the assessment, particularly since the assessment was reopened after six years from the relevant assessment year.

4. Jurisdictional excess by Ld. CIT(A) in enhancing the addition and changing the section:
The Tribunal noted that the Ld. CIT(A) acted arbitrarily by enhancing the addition and changing the section without issuing a show cause notice u/s 251(2). The Tribunal found that the Ld. CIT(A) exceeded his jurisdiction, and the addition u/s 69A was not sustainable once the sources for the cash deposits were established.

Conclusion:
The Tribunal allowed the appeal on merits, holding that the AO could not make additions beyond the mandate of verifying the cash deposits. The Tribunal found that the sources for the cash deposits were adequately explained as proceeds from the sale of agricultural land, and the additions made by the AO and confirmed by the Ld. CIT(A) were unwarranted. The appeal was partly allowed.