2024 (6) TMI 207 - AT - Income Tax

Validity of reopening of assessment u/s 147 - addition u/s 69A - HELD THAT - In the present case the AO has received information from DDIT indicating that the assessee could not explain sources of deposit in bank a/c this information duly considered by AO could be sufficient to form a belief that there was escapement of income. The assessee is neither having copy of exact reasons recorded by AO nor able to demonstrate in any manner that the AO did not give his own thought to the information received from DDIT Ujjain before or at the time of recording reasons. The assessee is merely speculating the absence of AO s consideration. Therefore we do not find any worth in the claim of assessee the same remains unsubstantiated and hence rejected. We may further add here that although in ground No. 1 the assessee has also mentioned that the AO s action was time-barred but during hearing both sides were ad idem that the time-limitation was extended by Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020 dated 31.03.2020 TOLA . Therefore limitation point is also rejected. Decided against assessee. Addition u/s 69A - cash deposits in bank accounts - The assessee s stand is such that the HDFC Bank A/c and all entries of deposits therein are already recorded in regular books of account maintained by him; those books of account have been duly audited by auditors and the auditors have not reported any infirmity; that the year-end balance also tallies with bank statement; and that the AO has also not rejected assessee s books u/s 145(3) which means there is nothing incorrect in assessee s books. We find sufficient strength in these submissions. AR has also shown by referring to Paper-Book that the assessee has submitted relevant details/ documents in the shape of bank book cash book audited accounts and a/c statements of banks to AO and yet again made a sincere effort to explain the source of deposits to CIT(A). The revenue is not able to rebut controvert or dispute the details and documents submitted by assessee before lower authorities. Looking into all these aspects we are of the considered view that in the present case the addition made by AO is not sustainable - Decided in favour of assessee.

Summary

Issues:
1. Validity of AO's action to re-open assessment under section 147.
2. Merit of addition of Rs. 16,18,317/- under section 69A.

Analysis:

Issue 1: Validity of AO's action to re-open assessment under section 147:
The appellant challenged the re-opening of assessment by the AO under section 147, contending that the proceedings were barred by limitation and lacked compliance with statutory provisions. The AO re-opened the assessment based on information received from DDIT regarding unexplained deposits in the appellant's bank accounts. The appellant argued that the re-opening was unjustified as the excess deposits were already explained and recorded in the books. The AR submitted that the AO's belief in escapement of income was unfounded, as the bank accounts in question were duly audited and included in the appellant's regular books. The Tribunal held that the AO had valid reasons to re-open the assessment based on the information received, and the appellant failed to substantiate their claim that the re-opening was invalid. The Tribunal also noted that the time limitation issue was addressed by the Taxation and Other Laws Ordinance, 2020, and hence, rejected the appellant's challenge on the validity of the re-opening.

Issue 2: Merit of addition of Rs. 16,18,317/- under section 69A:
Regarding the addition made by the AO under section 69A for unexplained cash deposits, the appellant argued that the amounts were already recorded in the audited books and hence, section 69A should not apply. The appellant provided detailed submissions and documents to support their claim that the deposits were legitimate and explained. The Tribunal agreed with the appellant's contentions, noting that the bank accounts and deposits were duly accounted for in the books, audited, and reconciled with bank statements. The Tribunal found no merit in the AO's addition under section 69A and concluded that the addition was not sustainable. Therefore, the Tribunal decided to delete the addition made by the AO on merit.

In conclusion, the Tribunal rejected the challenge to the AO's re-opening of assessment but allowed the appeal by deleting the addition made under section 69A. The appeal was partly allowed, and the order was pronounced on 15.01.2024.