2024 (8) TMI 630 - AT - Income Tax

Validity of reopening of assessment u/s 147 - unexplained cash deposits in the bank account - addition u/s 68 - notice having been served after expiry of six years - HELD THAT - The fact that the cash deposits appearing in assessee s bank account in different assessment years are receipts from his business activity has been accepted by the learned first appellate authority. However, he has estimated the income at 25% of the receipts. From the materials placed before us, it is observed that the assessee had not filed any return of income for assessment year 2007-08 to 2011-12. When the cash deposits were found in his bank account, the assessee came forward to disclose income from the profit derived from his business. As by that time, the limitation for filing return of income had expired for assessment years 2007-08 to 2010-11. The assessee offered the entire income for assessment years 2007-08 to 2011-12 by offering income of ₹ 5,49,320/- computed by applying 3% net profit rate on the receipts appearing in the bank account. The assessee had also discharged tax liability for the income declared by paying tax of ₹ 45,180/-. This is clearly discernible from the copy of the bank challan and chart showing computation of profit placed in the paper book. Thus, the contention of the assessee that it has offered the profit from business to tax is believable. Once the assessee has offered the income to tax in a consolidated manner in assessment year 2011-12, no further addition can be made in the respective assessment years. Assessee appeal allowed. Penalties u/s 271(1)(c) cannot be imposed as in quantum appeals (supra) we have decided the issues in favour of the assessee.

Summary

Issues:
Appeals against orders of Commissioner of Income-tax (Appeals)-15, Delhi for assessment years 2007-08 and 2008-09. Two issues: challenging validity of reopening of assessment under Section 147 and merits of additions sustained by first appellate authority.

Quantum Appeals (ITA Nos.4395/Del/2016 & 4396/Del/2016):
The legal issue challenged the validity of reopening assessment under Section 147 due to cash deposits in the bank account. Assessing Officer added deposits as unexplained cash credit under Section 68. Notice under Section 148 was issued on 28th March, 2014, but not served. Another notice on 8th July, 2014 was served after six years, rendering proceedings invalid. Merits issue involved cash deposits from business, with the first appellate authority estimating profit at 25% of receipts. Assessee offered income for all years in 2011-12, so no further addition was warranted.

Appeals arising out of penalty proceedings (ITA Nos.5516/Del/2019 & 5517/Del/2019):
Since additions were deleted in quantum appeals, penalties under Section 271(1)(c) were also deleted. All appeals of the assessee were allowed, and penalties imposed were deemed invalid.

The Tribunal held that the notice served after the six-year period was invalid, rendering the assessment orders invalid. On the merits, the Tribunal accepted the assessee's claim that the cash deposits were from business activities. As the assessee offered income for all relevant years in 2011-12, no further additions were justified. Consequently, the additions sustained by the first appellate authority were deleted.

In conclusion, all appeals by the assessee were allowed, and penalties imposed under Section 271(1)(c) were deleted due to the favorable decision in the quantum appeals. The judgment was pronounced on 9th August, 2024.