2024 (9) TMI 1047 - AT - Income Tax

Reopening of assessment - cash deposited in the bank account unexplained - reasons recorded stated the fact that the assessee has not filed ITR -assessee contended that the deposit of cash is sourced from the sales that has been booked for which the profit is also taxed by the revenue - HELD THAT - As noted from the records so produced before the ld. AO the ld. AO noted that that the assessee has filed the details of sales along with sales register and bank statement. AO did not find any specific defects except that he observed that the copy of cash book submitted by the assessee wherein opening balance was shown at Rs. 1,42,593.92 and cash received on 15.06.2012 at Rs. 6,520/-. Thus the total balance of Rs. 1,49,113.92/- was available with the assessee but he has deposited out of cash balance a sum of Rs. 2,00,000/-. So, there is a deficit of Rs. 50,886.08/- for which the assessee could not substantiate the source with tangible material that this cash is out of regular transactions recorded in the books so produced. Therefore, we feel that in the case of the assessee additions should be sustained instead partly Rs. 50,886.08/- - Appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Legality of the proceedings under Sections 147/148 of the Income Tax Act.
2. Addition of Rs. 3,80,000/- on account of cash deposited in the bank.
3. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act.
4. General grounds for amendment or alteration of the appeal.

Detailed Analysis:

1. Legality of the proceedings under Sections 147/148 of the Income Tax Act:
The assessee challenged the legality of the proceedings initiated under Sections 147/148, arguing that the notice and action were illegal, bad in law, barred by limitation, and without proper jurisdiction. The assessee contended that the reasons recorded for reopening were incorrect and without material on record at the time of recording reasons. The Tribunal noted that the reasons for reopening were based on incorrect facts, as the total cash deposits in the bank account during the year were Rs. 9,87,900/-, not Rs. 3,80,000/-. The Tribunal referenced several judgments, including those from the Gujarat High Court and the Rajasthan High Court, which supported the position that reopening based on incorrect or insufficient reasons is invalid. However, the Tribunal ultimately decided not to adjudicate this ground separately since the appeal was considered on merits.

2. Addition of Rs. 3,80,000/- on account of cash deposited in the bank:
The assessee argued that the cash deposits were out of cash sales and realizations from debtors, and thus, justified. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] did not accept this explanation, citing a lack of documentary evidence. The Tribunal observed that the AO had noted a deficit of Rs. 50,886.08/- in the cash balance on a specific date, which the assessee could not substantiate with tangible material. Consequently, the Tribunal decided to sustain an addition of Rs. 50,886.08/- instead of the entire Rs. 3,80,000/-, finding the assessee's explanation partially credible.

3. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act:
The assessee contended that the interest charged under Sections 234A, 234B, and 234C was contrary to the provisions of law and facts of the case. The Tribunal noted that the charging of interest under these sections is consequential in nature and does not require separate adjudication.

4. General grounds for amendment or alteration of the appeal:
The assessee sought the Tribunal's indulgence to add, amend, or alter any grounds of the appeal before the hearing date. The Tribunal did not find it necessary to adjudicate this ground as it was general in nature.

Conclusion:
The Tribunal condoned the delay in filing the appeal, citing sufficient cause. On merits, the Tribunal partially allowed the appeal by sustaining an addition of Rs. 50,886.08/- instead of Rs. 3,80,000/-, and noted that the interest charged under Sections 234A, 234B, and 234C is consequential. The appeal was partly allowed, and the order was pronounced in the open court on 09/09/2024.