2024 (9) TMI 1053 - AT - Income Tax

Validity of reassessment proceedings - reasons recorded the AO stated that an information was received from the office of ITO, Ward 33(1) that the assessee has deposited cash of Rs. 10 lakhs or more in savings bank account - assessee submits that the AO in the reasons recorded did not mention the exact amount of escapement and also did not mention in which bank account the assessee has deposited cash - HELD THAT - The reasons are general and very vague. It appears that the AO is not even in possession of bank account of the assessee before recording reasons for reopening of assessment. The reasons recorded did not specify the exact amount of cash deposit made by the assessee and the name of the bank, the account number of the assessee and also the date of transaction. All these goes to show that the AO do not possess any credible information to form a belief that income had escaped assessment. Thus, the reassessment made u/s 143(3) r.w.s. 147 of the Act is hereby quashed in view of the above discussion. Ground no. 1 of grounds of appeal of the assessee is allowed.

Summary

Issues Involved:
1. Initiation of reassessment proceedings.
2. Validity of reassessment proceedings without assessment records.
3. Service of notice under Section 148.
4. Non-disposal of objections filed by the assessee.
5. Non-compliance with the Supreme Court's mandate in GKN Driveshaft (India) Ltd. vs. ITO.
6. Addition of Rs. 29,49,000 under Section 69A.
7. Consideration of the assessee's submissions and documents.
8. Statutory requirement to maintain books of account.
9. Jurisdictional aspect under Section 127.
10. Prematurity of penalty under Section 271(1)(c).
11. Levy of tax demand including interest under Sections 234A, 234B, and 234C.
12. Condonation of delay in filing the appeal.

Issue-wise Detailed Analysis:

1. Initiation of reassessment proceedings:
The Tribunal examined the reasons recorded by the AO for reopening the assessment under Section 147. The AO received information regarding the assessee depositing cash of Rs. 10 lakhs or more in a savings bank account during FY 2011-12. However, the reasons recorded were found to be vague and lacking specific details such as the exact amount, bank account, and transaction dates. It was held that the AO did not possess any credible information to form a belief that income had escaped assessment, leading to the conclusion that the reassessment proceedings were invalid.

2. Validity of reassessment proceedings without assessment records:
The assessee argued that the reassessment proceedings were upheld without calling for the assessment records, which was necessary to verify the proper sanction by the appropriate authority under Section 151. The Tribunal did not specifically address this issue separately due to the primary finding of invalid initiation of reassessment proceedings.

3. Service of notice under Section 148:
The assessee contended that there was no proper service of notice issued under Section 148. The Tribunal did not delve into this issue separately as the reassessment proceedings were quashed on the grounds of vague reasons and non-application of mind by the AO.

4. Non-disposal of objections filed by the assessee:
The assessee's objections to the reasons recorded under Section 147 were not disposed of by the AO, violating the Supreme Court's decision in GKN Driveshafts (India) Ltd. vs. ITO. The Tribunal noted this procedural lapse but focused on the primary issue of the invalid initiation of reassessment proceedings.

5. Non-compliance with the Supreme Court's mandate in GKN Driveshaft (India) Ltd. vs. ITO:
The Tribunal acknowledged the non-compliance with the Supreme Court's mandate in GKN Driveshafts (India) Ltd. vs. ITO, which required the AO to dispose of the objections filed by the assessee before proceeding with the reassessment. This further supported the Tribunal's decision to quash the reassessment proceedings.

6. Addition of Rs. 29,49,000 under Section 69A:
The assessee challenged the addition of Rs. 29,49,000 under Section 69A, arguing that the amount of cash deposited in the bank account was explained. The Tribunal did not address this issue separately due to the primary finding of invalid initiation of reassessment proceedings.

7. Consideration of the assessee's submissions and documents:
The assessee argued that the CIT(A) failed to appreciate the submissions and documents provided in support of the cash deposits. The Tribunal did not specifically address this issue separately due to the primary finding of invalid initiation of reassessment proceedings.

8. Statutory requirement to maintain books of account:
The assessee contended that they were not statutorily required to maintain books of account and provided evidence to support the explanation for cash deposits. The Tribunal did not address this issue separately due to the primary finding of invalid initiation of reassessment proceedings.

9. Jurisdictional aspect under Section 127:
The assessee raised a ground relating to the invalidity of the assessment order on account of jurisdictional issues under Section 127. The Tribunal did not address this issue separately due to the primary finding of invalid initiation of reassessment proceedings.

10. Prematurity of penalty under Section 271(1)(c):
The assessee argued that the issue regarding the levy of penalty under Section 271(1)(c) was premature. The Tribunal did not address this issue separately due to the primary finding of invalid initiation of reassessment proceedings.

11. Levy of tax demand including interest under Sections 234A, 234B, and 234C:
The assessee contended that the tax demand including interest under Sections 234A, 234B, and 234C was not leviable as no income other than the returned income arose. The Tribunal did not address this issue separately due to the primary finding of invalid initiation of reassessment proceedings.

12. Condonation of delay in filing the appeal:
The Tribunal condoned the delay of 100 days in filing the appeal, accepting the assessee's explanation that the delay was neither willful nor wanton but due to circumstances beyond their control, including the registered email address being that of the company where the assessee is a Director.

Conclusion:
The Tribunal quashed the reassessment proceedings under Section 143(3) read with Section 147 of the Act due to vague reasons and non-application of mind by the AO. As a result, other legal issues and the merits of the addition/disallowance were not addressed, rendering the appeal partly allowed.