2025 (2) TMI 231 - AT - Income Tax

Validity of reassessment proceedings - Unexplained cash u/s 69A - HELD THAT - On one hand the assessee has not furnished the return of income and secondly she did not respond to the communication of the AO who had reason to believe that the cash deposits can be from unexplained sources of income. In our considered opinion under given facts and circumstances a valid notice u/s 148 was issued after getting prior approval from the competent authority because there was a valid information from the bank account about cash deposit no return was filed by the assessee and no further information was given by the assessee in response to the letter dated 18.01.2018. therefore dismiss the legal ground raised in ground no.4. Unexplained cash deposit - Alleged sum is part of the sale consideration received by the assessee during the year from the business of trading in Cashew Seeds. Estimation of net profit apart from placing the purchase and sale register no other documents supporting the expenditure has been furnished and also the cash received has mostly being utilized either for purchase or for making payment to husband and purchase of immovable property. Therefore certainly the margin of profit of the assessee is on much higher side as has been declared in the income tax return. In the absence of any details about opening and closing stock (if any) difference of purchase and sales as given by the assessee. Though there are certain withdrawals during the year and the same includes household drawings utilized by the assessee estimate net profit of Rs. 3, 00, 000/- as against Rs. 1, 96, 800/- declared by the assessee. Accordingly addition of Rs. 1, 03, 200 is sustained in the hands of the assessee and remaining addition is hereby deleted - Decided partly in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment revolve around the following questions:

1. Whether the reassessment proceedings initiated under section 147 of the Income Tax Act were valid.

2. Whether the addition of Rs. 16,23,000/- as unexplained cash deposits under section 69A was justified.

3. Whether the income of Rs. 2,02,640/- was charged to tax twice.

4. Whether the interest computed under sections 243A, B, and C of the Act was valid.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Reassessment Proceedings

Relevant legal framework and precedents: The reassessment proceedings were initiated under section 147 of the Income Tax Act, which allows for reopening an assessment if the Assessing Officer has reason to believe that income has escaped assessment.

Court's interpretation and reasoning: The Tribunal noted that the assessee did not file a return of income for the relevant assessment year, and the Assessing Officer had received information about significant cash deposits in the assessee's bank account. The lack of response from the assessee to the initial inquiry justified the Assessing Officer's belief that the income might be from unexplained sources.

Application of law to facts: Given the non-filing of the return and non-response to the inquiry, the Tribunal found the issuance of notice under section 148 to be valid.

Conclusion: The Tribunal dismissed the legal ground challenging the validity of the reassessment proceedings.

2. Addition of Unexplained Cash Deposits

Relevant legal framework and precedents: Section 69A of the Income Tax Act deals with unexplained money, allowing for the addition of unexplained cash deposits to the income of the assessee.

Court's interpretation and reasoning: The Tribunal considered the bank statements, Gram Panchayat letter, and purchase and sale register provided by the assessee. It noted the consistent cash deposits and withdrawals and the lack of proof for some transactions.

Key evidence and findings: The assessee provided evidence of trading in Cashew Seeds and claimed that the cash deposits were part of the business income. However, there was insufficient evidence of payments made through banking channels.

Application of law to facts: The Tribunal took a liberal approach, partially accepting the assessee's claim that the deposits were business income. It estimated a higher net profit margin than declared by the assessee due to the lack of supporting expenditure documents.

Conclusion: The Tribunal partially allowed the grounds, sustaining an addition of Rs. 1,03,200/- and deleting the remaining addition.

3. Double Taxation of Income

Relevant legal framework and precedents: The issue was whether the same income was taxed twice.

Court's interpretation and reasoning: The Tribunal found this ground to be academic and did not require separate adjudication as the main issue regarding the addition was already addressed.

Conclusion: The Tribunal dismissed this ground as infructuous.

4. Computation of Interest

Relevant legal framework and precedents: The interest computation under sections 243A, B, and C is consequential to the principal tax liability.

Court's interpretation and reasoning: The Tribunal deemed this ground to be general and consequential in nature, not requiring separate adjudication.

Conclusion: The Tribunal did not adjudicate on this ground.

SIGNIFICANT HOLDINGS

Core principles established: The Tribunal emphasized the importance of responding to inquiries and providing adequate evidence to support claims of business income.

Final determinations on each issue: The reassessment proceedings were upheld as valid. The addition for unexplained cash deposits was partially sustained, with a revised net profit estimation. The issues of double taxation and interest computation were dismissed as academic and consequential, respectively.

Order: The appeal of the assessee was partly allowed.

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