Reassessment in case of cash deposits -unnecessary litigation by ignoring ground realities causing harassment of small assesses and people having dealing with them.

[DEV KUMAR KOTHARI]

Reassessment in case of cash deposits -unnecessary litigation by ignoring ground realities causing harassment of small assesses and people having dealing with them.

Reported cases indicate need to revise amount for reporting and for information collection by tax authorities from other parties.

Earlier article on related subject:

Cash deposits -un-necessary litigation by ignoring ground realities causing harassment of small assesses and people having dealing with them webhosted on 27.10.21.

In this article Learned  author had discussed general aspects and ground realities concerning small business and professional activities in which cash dealings and handlings take place on behalf of others also. In that case matter related to original assessment in which addition was made in hands of assesse who worked as a facilitator as officer, agent and team leader working in insurance company.   

Therefore, common points already discussed in earlier article are not reproduced and discussed again for sake of brevity.

Judgment discussed in this write-up :

2021 (4) TMI 815 - ITAT SURAT and cases referred to their in:

ASHISH NATVARLAL VASHI VERSUS THE INCOME TAX OFFICER, WARD-1, NAVSARI [2021 (4) TMI 815 - ITAT SURAT]    related to reassessment proceedings pursuant to reporting or information about cash deposits in account of assesse.

The reassessment in this case was set aside for reasons that recorded reasons were not correct and that mere deposit of cash in saving account does not mean that cash deposited is income of assesse.

 To analyze and summarize:

In the reasons recorded AO proceeded on the erroneous footing that the assessee has not filed return of income at all.  This, itself would be sufficient to annual the notice of reopening the assessment.

Mere cash deposit in the bank account would not disclose escapement of income. Because the assessee might have deposited the cash out of his sale of capital asset, sale of property and sale of investment, agricultural income etc.

It may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment.

Tribunal held the reassessment proceedings under section 147 of the Act as bad in law and was quashed the reassessment proceedings.

As discussed in earlier article, there should be objectivity in issuing notices, making enquiry and making additions after due consideration of ground realities.

Reported cases indicate need to revise amount for reporting:

Amount for reporting in AIR and reporting of Specified Financial transactions and other statements for various transactions were fixed long ago. These reported amounts are many times used a basis for proceedings of different type under IT Act.

Amount for deposit of cash in saving account was also fixed long ago at ₹ 10 lakh for deposit of cash in a saving bank account during any previous year.

Therefore, these limits should be revised and there should also be collection of information about persons having such deposits. So that un-necessary proceedings are not initiated merely because transactions of particular type above prescribed limit are reported or information is otherwise collected by income tax department.