2015 (7) TMI 979 - AT - Income Tax

Reopening of assessment - Addition on account of negative cash balance as on 31.03.2002 - Unexplained receipts - CIT(A) deleted the addition - Held that - The impugned order of reassessment passed by the AO without disposing off the objections raised by the assessee against the issuance of notice u/s 148 by a separate order is liable to be quashed. See ACIT, Cen.Cir.-2, Baroda vs. M/s Sagar Developers 2015 (7) TMI 718 - ITAT AHMEDABAD and General Motors India P. Ltd. vs. DCIT 2012 (8) TMI 714 - GUJARAT HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
Deletion of addition on account of negative cash balance and unexplained receipts for AY 2002-03.

Analysis:

1. Deletion of Addition on Account of Negative Cash Balance:
The first issue pertains to the deletion of the addition of Rs. 39,94,398/- made on account of negative cash balance. The Assessing Officer made this addition as the assessee failed to explain the source of cash receipts and payments. The Assessing Officer based the addition on the information obtained during a search u/s 132, where incriminating documents were seized, including data of unaccounted business transactions. The Assessing Officer issued notices and questionnaires, but the assessee's explanations were rejected. However, the CIT(A) deleted the addition after considering the submissions. The Tribunal observed that the Assessing Officer made the reassessment without disposing of the objections raised by the assessee, citing a similar case precedent. Following legal precedents, the Tribunal quashed the reassessment proceedings, rendering the merit-based argument by the Revenue academic and dismissing the appeal on this preliminary issue.

2. Deletion of Addition on Account of Unexplained Receipts:
The second issue concerns the deletion of the addition of Rs. 7,38,000/- made on account of unexplained receipts. The Assessing Officer added this amount as unexplained cash receipts. However, the CIT(A) deleted this addition after considering the submissions made by the assessee. The Tribunal, following the legal precedent discussed in the first issue, quashed the reassessment proceedings, rendering the merit-based argument by the Revenue moot and dismissing the appeal based on this preliminary issue.

In conclusion, the Tribunal dismissed the Revenue's appeal concerning the deletion of additions on account of negative cash balance and unexplained receipts for AY 2002-03. The decision was based on the procedural irregularity of the Assessing Officer in making the reassessment without addressing the objections raised by the assessee, in line with legal precedents and the decision of the Hon'ble Gujarat High Court. The Tribunal upheld the CIT(A)'s decision to delete the additions and quashed the reassessment proceedings, rendering the Revenue's merit-based arguments irrelevant.