2017 (12) TMI 805 - AT - Income Tax

Validity of reopening of assessment u/s 147/148 - unexplained cash deposited in the joint account of the assessee and his wife - Held that - The wife of the assessee stated that the entire cash in the account was deposited by the assessee. Therefore, in the absence of showing this amount in the return of income the AO on the basis of an enquiry conducted during the assessment proceedings of the wife of the assessee found that this transaction pertains to the assessee which constitutes a tangible material to belief that the income assessable to tax as escaped assessment. Further, there is no assessment and the return of income was processed only u/s 143(1) of the Act, therefore, it is not a case of change of opinion. Only during the course of assessment proceedings the AO came to know that the assessee sold the house. Accordingly no error or illegality in the action of the AO to reopen the assessment u/s 147/148 of the IT Act Assessment made u/s 144 - Held that - The assessee did not response to the notice issued u/s 148 and further, the assessee has also not filed the return of income in response to the notice issued u/s 148 of the Act. However, the assessee requested the AO consider the original return of income as return filed in response to the notice issued u/s 148 of the IT Act. Thereafter, the assesse did not appear before the Assessing Officer. Accordingly, when the assessee has chosen not to participate in the assessment proceedings then the AO was left with no option but to complete the assessment u/s 144 of the Act. Addition u/s 69A - Held that - The payment made for the purchase of new house has gone from the bank account in which the cash was deposited. Even otherwise if the contention of the assessee is accepted that he has received part of sale consideration in cash then applying the same analogy the purchase consideration paid in cash for purchase of new house is also required to be explained by the assessee and at least in the same ratio the purchase consideration in cash has not been explained by the assessee. Thus, it is clear that cash consideration if any received by the assessee, the same has been paid for purchase of the new house and therefore, the source of cash deposit in the back account remained unexplained. The assessee has relied upon various decisions however, in those decisions there are some documents to support the receipt of cash consideration. Hence, the assessee has failed to explain the source of ₹ 20,54,500/- cash deposit in the bank. Claim of the assessee u/s 54 - Held that - Accordingly when the entire investment for the purchase of new house has gone through the assessee s account then the benefit u/s 54 of the Income Tax Act cannot be denied on the ground the new house was purchased in the name of wife. Hence, the claim of the assessee u/s 54 of the Income Tax Act is allowed.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of reopening of assessment under Section 147/148.
3. Justification of assessment under Section 144.
4. Justification of addition under Section 69A.
5. Denial of benefit under Section 54 and enhancement of income without notice.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal by the assessee was delayed by 209 days. The assessee explained the delay as a result of inadvertence and oversight by the Chartered Accountant, despite having signed the appeal papers and paid the appeal fee on time. The Tribunal found the explanation reasonable and condoned the delay, noting that the appeal fee was paid within the limitation period and the mistake was bona fide.

2. Validity of Reopening of Assessment under Section 147/148:
The assessee challenged the reopening of assessment, arguing that the Assessing Officer (AO) did not have sufficient reasons to believe that income had escaped assessment. The Tribunal noted that the reopening was based on a letter indicating a cash deposit of ?20,54,500 in the assessee's bank account, discovered during the assessment of the assessee's wife. The Tribunal held that this constituted tangible material justifying the belief that income had escaped assessment. The Tribunal found no error or illegality in the AO's action to reopen the assessment.

3. Justification of Assessment under Section 144:
The assessee did not respond to the notice issued under Section 148 and did not participate in the assessment proceedings. Consequently, the AO completed the assessment under Section 144. The Tribunal upheld the AO's action, noting that the assessee failed to appear or provide any contrary facts to challenge the assessment under Section 144.

4. Justification of Addition under Section 69A:
The assessee did not dispute the cash deposit but claimed it was part of the sale consideration received in cash over and above the amount shown in the sale deed. However, the assessee failed to provide documentary evidence to support this claim. The Tribunal noted that the source of the deposit remained unexplained, as no confirmation from the purchaser or any agreement was provided. The Tribunal upheld the addition under Section 69A, as the assessee could not substantiate the source of the cash deposit.

5. Denial of Benefit under Section 54 and Enhancement of Income without Notice:
The assessee claimed the benefit of Section 54 for the investment in a new house purchased in the name of his wife. The CIT(A) denied this benefit, following a jurisdictional High Court decision. However, the Tribunal referred to a later decision by the same High Court, which allowed the benefit of Section 54 even if the investment was made in the name of the spouse. Consequently, the Tribunal allowed the assessee's claim under Section 54, noting that the entire investment for the new house was made through the assessee's account. This rendered the ground of enhancement of income without notice infructuous.

Conclusion:
The appeal was partly allowed, with the Tribunal condoning the delay, upholding the reopening of assessment and the addition under Section 69A, but allowing the benefit under Section 54 for the investment in the new house. The Tribunal's order was pronounced in the open court on 13/12/2017.

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