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2020 (2) TMI 82 - AT - Income TaxReopening of assessment - whether incorrect, wrong and non-existing reasons are recorded by the A.O. for reopening of the assessment and that A.O. failed to verify the information received from Investigation Wing? - HELD THAT - It is well settled Law that mere cash deposited in the bank account of the assessee per se would not disclose escapement of the income as is held by the ITAT in the case of Shri Tejendra Kumar Ghai, 2017 (6) TMI 491 - ITAT DELHI and Shri Abrar Ahmad Qasimi, New Dekhi vs., ITO, 2018 (6) TMI 1655 - ITAT DELHI . The assessee further explained that there is no unaccounted investment in the properties because the deal of ₹ 48 lakhs pertain to sale of the property by assessee which is supported by the Sale Deed and such property was purchased by the assessee way back in 1996. Thus, the sale could not be an unexplained investment in the case of the assessee. In respect of other property, assessee has made Collaboration Agreement with Shri Nilambar Rudrapal and paid ₹ 46 lakhs, the source of which itself is explained in the receipt. A.O. has recorded incorrect and wrong reasons for reopening of the assessment and did not apply his mind to the facts of the case before recording reasons for reopening of the assessment. The A.O. has also failed to verify the information received from the Investigation Wing before recording the reasons for reopening of the assessment. Even the sanctioning authority has not applied its mind to the conclusion drawn by the A.O. based on specific material on record which clearly revealed that reasons recorded by the A.O. are wrong, incorrect and based on no evidence. It is, therefore, clear case of non-application of mind by the A.O. before recording reasons for reopening of the assessment. We are of the view that reopening of the assessment is illegal and bad in Law and is liable to be quashed. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. - Decided in favour of assessee.
Issues Involved
1. Validity of reopening the assessment under Section 148 of the Income Tax Act, 1961. 2. Addition of unexplained cash deposits under Section 68 of the Income Tax Act, 1961. 3. Addition of unexplained investments under Section 69 of the Income Tax Act, 1961. Detailed Analysis 1. Validity of Reopening the Assessment under Section 148 of the Income Tax Act, 1961 The assessee challenged the initiation of reassessment proceedings for both assessment years 2006-2007 and 2007-2008. The primary contention was that the Assessing Officer (A.O.) did not apply his mind independently and relied solely on the information provided by the Investigation Wing, which was not verified. The Tribunal noted that the reasons recorded for reopening were based on incorrect facts. Specifically, the A.O. recorded cash deposits of ?2,82,70,090/- based on the Investigation Wing’s report, whereas the actual cash deposit was ?2,05,54,090/- as per Annexure-C. The Tribunal emphasized that mere cash deposits in bank accounts do not per se indicate income escapement and require further verification. The Tribunal cited several judgments, including those of the Hon’ble Delhi High Court and ITAT, which held that reopening based on unverified information or incorrect facts is invalid. The Tribunal concluded that the A.O. failed to verify the information and did not apply his mind, making the reopening of the assessment illegal and bad in law. 2. Addition of Unexplained Cash Deposits under Section 68 of the Income Tax Act, 1961 For the assessment year 2006-2007, the A.O. added ?2,82,70,090/- as unexplained cash deposits in the assessee’s bank accounts under Section 68. The assessee contended that the actual cash deposits were ?1,23,45,200/- and provided bank statements to support this claim. The Tribunal found discrepancies in the A.O.’s calculations and noted that the A.O. did not verify the actual cash deposits. The Tribunal held that the A.O. recorded incorrect reasons for reopening the assessment and failed to verify the information received from the Investigation Wing, thereby quashing the addition. For the assessment year 2007-2008, the A.O. added ?86,86,537/- as unexplained cash deposits. The assessee argued that the actual deposit was ?20,16,000/-. The Tribunal found the reasons for reopening similarly flawed as in the previous year and quashed the addition. 3. Addition of Unexplained Investments under Section 69 of the Income Tax Act, 1961 For the assessment year 2006-2007, the A.O. added ?94 lakhs as unexplained investments under Section 69. The investments included ?48 lakhs for a property in Greater Kailash-II and ?46 lakhs for a property in C.R. Park. The assessee argued that the ?48 lakhs pertained to the sale of a property, which was not an unexplained investment, and provided supporting sale deeds. For the ?46 lakhs, the assessee had a Collaboration Agreement with Shri Nilambar Rudrapal, explaining the source of the investment. The Tribunal found that the A.O. did not apply his mind and recorded incorrect reasons, leading to the quashing of the addition. Conclusion The Tribunal allowed both appeals, quashing the reopening of assessments and deleting all additions for the assessment years 2006-2007 and 2007-2008. The Tribunal emphasized the need for the A.O. to independently verify information and apply his mind before recording reasons for reopening assessments.
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