2020 (2) TMI 973 - AT - Income Tax

Validity of initiation of proceedings u/s 147/148 - unexplained deposit of cash - HELD THAT - AO has found out the facts of deposit of cash of ₹ 14.00 lacs in the bank account of the assessee and no return of income has been filed by the assessee for the year under consideration. Thus this very fact of deposit of cash of ₹ 14.00 lacs and not filing of the return of income by the assessee itself constitute a tangible material to form the belief that income assessable to tax has escaped assessment. We further note that JCIT after considering the reasons also recommended the reasons recorded by the AO for issuing notice u/s 148 of the Act. Based on these facts, the ld. Pr.CIT finally granted the approval. Therefore, it was not a case where the prudent person could have taken another view or opinion. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A) upholding the validity of reopening of the assessment. Unexplained cash Deposits u/s 68 - Past saving / life long savings - Held that - except the cash book prepared by the assessee in support of the source of deposit, no other material was produced by the assessee regarding the past savings of the assessee. - Once the assessee is capable of earning income then failure to explain the source of deposit in the bank would attract the provisions of Section 69 of the Act. Hence, in the facts and circumstances of the case, plea of the assessee cannot be accepted that the disclosed source of income of the assessee is not sufficient for making the deposit in the bank. if the said amount of deposit cannot be assessed as income of the assessee then the very object and purpose of provisions of Section 69 of the Act is defeated. Section 69 of the Act contemplates that if the assessee is found to have invested money without explaining the source of the same then it will be deemed as unexplained investment. Therefore, the reasons for failure of the assessee to explain the source of deposit in the bank account as not having sufficient disclosed source of income cannot be a ground for immunity from attracting the provisions of Section 69 of the Act and consequential deletion of such addition made by the AO. Appeal of the assessee is dismissed

Summary

Issues:
1. Validity of initiation of proceedings u/s 147/148 of the Act
2. Addition of ?15.50 lacs made u/s 68 of the Act

Issue 1: Validity of initiation of proceedings u/s 147/148 of the Act

The assessee challenged the initiation of proceedings u/s 147/148 by the AO, arguing that the approval granted by the ld. Pr.CIT was mechanical and lacked proper application of mind. The assessee contended that the reopening of assessment was not sustainable in law. The AO had initiated proceedings based on the deposit of ?14.00 lacs in the bank account without the assessee filing a return of income. The Tribunal considered the reasons recorded by the AO, which included the deposit of cash and non-filing of the return by the assessee, as tangible material justifying the belief that income had escaped assessment. The Tribunal upheld the validity of the reopening of the assessment, noting that the approval granted by the ld. Pr.CIT was based on valid reasons and recommendations.

Issue 2: Addition of ?15.50 lacs made u/s 68 of the Act

The AO made an addition on account of unexplained cash deposited in the bank account of the assessee. The assessee claimed that the amount was deposited from past savings and utilized by his son for business purposes. The AO rejected the explanation due to lack of documentary evidence, leading to the confirmation of the addition by the ld. CIT(A). The Tribunal observed that the assessee failed to substantiate the source of deposits, and the cash book produced was insufficient to prove the opening balance. Despite the AO's reliance on the cash book, the Tribunal found the explanation unsatisfactory due to the lack of supporting evidence for the past savings. The Tribunal distinguished a precedent cited by the assessee, emphasizing that failure to explain the source of deposit attracts Section 69 of the Act. Consequently, the Tribunal dismissed the plea of the assessee, upholding the addition made by the AO under Section 68 of the Act.

In conclusion, the appeal of the assessee was dismissed by the Tribunal, affirming the actions taken by the AO and ld. CIT(A) regarding the initiation of proceedings u/s 147/148 and the addition made u/s 68 of the Income Tax Act.