2021 (4) TMI 904 - AT - Income Tax

NP Estimation - CIT(A) has held that the AO treated the entire deposit in bank account of assessee as sale of assessee and estimated net profit by applying net profit rate of 5% - HELD THAT - On perusal of facts, it is seen that the credit is in the bank account of the assessee and it is the onus of assessee to prove correct nature of the credits. She has not given any evidence to prove that this is not the turnover. The affidavit filed by her is not supported by any evidence and is self-serving. So far as net profit rate of 5% is concerned, the same is reasonable. The assessee did not furnish any comparative cases where the net profit rate is lesser than 5%. The case laws relied upon the ld. AR are not applicable on the facts of the present case, therefore, we do not find any reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) and we uphold the same qua the issue under consideration. Reopening of the assessment u/s 147/148 as proper sanction U/s 151 was not obtained before issuing notice - HELD THAT - The case of the assessee was reopened in the light of information/documents to the extent which were available with the AO. The material before the Assessing Officer was relevant and affords a live link or nexus to the formation of the prima facie belief that income chargeable to tax has escaped assessment in the hands of the assessee. The sufficiency and correctness of material need not be looked at the initial stage at the time of reopening of the case. While considering whether commencement of reassessment proceedings was valid, the court has only to see whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not anything to be considered at that stage. The reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion and what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Appeal of the assessee is dismissed.

Issues Involved:

1. Assessment of Income
2. Initiation of Penalty under Section 271A & 271B
3. Reopening of Assessment under Section 147/148
4. Validity of Notice under Section 143(2)

Issue-wise Detailed Analysis:

1. Assessment of Income:

The primary issue revolves around the assessment of the income of the assessee. The Assessing Officer (A.O.) treated the entire deposit in the assessee's bank account as her income and assessed it at ?20,37,281. The assessee contended that she only earned a commission at the rate of 0.25% and that the deposits were not her income but were related to accommodation entries. The A.O. applied a net profit rate of 5% on the total deposits, treating them as turnover. The assessee argued that she was an illiterate housewife, and her bank account was used by another person for issuing bogus bills. The CIT(A) upheld the A.O.'s decision, stating that the assessee failed to provide evidence to prove that the credits were not her turnover and that the net profit rate of 5% was reasonable. The Tribunal agreed with the CIT(A) and found no reason to interfere with the decision, thereby dismissing this ground of appeal.

2. Initiation of Penalty under Section 271A & 271B:

The assessee did not press this ground during the hearing, and hence, it was dismissed as not pressed.

3. Reopening of Assessment under Section 147/148:

The assessee challenged the reopening of the assessment, arguing that proper sanction under Section 151 was not obtained before issuing the notice. The CIT(A) and the Tribunal noted that the A.O. had recorded due reasons and obtained necessary approval, thus following the due process. The material before the A.O. was relevant and provided a prima facie belief that income had escaped assessment. The Tribunal upheld the CIT(A)'s decision, stating that the sufficiency and correctness of the material need not be looked at the initial stage, and the "reason to believe" was justified.

4. Validity of Notice under Section 143(2):

The additional ground raised by the assessee regarding the validity of the notice under Section 143(2) was dismissed as not maintainable because it was not raised in the prescribed proforma. The Tribunal emphasized the procedural requirement for raising additional grounds and dismissed this ground accordingly.

Conclusion:

The Tribunal dismissed the appeal, upholding the decisions of the lower authorities on all grounds. The assessment of income at ?20,37,281 was confirmed, the initiation of penalty under Section 271A & 271B was dismissed as not pressed, the reopening of assessment under Section 147/148 was found to be valid, and the additional ground regarding the validity of notice under Section 143(2) was dismissed as not maintainable.

← Previous Next →