2021 (7) TMI 45 - AT - Income Tax

Reopening of assessment u/s 147 - Income from undisclosed sources - no explanation to source of cash deposit and the source of property purchased - HELD THAT - The only person from whom the Assessing Officer could have made enquiry was the assessee herself and the Assessing Officer can make enquiry from the assessee by issuing notice and asking her to explain the source and this is what the Assessing Officer has done. The Assessing Officer has not made additions solely by issuing notice u/s. 148 of the Act, but after giving several opportunities to the assessee to explain the source of her investment. We are of the considered view that there is no error or infirmity in issuing notice u/s. 148 of the Act and initiating reassessment proceedings. We, accordingly, confirm the findings of the ld. CIT(A). To this extent, reopening of the assessment is upheld. Merits of the addition, though the first appellate authority has accepted the additional evidences u/r. 46A of the Rules, but has not examined the explanation of the assessee that the source of cash deposits are duly reflected in her books of account regularly maintained by her. We are of the considered opinion that since the assessee has sought to explain the source of cash deposit from her books of account, the entries need to be examined. Therefore, in the interest of justice and fair play, we restore this issue to the file of the Assessing Officer.

Summary

Issues:
1. Validity of notice issued under section 148 and initiation of proceedings under section 147.
2. Assessment order passed without affording reasonable opportunity of being heard.
3. Sustaining addition of cash deposited in the bank as income from undisclosed sources.

Analysis:

Issue 1: Validity of notice issued under section 148 and initiation of proceedings under section 147

The Assessing Officer initiated proceedings under section 147 based on information regarding cash deposits and property transactions by the assessee. The notice under section 148 was issued, and subsequent notices were sent to the assessee for explanation. The ld. CIT(A) upheld the reopening of the assessment, citing credible material from AIR information and legal precedents. The Tribunal confirmed the reopening, stating that the Assessing Officer had reasons to believe income had escaped assessment due to disparities in declared income and actual transactions. The Tribunal emphasized that in such cases, the Assessing Officer can form reasons to believe without fresh tangible material.

Issue 2: Assessment order passed without affording reasonable opportunity of being heard

The assessee challenged the assessment order on the grounds of lack of opportunity to be heard. The ld. CIT(A) admitted additional evidences and considered the explanation provided by the assessee. The Tribunal acknowledged the need for a fair opportunity for the assessee to explain the source of cash deposits reflected in her books of account. The issue was restored to the Assessing Officer for re-examination, emphasizing the importance of fair play and justice in the assessment process.

Issue 3: Sustaining addition of cash deposited in the bank as income from undisclosed sources

The ld. CIT(A) confirmed the addition of a portion of the cash deposits as income from undisclosed sources but deleted the addition related to the property purchase based on the assessee's explanation. The Tribunal directed a fresh examination of the source of cash deposits from the books of account, emphasizing the need for verification and a fair opportunity for the assessee to be heard. The appeal was allowed in part for statistical purposes, highlighting the importance of a thorough assessment process in determining undisclosed income.

This detailed analysis of the judgment highlights the key issues raised by the parties, the legal reasoning provided by the authorities, and the Tribunal's decision on each aspect of the case.