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2021 (7) TMI 882 - AT - Income TaxValidity of reopening of assessment u/s 147 - addition of transactions in HSBC Bank, Geneva - co-ownership in bank account with ex-wife - assessee argued that amendment to section 147 would not be applicable to the Appellant s case and therefore the re-assessment was not valid - HELD THAT - As per reasons recorded, the assessee has invested along with his ex-wife in HSBC Bank, Geneva and the transaction with HSBC Bank were not disclosed to the department. However, it has not been stated that the said investment in HSBC was out of income which escaped assessment. AO also has not mentioned in the aforesaid reasons that he was satisfied that the above income escaped assessment. He simply relied on the information received in his possession to come to the conclusion that this HSBC bank account belonged to the assessee. In the present case, the AO simply relied upon the information received by him and stated that the investment in assessee s joint account with his ex-wife with HSBC Bank which has not been disclosed in the return of income filed by the assessee is the income which escaped assessment in the hands of assessee - AO simply acted upon the information and did not apply his own mind to the information to arrive at a belief independently that on the basis of material before him to come to the conclusion that income has escaped assessment - it is a joint account of assessee with his ex-wife, Ms. Vandana Virwani with HSBC Bank, Geneva and the assessee solely cannot be considered as owner of the account so as to bring the entire transaction in that account in the hands of the assessee. AO has just suspicion in his mind and it is trite law that an assessment cannot be reopened merely on the basis of suspicion and initiation of reassessment proceedings u/s. 148 of the Act on the basis of this aspect was invalid in the eye of law. AO framed assessment on protective basis in AY 2002- 03 which clearly shows that he was not sure as to whether assessee was having income which escaped assessment AO is not sure whether income has to be assessed in the hands of assessee or his ex-wife. Next, he was not sure in which assessment year it has to be taxed, whether AY 2002-03 or 2003-04. In addition, he is not sure who is the exact owner of this bank account. HSBC bank account is a joint account with assessee s ex-wife. It does not lead to the conclusion that the assessee is the sole owner and beneficial of the said bank account in order to bring this deposit as taxable in the hands of assessee as the owner of the account. The onus of proving lies with the department. This legal proposition has been laid down in the case of CIT v. K. Chinnathamban 2007 (7) TMI 204 - SUPREME COURT wherein it was held that where a deposit stands in the name of a third person and where that person is related to the assessee, then in such a case the proper course would be to call upon the person in whose books the deposit appears or the person in whose name the deposit stands to explain such deposit. AO reopened the assessment merely on suspicion and surmise, without there being any positive material in his possession to prove that the assessee is the owner of the bank account or having beneficial interest in this bank account. Therefore, we are of the opinion that the reopening of assessments are bad in law, which cannot be sustained. Accordingly, we quash the reassessments. - Decided in favour of assessee.
Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income-tax Act, 1961. 2. Legality of the addition of income under Section 69 and levy of interest under Section 234D. 3. Compliance with the time limit for issuing notice under Section 148. 4. Application of mind by the Assessing Officer (AO) in reopening the assessment. 5. Disclosure of material facts by the appellant. 6. Ownership and operation of the HSBC Bank, Geneva account. 7. Authenticity and source of evidence forming the basis of the belief that income has escaped assessment. 8. Examination of evidence by the appellant. 9. Principles of natural justice. 10. Double assessment of the same income in the hands of the appellant and his ex-wife. 11. Legality of levying interest under Section 234D in reassessment. Issue-wise Detailed Analysis: 1. Validity of reopening the assessment under Section 147 of the Income-tax Act, 1961: The appellant argued that the reopening of assessment was invalid as the AO did not have "reason to believe" that income chargeable to tax had escaped assessment. The Tribunal noted that the AO relied on information received from another department without applying his own mind. The AO did not provide concrete findings to support the belief that income had escaped assessment. The Tribunal concluded that the AO's actions were based on suspicion rather than tangible material, making the reopening of the assessment invalid. 2. Legality of the addition of income under Section 69 and levy of interest under Section 234D: The Tribunal found that the AO had not established that the deposits in the HSBC Bank account were unexplained income of the appellant. The AO's reliance on mere information without substantiating the source of the deposits was insufficient. Consequently, the addition of income under Section 69 and the levy of interest under Section 234D were deemed unjustified. 3. Compliance with the time limit for issuing notice under Section 148: The appellant contended that the notice issued under Section 148 was barred by limitation as per the pre-amended Section 149. The Tribunal observed that the amendment to Section 149, which extended the time limit for issuing notice, was effective from 01.07.2012. Since the time limit under the old law had expired on 31.03.2009, the notice issued on 24.03.2014 was barred by limitation. 4. Application of mind by the Assessing Officer (AO) in reopening the assessment: The Tribunal emphasized that the AO must independently apply his mind to the material before forming a belief that income had escaped assessment. In this case, the AO merely acted on information received from another department without independently verifying the facts. The Tribunal held that the AO's failure to apply his mind invalidated the reopening of the assessment. 5. Disclosure of material facts by the appellant: The appellant argued that he had fully and truly disclosed all material facts necessary for assessment. The Tribunal noted that the AO did not provide evidence to contradict the appellant's claim. The Tribunal concluded that the appellant had disclosed all relevant facts, and the AO's reopening of the assessment was unjustified. 6. Ownership and operation of the HSBC Bank, Geneva account: The appellant denied owning or operating the HSBC Bank account. The Tribunal found that the AO did not establish the appellant's ownership or operation of the account. The AO's reliance on information without verifying the appellant's connection to the account was deemed insufficient to justify the reopening of the assessment. 7. Authenticity and source of evidence forming the basis of the belief that income has escaped assessment: The Tribunal observed that the AO did not provide credible evidence to support the belief that income had escaped assessment. The information relied upon by the AO was not authenticated, and the source of the evidence was not specified. The Tribunal held that the AO's reliance on unverified information invalidated the reopening of the assessment. 8. Examination of evidence by the appellant: The appellant argued that he was deprived of the opportunity to examine the evidence used by the AO. The Tribunal agreed, noting that the AO did not provide the appellant with the evidence forming the basis of the reassessment. This lack of transparency violated the principles of natural justice. 9. Principles of natural justice: The Tribunal emphasized that the AO's actions violated the principles of natural justice. The appellant was not given a fair opportunity to examine the evidence or present his case. The Tribunal held that the reassessment was invalid due to the violation of natural justice principles. 10. Double assessment of the same income in the hands of the appellant and his ex-wife: The appellant argued that the same income was assessed in the hands of both him and his ex-wife. The Tribunal found that the AO did not conclusively determine the ownership of the HSBC Bank account. The Tribunal held that the double assessment of the same income was unjustified and invalid. 11. Legality of levying interest under Section 234D in reassessment: The appellant contended that the levy of interest under Section 234D was not applicable in reassessment. The Tribunal agreed, noting that the interest could not be levied or increased in the reassessment under Section 147. The Tribunal held that the levy of interest under Section 234D was invalid. Conclusion: The Tribunal quashed the reassessments for both assessment years, holding that the AO's actions were based on suspicion and unverified information. The reopening of the assessments was deemed invalid, and the additions of income and levy of interest were annulled. The appeals by the appellant were allowed.
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