2021 (10) TMI 664 - AT - Income Tax

Reopening of assessment u/s 147 - payment towards the credit card bill made - withdrawal of cash from the assessee's bank account for making credit card payment - HELD THAT - If we look at the assessment order passed by the Assessing officer, the addition has been made on account of the reason that the assessee has failed to explain the source of cash deposits/payments towards credit card bills. There is however nothing on record in terms of assessee's bank statement and credit card statement which shows that cash has been withdrawn from the assessee's bank account and thereafter, the payment has been made towards discharge of credit card liability. In absence of the same, it can be reasonably concluded that the payment has been made through banking channels towards discharge of credit card liability and there is thus clearly a mismatch between the reasons so recorded and basis of the addition so made by the Assessing officer. There is nothing on record that besides the AIR information, the AO has either these details in his possession or have sought these details by conducting further independent and direct enquiry during the course of assessment proceedings and which explains as to why the same were never shared with the assessee - in such peculiar circumstances, where the assessee is disputing making any cash payments and in absence of any tangible material brought on record by the Revenue and shared with the assessee in order to enable the latter to put forward his explanation, we do not see any justifiable basis to make the addition in the hands of the assessee and the addition so made is hereby directed to be deleted. Addition made by the AO wherein the assessee has again requested to provide the requisite information/material in possession of the AO - Besides the AIR information, the AO has neither these details in his possession nor have sought these details by conducting further enquiry during the course of assessment proceedings and hence, the same were never shared with the assessee - in absence of any tangible material brought on record by the Revenue and shared with the assessee in order to enable the latter to put forward his explanation, we do not see any justifiable basis to make the addition in the hands of the assessee and the addition so made is hereby directed to be deleted.

Issues Involved:
1. Legality of proceedings initiated under sections 147/148.
2. Validity of assessment due to non-provision of reasons and evidence.
3. Addition of ?3,82,079 on account of unexplained cash transactions.
4. Addition of ?4,74,040 on account of unexplained share transactions.
5. Levy of interest under sections 234A, 234B, and 234C.

Detailed Analysis:

1. Legality of Proceedings Initiated Under Sections 147/148:
The assessee contended that the proceedings under sections 147/148 were illegal as the Assessing Officer (AO) did not supply the reasons for issuing the notice under section 148. The AO is legally obligated to provide these reasons to allow the assessee to file suitable replies or objections. The Tribunal referenced judicial pronouncements, including the Supreme Court's decision in GKN Driveshafts (India) Ltd. and the Delhi High Court's decision in Haryana Acrylic Manufacturing Co. vs. CIT, which mandate that reasons must be supplied within a reasonable time, typically within the time frame specified under section 149 (4 or 6 years). The Tribunal found that the assessee did not request the reasons during the assessment proceedings and participated without objections. Therefore, the AO's actions did not violate the Supreme Court's directions or principles of natural justice, and the grounds of appeal were dismissed.

2. Validity of Assessment Due to Non-Provision of Reasons and Evidence:
The assessee argued that the AO did not provide the reasons for the notice under section 148 or the evidence used against him. The Tribunal noted that the AO apprised the reasons through order sheet entries, which the assessee acknowledged. The Tribunal concluded that the reasons were communicated during the assessment proceedings, adhering to the principles of natural justice. The Tribunal dismissed the contention that the assessment was invalid due to non-communication of reasons.

3. Addition of ?3,82,079 on Account of Unexplained Cash Transactions:
The AO made an addition of ?3,82,079 for unexplained cash payments towards credit card bills. The assessee claimed that he did not remember making such payments and requested the AO to provide the relevant documents, which were not supplied. The assessee submitted an affidavit from his mother, acknowledging a gift of ?5,00,000, which the AO did not accept. The Tribunal noted discrepancies between the reasons recorded for the notice and the basis for the addition. The AO did not provide tangible evidence of cash payments. The Tribunal concluded that without the necessary records and further enquiries by the AO, the addition was unjustified and directed its deletion.

4. Addition of ?4,74,040 on Account of Unexplained Share Transactions:
The AO added ?4,74,040 for unexplained investments in shares. The assessee argued that the AO did not provide the documents despite repeated requests. The Tribunal found that the AO relied solely on AIR information without conducting further enquiries or providing the details to the assessee. In the absence of tangible material and given the assessee's inability to access old records, the Tribunal directed the deletion of the addition.

5. Levy of Interest Under Sections 234A, 234B, and 234C:
The issue of interest levied under sections 234A, 234B, and 234C was not specifically addressed in the Tribunal's detailed analysis, as the primary focus was on the legality of the proceedings and the additions made by the AO.

Conclusion:
The Tribunal found procedural lapses in the AO's handling of the case, particularly in providing necessary documents and conducting further enquiries. The additions of ?3,82,079 and ?4,74,040 were deleted due to lack of evidence and proper communication. The appeal was disposed of with directions to delete the contested additions.

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