2021 (10) TMI 667 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - non supply of copy of the approval of PCIT - HELD THAT - Apart from stating that the AO had not supplied him copy of the approval of PCIT, could not point out any other defect in the reopening of the assessment. In our opinion, the assessee could not substantiate as to how the reopening is bad in law. Therefore, in absence of any merit in the arguments advanced by the ld. Counsel for the assessee, the ground challenging the validity of reassessment proceedings is dismissed. Addition of cash deposit - A perusal of the bank account shows that on certain dates, there are substantial cash withdrawals. However, neither the AO nor the CIT(A) has considered the same properly as to what is the extent of cash withdrawn from the bank account so as to enable the assessee to re-deposit the same after meeting his personal expenses, etc. - there are various other investments and deposits made by the assessee out of the said bank account - matter needs fresh adjudication by the AO. He shall also verify the past and subsequent records as to whether the assessee is opting for presumptive tax u/s. 44AF - AO is directed to verify the total cash withdrawals from the said bank account and after taking into account reasonable personal expenses and investments, etc., may consider the benefit of redeposit in the bank account from the said cash withdrawals. Appeal filed by the assessee is partly allowed for statistical purposes.

Summary

Issues:
1. Validity of reassessment proceedings under section 148 of the Income Tax Act.
2. Addition of unexplained cash deposit in the bank account.
3. Challenge against the order of the Commissioner of Income Tax (Appeals) regarding the addition made by the Assessing Officer.

Validity of Reassessment Proceedings:
The appeal raised concerns about the validity of the reassessment proceedings under section 148 of the Income Tax Act, arguing that approval from the Principal Commissioner of Income Tax (PCIT) was not obtained. However, the CIT(A) dismissed this ground, stating that approval from the PCIT was indeed taken before issuing the notice under section 148. The Tribunal upheld the CIT(A)'s decision, finding no legal infirmity in the approval process.

Addition of Unexplained Cash Deposit:
The Assessing Officer (AO) made an addition of ?29,85,045 to the total income of the assessee due to unexplained cash deposits in the bank account. The assessee claimed that the deposits were from the sale of jewelry on commission basis and through job work. However, the AO found discrepancies in the withdrawals and deposits, leading to the addition. The CIT(A) partially allowed the appeal, reducing the addition to ?27,05,938 by considering the income offered by the assessee. The Tribunal noted that the matter required fresh adjudication by the AO to properly assess the extent of cash withdrawals and re-deposits, directing the AO to verify the total cash withdrawals and consider personal expenses and investments. The appeal on this issue was partly allowed for statistical purposes.

Challenge Against CIT(A) Order:
The assessee challenged the CIT(A)'s decision regarding the addition made by the AO. The Tribunal observed that the AO and CIT(A) did not adequately consider the cash withdrawals and re-deposits made by the assessee for business purposes. The Tribunal directed the AO to re-examine the case, verify the cash transactions, and consider the benefit of re-deposits in the bank account. The assessee was instructed to appear before the AO to substantiate the case. The appeal was partly allowed for statistical purposes.

This detailed analysis covers the issues related to the validity of reassessment proceedings, addition of unexplained cash deposits, and challenges against the CIT(A) order, providing a comprehensive understanding of the judgment delivered by the Appellate Tribunal ITAT Delhi.