2022 (3) TMI 887 - AT - Income Tax

Validity of the assessment framed u/s. 147 - Unexplained cash deposits in the bank account of the assessee - assessee challenging the reopening was that the reasons recorded by the A.O. were not sufficient for the formation of belief of escapement of income - HELD THAT - There can be no iota of doubt that there was sufficient information for the formation of belief of escapement of income, with the assessee having been found to have deposited substantial cash in his bank account which could neither be explained by any return of income filed by the assessee ,which he had evidently not filed and nor had the assessee offered any explanation of the same in the course of enquiries conducted by the A.O. The cash deposits therefore were found to be unexplained by the A.O. and it was this information which logically and rightfully led to the formation of belief of escapement of income. The contention of the assessee therefore regarding the insufficiency of reasons for formation of belief of escapement of income needs to be out rightly rejected. The source of cash deposit remaining unexplained by the assessee, the formation of belief of escapement of income on account of the same was justified and as a consequence, the initiation of reassessment proceedings also. No other arguments challenging the validity of reopening the case were made before us. We reject the contention of the assessee challenging the validity of reopening in the present case u/s. 147 of the Act. Unexplained cash deposits - Assessee explanation that the bank account was infact being operated by his employer, we find was evidenced by the narration in the entries in the bank account reflecting the name of his employer, the brokerage firm of which he was an agent i.e. Bonanza Portfolio Ltd. and his purported relatives. We have noted that almost entirely all the withdrawals in this bank account by cheque related to these aforesaid persons only while there were few withdrawals in cash also - whatever amount was deposited in this account was withdrawn either in the name of the asseesses employer, his brokerage firm which he was an agent or for the benefit of his relatives. The explanation of the assessee therefore that his bank account was being operated by his employer appears to be justified on the touchstone of preponderance of probability. The onus stood shifted to the Revenue to prove otherwise. It was incumbent on the Revenue to have examined the evidences, make necessary inquiries from the employer of the assessee, Mr.Prakash Mirani, and also from the bank and only thereafter on finding these evidences to be of no consequence ,the onus to justify his explanation with further evidences would have shifted to the assessee. The Revenue, on the contrary, we find insisted on further evidences from the assessee without even considering that filed by the assessee or pointing out why they were not relevant. In the present case, the assessee having sufficiently evidenced his explanation regarding the nature of cash deposits and the revenue being unable to controvert the same, we hold that the Ld. CIT(A) was not justified in dismissing the explanation of the assessee and upholding the addition of cash deposits - Assessee appeal partly allowed.

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961.
2. Merits of the addition of ?32,72,380 as income from undisclosed sources.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:
The primary contention raised by the assessee was the legality of the reassessment framed under Section 147 of the Income Tax Act, 1961. The grounds for challenging the reassessment included:
- The requisite conditions under Section 147 were not fulfilled, leading to a wrongful assumption of jurisdiction.
- The objections to the reassessment were not disposed of by the Assessing Officer (A.O.).
- The written submissions and replies during the assessment proceedings were not properly appreciated.
- The decision in the case of Mariyam Ismail Rajwani was not considered.

The A.O. reopened the case based on information regarding cash deposits of ?57,22,380 in the assessee's bank account, without any return of income filed for the relevant assessment year. The A.O. issued a notice under Section 148 and, after considering the assessee's reply, passed an order under Section 143(3) read with Section 147, making an addition of ?32,72,380 for unexplained cash deposits.

The assessee argued that the reasons recorded by the A.O. were insufficient for forming a belief of escapement of income, citing the ITAT decision in Mariyam Ismail Rajwani's case, where similar reasons were held insufficient. However, the Tribunal found that in the present case, the A.O. had made inquiries seeking an explanation for the cash deposits, which the assessee did not respond to. Therefore, the Tribunal held that there was sufficient information for the formation of belief of escapement of income, distinguishing it from the Mariyam Ismail Rajwani case where no such inquiries were made.

The Tribunal concluded that the reopening of the assessment was justified, and the grounds challenging the validity of the reassessment were dismissed.

2. Merits of the Addition of ?32,72,380 as Income from Undisclosed Sources:
The A.O. made an addition of ?32,72,380 to the assessee's income, noting unexplained cash deposits in the bank account. The assessee contended that the bank account was operated by his employer, Mr. Prakash Dilipbhai Mirani, and provided details, including the employer's PAN and an affidavit stating the facts.

The assessee argued that the revenue authorities did not properly appreciate the explanation and evidence provided. The Ld. CIT(A) upheld the addition, noting that the assessee failed to furnish a confirmation from his employer and did not substantiate the claim that the employer operated the bank account.

The Tribunal, after reviewing the documents and submissions, agreed with the assessee. The Tribunal found that the assessee had sufficiently discharged his onus by providing evidence that the bank account was operated by his employer, supported by the narration in the bank entries and the affidavit. The Tribunal held that the revenue authorities should have made further inquiries from the employer and the bank. Since the revenue failed to do so and could not controvert the assessee's explanation, the Tribunal directed the deletion of the addition of ?32,72,380.

Conclusion:
The appeal filed by the assessee was partly allowed. The Tribunal upheld the validity of the reassessment proceedings under Section 147 but deleted the addition of ?32,72,380 as income from undisclosed sources, finding that the assessee had sufficiently explained the nature of the cash deposits.

← Previous Next →