2022 (4) TMI 860 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained cash deposits made in the bank account - HELD THAT - In this case original assessment was completed under section 143(1) of the Act and therefore there was no occasion for the Assessing Officer to examine all the relevant information to complete the assessment. Subsequently the Assessing Officer has noted that there is a huge credits and debits on various dates and therefore the Assessing Officer was of the opinion that there is an escapement of income chargeable to tax and reopened the assessment. In view of the above facts we find that the Assessing Officer has validly reopened the assessment. We find no merits in the arguments of the ld. Counsel and accordingly the ground of reopening of assessment raised by the assessee is dismissed. Unexplained cash deposits - As assessee has submitted with regard to the addition of 86, 500/- that the assessee has received the said amount from Arihant Capital Markets Limited share broker and member of NSE and is registered with SEBI. It was further submitted that the receipt of funds from Arihant Capital Markets Limited are from trading of securities only and that all the receipts and payments are being made through banking channel only. Once the receipts and payments are being made through banking channel and not disputed by the authorities below we are of the opinion that the addition made by the Assessing Officer is liable to be deleted and accordingly the addition is deleted. For amount shown as opening cash balance as on 01.04.2009 since no wealth tax return has been filed by the assessee - assessee has submitted that the net wealth of the assessee is far below the taxable limit and there is no need for the assessee to file her wealth tax return. In case the AO is of the opinion that the net wealth of the assessee is more than the prescribed limit the Assessing Officer can proceed for making wealth tax assessment than adding the sum under the income tax assessment. Accordingly the addition made by the Assessing Officer is deleted. Thus the grounds raised by the assessee on merits are allowed.

Summary

Issues:
Reopening of assessment under section 147 of the Income Tax Act, 1961

Analysis:
The judgment involves appeals against orders of the Commissioner of Income Tax (Appeals) related to the assessment years 2008-09 and 2009-10. The primary issue raised in both appeals by the assessee pertains to the reopening of assessment under section 147 of the Income Tax Act, 1961. The case was reopened based on reasons related to significant cash deposits and share transactions made by the assessee during the relevant financial year. The Assessing Officer believed that income had escaped assessment and thus issued a notice under section 148 of the Act. Subsequent to the notice, the AR of the assessee provided explanations and submissions regarding the source of funds and the nature of cash deposits. However, the Assessing Officer proceeded to treat a portion of the cash deposits as unexplained and added it to the total income of the assessee. The additions made by the Assessing Officer were confirmed by the Commissioner of Income Tax (Appeals).

In response to the appeal before the Tribunal, the assessee contended that there was no tangible material available for the reopening of assessment under section 147 of the Act, rendering the reopening invalid. The assessee also challenged the additions made on merits, emphasizing that the funds received were from a registered entity and that all transactions were conducted through banking channels. On the other hand, the Department strongly supported the reopening of assessment based on the reasons recorded by the Assessing Officer.

The Tribunal observed that the original assessment was completed under section 143(1) of the Act, and the Assessing Officer had valid reasons to believe that there was an escapement of income chargeable to tax, justifying the reopening of assessment. Consequently, the Tribunal dismissed the grounds raised by the assessee regarding the reopening of assessment. However, on the merits of the case, the Tribunal held in favor of the assessee. The Tribunal found that the addition of a specific amount as unexplained cash deposits was not justified, considering the nature of transactions and the absence of any discrepancies in the banking channels. Therefore, the addition was deleted. Similarly, another addition made for the opening cash balance was also deleted as the net wealth of the assessee was below the taxable limit, and there was no requirement for filing a wealth tax return.

In conclusion, the Tribunal partly allowed both appeals filed by the assessee, ruling in favor of the assessee on the merits of the case while dismissing the grounds related to the reopening of assessment.