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2022 (5) TMI 242 - AT - Income TaxReopening of assessment u/s 147 - Unexplained bank deposits - HELD THAT - From the reasons as recorded, it is noted about the escaped income for the assessment year under consideration, that the assessee had entered into financial transactions, amounting to Rs. 1,41,94,000/- but as per the copy of the bank statement obtained by the Assessing Officer by way of enquiries u/s 133(6), there were only deposits of Rs. 74,41,900/-, for which, he has made the addition. In our view the very formation of belief by the Assessing Officer is not valid. We have gone through the judgements, relied upon by the Ld. Counsel in the cases of Sh. Gaurav Joshi , Smt. Monika Rani , Sh. Jaspal Singh and M/s Kapoor Rice Gen. Mills 2019 (1) TMI 1893 - ITAT AMRITSAR - In all these cases, it has been held that where wrong facts have been recorded for formation of reason to believe, the assessment proceedings deserve to be quashed. Also relying on GURDISH KAUR KHULLAR case 2022 (3) TMI 122 - ITAT CHANDIGARH there were wrong reasons recorded for the purposes of formation of belief for issuance of notice u/s 148 in the present case. It was merely on the basis of incorrect bank transaction in the form of bank deposits, the Assessing Officer has form reason to belief and thus He has wrongly assumed the jurisdiction and, therefore following the judgments as cited supra , the assessment as framed by issuance of notice u/s 148 for incorrect belief is deserves to be quashed. - Decided in favour of assessee.
Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961. 2. Confirmation of addition of Rs. 74,41,900/- on account of unexplained bank deposits. Issue-wise Detailed Analysis: 1. Validity of Notice Issued under Section 148: The primary grievance of the assessee was regarding the notice issued under Section 148 of the Income Tax Act, 1961. The assessee contended that the notice was issued without proper application of mind by the Assessing Officer (AO) and was based on incorrect information. The AO recorded reasons for reopening the case, stating that the assessee had entered into financial transactions amounting to Rs. 1,41,94,000/- and had not filed an income tax return for the relevant assessment year. However, the actual deposits in the bank account were only Rs. 74,41,900/-, which the AO later confirmed through enquiries under Section 133(6). The assessee argued that the reasons recorded for the formation of belief about the escapement of income were incorrect, as the actual bank deposits were significantly lower than the amount mentioned in the notice. The reliance was placed on various judgments, including those of the Amritsar Bench of ITAT in the case of Sh. Gaurav Joshi Vs ITO and the Chandigarh Bench in the cases of Smt. Monika Rani and Sh. Jaspal Singh, which held that reopening of assessment based on incorrect facts is invalid. The Tribunal agreed with the assessee, noting that the formation of belief by the AO was not valid due to the incorrect recording of facts. The Tribunal cited multiple judgments supporting the view that wrong reasons recorded for the formation of belief render the reassessment proceedings invalid. Consequently, the Tribunal quashed the notice issued under Section 148 and the subsequent reassessment proceedings. 2. Confirmation of Addition of Rs. 74,41,900/-: On the merits, the AO had made an ex-parte assessment, adding Rs. 74,41,900/- as unexplained deposits in the assessee’s bank account. The assessee explained that the deposits were from an advance received for the sale of land belonging to his mother and uncle, which was later returned when the deal was cancelled. The Ld. CIT(A) dismissed the assessee’s explanation, noting that the agreement to sell was not registered and the assessee was not the owner of the land. However, since the Tribunal quashed the reassessment proceedings on legal grounds, it did not adjudicate on the merits of the addition. The Tribunal emphasized that the decision was based solely on the legal issue of the validity of the notice under Section 148, and thus, the merits of the case became academic. Conclusion: The Tribunal allowed the appeal of the assessee on the legal issue, quashing the order of the Ld. CIT(A) and the reassessment proceedings initiated under Section 148 due to the incorrect formation of belief by the AO. The merits of the addition were not adjudicated upon as the primary issue was resolved in favor of the assessee.
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