2022 (9) TMI 692 - AT - Income Tax

Deemed income u/s 69A - unexplained cash deposited in bank account - nexus, purpose, character of the receipts and payments - payments received from the students - assessee had explained consistently by way of documentary evidences that the payments were received by her on behalf of M/s Ram Narain Institute of Education and these had been deposited in the bank accounts - HELD THAT - Assessee was appointed as a Lecturer at Ram Narain School of Education on 01.10.2007 and the Employer Certificate that she was working as Principal in the Institute dated 09.09.2009 is also available on record. The Cash Book of the assessee mentioning the voucher numbers and the deposit in the bank account for the specific periods is available on record. It has been made available to the AO also as noticed that reference to the Cash Book has been made by him in his queries raised to the assessee as per ordersheet referred to by him - It is also seen that the Receipt Book of Ram Narain Society of Education qua these deposits for B.Ed/Courses is available - None of these documents, it is seen have been faulted with by the Revenue. Considering the reply made before the AO as well as the CIT(A) on merits, it is seen that the occasion to make the addition or sustain it in appeal did not arise. The consistent evidence on record remains unrebutted. In the absence of any inconsistency in the assessee's claim and non rebuttal of supporting documents, the addition cannot be sustained arbitrarily. The addition is directed to be deleted. It is also seen that the assessee has raised jurisdictional challenge. On going through the facts available in the assessment order itself which have been extracted in the earlier part of this order it is seen that on the basis of which it has been pleaded that the notices issued at the incorrect address are non est. These have been elaborated at length while recording submissions advanced on behalf of the assessee, find that the bald finding arrived at by the ld. CIT(A) though does not inspire any confidence in the correctness of the conclusion drawn on assumption of jurisdiction, however, since the addition on merits has been deleted, the jurisdictional issue, accordingly, does not require any specific adjudication. Accordingly, the appeal of the assessee is allowed.

Issues Involved:
1. Correctness of the reassessment under Sections 147/148 of the Income Tax Act.
2. Addition of Rs. 41,21,700/- as deemed income under Section 69A of the Income Tax Act.
3. Consideration of nexus, purpose, and character of the receipts and payments.
4. Deduction for payments made or loss of capital.
5. Issuance of notices under Sections 131/133 to gather information from the school management and students.

Detailed Analysis:

1. Correctness of the Reassessment under Sections 147/148:
The assessee challenged the jurisdictional validity of the reassessment proceedings, arguing that the initial notices were sent to an incorrect address. The Assessing Officer (AO) later acknowledged the correct address and issued a new notice, which was responded to by the assessee. The CIT(A) dismissed the jurisdictional challenge by referring to Section 292BB, stating that the assessee's participation in the proceedings validated the notice. However, the tribunal found that the initial notices were non-est in the eyes of the law, citing the decision in Girirajkripa Developers Pvt. Ltd. Vs ITO, which emphasized that proper service of notice under Section 148 is a jurisdictional requirement. Consequently, the tribunal concluded that the assumption of jurisdiction by the AO was faulty.

2. Addition of Rs. 41,21,700/- as Deemed Income under Section 69A:
The AO added Rs. 41,21,700/- to the assessee's income, considering it as unexplained cash deposits in her bank account. The assessee contended that these amounts were fees collected on behalf of Ram Narain Institute of Education, where she served as Principal. Despite providing supporting documents, such as the employer's certificate, appointment letter, cash book, and receipts, the AO and CIT(A) did not accept the explanation. The tribunal, however, found that the assessee had consistently provided documentary evidence supporting her claim and that the revenue had not rebutted these documents. Therefore, the tribunal directed the deletion of the addition, stating that the conditions of Section 69A were not met as the cash was recorded in the books of account and the assessee was not the owner of the money.

3. Consideration of Nexus, Purpose, and Character of the Receipts and Payments:
The assessee argued that the authorities ignored the nexus, purpose, and character of the transactions. The tribunal noted that the assessee had provided a detailed cash book and receipts showing that the amounts were fees collected on behalf of the educational institution. The tribunal found no inconsistency in the assessee's claim and concluded that the authorities had arbitrarily sustained the addition without properly considering the supporting evidence.

4. Deduction for Payments Made or Loss of Capital:
The assessee sought deductions for payments made or loss of capital if the addition was sustained. However, since the tribunal directed the deletion of the addition on merits, this issue became moot and did not require specific adjudication.

5. Issuance of Notices under Sections 131/133:
The assessee contended that the authorities did not issue notices under Sections 131/133 to gather information from the school management and students, which could have substantiated her claim. The tribunal observed that the AO did not take steps to verify the assessee's claim through third-party verification, which could have clarified the matter. This inaction by the AO further supported the tribunal's decision to delete the addition.

Conclusion:
The tribunal allowed the appeal, directing the deletion of the addition of Rs. 41,21,700/- and finding that the reassessment proceedings were faulty due to improper service of notice. The tribunal emphasized the importance of proper jurisdictional procedures and the need for the revenue to adequately consider and verify the evidence provided by the assessee.

← Previous Next →