2022 (12) TMI 1345 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Unexplained source of the cash deposits in the bank accounts - HELD THAT - It is evident, in the year under consideration, the assessee has deposited cash amounting to Rs.58,86,000 in two bank accounts standing in his name. It is a fact on record that the assessee did not file any return of income u/s 139(1). The fact relating to cash deposit made by the assessee came to the notice of the Assessing Officer from the individual transaction statement available with the department. Thus, in absence of any return of income filed by the assessee, the Assessing Officer had no other information to suggest that the cash deposits reflected in the individual transaction statement has been offered to tax by the assessee. Therefore, while reopening the assessment under Section 147 of the Act, the Assessing Officer had tangible material in his possession to form belief that income has escaped assessment. Therefore, he has validly initiated proceedings under Section 147 of the Act. Validity of approval granted under Section 151 - We do not find any deficiency in such approval. Therefore, no merit in ground no.2. Accordingly, the ground is dismissed.

Summary

Issues:
1. Validity of reopening of assessment under Section 147 of the Income-Tax Act, 1961.
2. Merits of the addition made of Rs.49,85,000.

Validity of Reopening of Assessment:
The case involved an appeal by the assessee against the order of the Commissioner of Income-Tax (Appeals) for the assessment year 2010-11. The Assessing Officer had reopened the assessment under Section 147 of the Act based on information indicating cash deposits made by the assessee in two bank accounts. The assessee challenged the validity of the reopening, arguing that the Assessing Officer did not conduct an independent inquiry and that the approval granted was mechanical. However, the tribunal found that the Assessing Officer had tangible material to believe that income had escaped assessment, as the assessee had not filed a return of income and the cash deposits were not offered for tax. The tribunal upheld the validity of the reopening under Section 147 of the Act.

Merits of the Addition Made:
Regarding the addition of Rs.49,85,000, the assessee explained the sources of cash deposits, including advances received for land sale, withdrawals from banks, and rent receipts. The Assessing Officer accepted some explanations but not others. The tribunal observed that the opening cash balance claimed by the assessee was believable considering the agricultural background and past earnings. The tribunal also found the explanations for withdrawals and land sale proceeds to be supported by evidence such as bank statements and agreements. Ultimately, the tribunal concluded that the assessee had sufficiently explained the sources of cash deposits, leading to the deletion of the addition of Rs.49,85,000. The appeal was partly allowed based on this finding.

In summary, the tribunal upheld the validity of the reopening of assessment under Section 147 of the Act due to tangible material supporting the belief of income escaping assessment. However, the tribunal found in favor of the assessee regarding the addition made, as the explanations provided for the sources of cash deposits were deemed satisfactory and supported by evidence. As a result, the tribunal deleted the addition of Rs.49,85,000, partially allowing the appeal.