2023 (2) TMI 752 - AT - Income Tax

Reopening of assessment u/s 147 - reopening on different item of income - assessment was reopened alleging that loan availed is non-genuine, hence, has escaped assessment - addition of cash deposited in the account held with ICICI bank by treating it as unexplained - HELD THAT - It is fairly well settled that while making assessment u/s 147 Assessing Officer has power to make addition of any other item of income which comes to his notice in course of the assessment proceedings along with the item of income for which assessment was reopened. Without making addition of the escaped income, no other addition can be made. Whereas, in the facts of the present appeal, the Assessing Officer without making addition of the loan availed for escapement of which the assessment was reopened has added a completely different item of income, being cash deposited in the bank account. Therefore, the addition made is unsustainable. Accordingly, direct the Assessing Officer to delete the addition. Appeal of assessee allowed.

Summary

Issues:
1. Addition of cash deposited in the bank account during assessment proceedings.
2. Reopening of assessment under Section 147 of the Income-Tax Act, 1961.
3. Consistency in additions made during assessment proceedings.

Analysis:
1. The dispute in the appeal revolved around the addition of Rs.2,68,819 on account of cash deposited in the bank account. The Assessing Officer added this amount during the assessment, which the assessee contested before the learned Commissioner (Appeals).

2. The assessment was reopened under Section 147 of the Income-Tax Act, 1961, based on the alleged non-genuineness of a loan availed by the assessee. The Assessing Officer called for explanations regarding the source of investment made by the assessee in a property. Despite the reopening being related to the loan, the addition made during assessment was for cash deposited in the bank account.

3. The judicial member noted that the Assessing Officer did not add the loan amount during the assessment, even though the reopening was based on its alleged non-genuineness. Instead, a different item of income, the cash deposited in the bank account, was added. The judicial member emphasized that any addition during assessment proceedings should be related to the escaped income for which the assessment was reopened. In this case, as the addition of cash was unrelated to the reopened issue of the loan's genuineness, it was deemed inconsistent and unsustainable.

4. The judicial member referenced legal precedents to support the decision that additions made during assessment proceedings should be connected to the escaped income for which the assessment was reopened. As the Assessing Officer added a different item of income without addressing the loan issue, the addition of cash was deemed unjustified. Consequently, the judicial member directed the Assessing Officer to delete the addition of cash deposited in the bank account.

5. Ultimately, the appeal was allowed, and the order directing the deletion of the cash deposit addition was pronounced in the open court on 17th February 2023.