2023 (4) TMI 469 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained cash deposits - HELD THAT - It is a settled position of law that the quality of the reasons to believe cannot be assailed by an assessee. As the reasons to believe recorded by the A.O for initiating proceedings u/s.147 clearly reveals a bonafide belief that was arrived at by him on the basis of the material available before him that the income of the assessee chargeable to tax of Rs.10.70 lac had escaped assessment, therefore, the claim of the Ld. AR therein alleging that the reasons to believe are not as per the mandate of law do not merit acceptance. Thus Ground of appeal raised by the assessee are dismissed. Cash deposits in bank account - Claim of the Ld. AR that the amount of cash deposits of Rs.10.70 lac (supra) were sourced out of the assessee s trading turnover, the income corresponding to which had been disclosed u/s.44AD of the Act, would require necessary verification, therefore, the matter requires to be revisited by the A.O. Thus we restore the matter to the file of the A.O who shall verify the maintainability of the aforesaid claim of the assessee by calling for the supporting documentary evidences, i.e., purchase/sales bills which would substantiate the assessee s claim that the cash deposits in question were sourced out of the turnover of his aforesaid trade. Ground allowed for statistical purposes.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of reassessment proceedings under Section 147 of the Income-tax Act, 1961.
3. Addition of cash deposits as unexplained income.

Condonation of Delay:
The appeal was time-barred by 63 days. The delay was attributed to the medical unavailability of the assessee's counsel, who lost track of the matter. The Tribunal found the reasons for the delay to be bona fide and not due to any malafide intention or lackadaisical conduct. Consequently, the delay was condoned.

Validity of Reassessment Proceedings:
The assessee challenged the initiation of reassessment proceedings under Section 147, arguing that the "reasons to believe" recorded by the AO were not in conformity with the standard procedure prescribed by the CBDT. The Tribunal held that internal guidelines issued by the CBDT for streamlining the work of the AOs cannot be used to draw adverse inferences regarding the "reasons to believe." The Tribunal found that the AO had a bona fide belief based on available material that the income had escaped assessment. Therefore, the additional ground of appeal and Ground No. 3 were dismissed.

Addition of Cash Deposits:
The AO added Rs. 10.70 lakhs as unexplained income, which the assessee claimed were business receipts. The CIT(Appeals) scaled down the addition to 50%, i.e., Rs. 5.35 lakhs, acknowledging the possibility of business activity but noting the lack of supporting evidence. The Tribunal observed that while the AO had failed to conclusively establish that the assessee was not engaged in business, the assessee also could not substantiate his claims with documentary evidence. The Tribunal found some merit in the assessee's argument that the cash deposits were part of the business turnover but required further verification. The case was remanded to the AO for fresh adjudication, allowing Grounds Nos. 1 & 2 for statistical purposes.

General Grounds:
Ground Nos. 4 & 5 were dismissed as not pressed.

Conclusion:
The appeal was partly allowed for statistical purposes, with the matter remanded to the AO for fresh adjudication regarding the source of cash deposits. The order was pronounced in open court on March 27, 2023.