2023 (5) TMI 150 - AT - Income Tax

Reopening of assessment u/s 147 - Cash deposited in the bank account - HELD THAT - Only information in the possession of the AO for assuming jurisdiction to reopen the case of the assessee was that of cash deposited in the bank account of the assessee, and this information has been held in various decisions of the ITAT cited by assessee before us, is not sufficient for formation of belief of escapement of income. There is no information on record that on receipt of this information by the AO any inquiry or investigation was conducted by him so as to gather information regarding source of cash deposits either from the assessee or from any other source. In the absence of the same, mere information of cash deposits could not have lead to formation of belief of escapement of income. The issue is squarely covered by the decision of the ITAT in the cases Mariyam Ismail Rajwani and Bir Bahadur Singh Sijwali 2016 (8) TMI 1472 - ITAT AHMEDABAD We hold that jurisdiction assumed by the AO to reopen the case of the assessee was not in accordance with law in the absence of formation of belief of escapement of income by the AO. The assessment order so framed is therefore not sustainable in law, and is set aside as invalid. Appeal of assessee allowed.

Summary

Issues:
1. Validity of assessment framed under section 147 of the Income Tax Act.
2. Addition of Rs.15,00,000/- under section 68 of the Act in respect of deposits in appellant's bank account.

Issue 1: Validity of assessment under section 147:
The appeal challenges the validity of the assessment framed under section 147 of the Income Tax Act. The contention was that the reopening of the assessment was not justified and should be held as invalid. The AO had reopened the case based on information about cash deposits in the bank account of the assessee. The argument presented was that this information alone was insufficient to form a belief of income escapement. The ITAT cited relevant cases to support this argument. The CIT(A) did not provide reasoning for rejecting this contention. The ITAT held that the jurisdiction assumed by the AO to reopen the case was not in accordance with the law as there was no formation of belief of income escapement. It was noted that no inquiry or investigation was conducted to gather information regarding the source of cash deposits, rendering the reopening invalid. Therefore, the assessment order was set aside as invalid.

Issue 2: Addition under section 68 of the Act:
The second issue raised in the appeal was the addition of Rs.15,00,000/- under section 68 of the Income Tax Act concerning deposits in the appellant's bank account. Since the assessment order under section 147 was set aside as invalid, the adjudication of this addition on merits was considered an academic exercise and was disposed of accordingly. The appeal of the assessee was allowed in the above terms.

Separate Judgment:
The judgment was pronounced in the Court on 29th March, 2023, at Ahmedabad by Smt. Annapurna Gupta, Accountant Member.