2023 (10) TMI 1235 - AT - Income Tax

Validity of Assessment u/s 144C r.w.s 147 - eligible assessee - Non-Resident - Absence of an order u/s 92CA(3) - addition on account of unexplained cash deposits - AO as well as DRP had disbelieved the explanation filed in support of the sources for cash deposits by holding that the appellant had failed to adduce the reasons for withdrawal of the cash from one bank account and deposits made in other bank account and the assessee failed to establish the live link between the withdrawals of the cash and deposit of same cash in bank - HELD THAT - The word and used by the Parliament in sub-clause (i) of sub-section (15) of section 144C shown in italics is to be read as or , as the two part of sub-section (15) of section 144C are disjunctive as it prescribes two separate and distinct categories of assessee as eligible assessee . Even otherwise such reading of words AND produces an unintelligible or absurd results, as the Parliament never intended that even in a case of Non-Resident, an order u/s 92CA(3) is prerequisite condition. Thus, we do not find any merit in the contention raised on behalf of the appellant. It is only from the assessment year 2020-21 that a Non-Resident is made as eligible assessee , therefore, the Assessing Officer ought not to have exercised the jurisdiction u/s 144C of the Act - It is settled position of law that the assessment procedure which provides a machinery procedure for quantification of charge and levying as well as collection of tax in respect of charge, thereof, it falls under realm of the procedural law. A procedural law is generally applicable to all the pending cases. The procedural law always has the retrospective application. The rule against retrospective operation of statute or a provision is not applicable to a statute or provisions if the same operates in the domain of procedural aspects of the statute. The Apex Court in several cases held that no person has a vested right in any course of procedure. He has only the right of prosecution or defense in the manner prescribed for the time being by or for the court in which the case is pending, and if, by an Act of Parliament the more of procedure is altered, he has no other night than to proceed according to the altered mode. Therefore, since in this case, admittedly, the reassessment proceedings were conducted after the amended provisions came into effect i.e. w.e.f. 1.4.2020, the Assessing Officer was justified in adhering to the provisions prescribed u/s 144C of the Act. Therefore, the contentions of the appellant are being devoid of any merit and dismissed. Decided against assessee. Addition being cash deposits in bank account u/s 69A - It is settled position of law that the cash withdrawn from the bank is treated as available for subsequent deposit into the bank, in the absence of any material on record to indicate that the cash withdrawn was utilised for some other purposes. Specially, in the present case, the interval between the withdrawal and deposit of the cash is hardly two days. There can be hundred and reasons as to why the assessee had withdrawn the money from one bank account and deposited in other bank account. Merely because the assessee had failed to explain the reasons for withdrawal from one bank account and deposited to another bank account, cannot lead to the conclusion that the cash withdrawn earlier was not available for subsequent deposit in the bank account. The reasoning of the DRP that the assessee had not furnished the sources of the cash deposits made cannot be a reason to make the addition on account of cash deposits, inasmuch as, the FDs in the bank were not made during the previous year relevant to the assessment year under consideration. When no addition can be made on account of unexplained sources for FDs for the year under consideration, the question of furnishing of explanation in support of such FDs does not arise. We find that the approach and reasoning of the DRP is unreasonable and illegal. It is most unfortunate that the DRP, a collegium consisting of three Commissioners of Income Tax had adopted such unreasonably illegal approach to confirm the addition. Approach adopted by DRP militates against the very object behind enactment of DRP prediction for speedy resolution of disputes and avoid unnecessary litigation. An authority created under statute conferred with process, it has obligation to act as a body living upto expectations which law mandates. As regards to the cash deposit of Rs. 20,00,000/- made out of money received from brother, namely, Saber Fakir Shaikh. The material on record clearly indicates that money was withdrawn from his bank account. The affidavit from his brother also affirms this fact. Even during the course of statement recorded from him, he had not denied that the money was given to the appellant. There is nothing on the record to disbelieve the explanation filed in support of cash deposit of Rs. 20,00,000/-. Therefore, we reverse the order of the lower authorities and direct the Assessing Officer to delete the addition made u/s 69A of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of initiation of reassessment proceedings.
2. Applicability of provisions of section 144C of the Income Tax Act.
3. Addition of cash deposits under section 69A of the Income Tax Act.

Summary:

Issue 1: Validity of Initiation of Reassessment Proceedings
The appellant challenged the validity of the reassessment proceedings initiated under section 147 of the Income Tax Act. The Assessing Officer had issued a notice under section 148 based on information about cash deposits made by the appellant, which led to the belief that income had escaped assessment. The Dispute Resolution Panel (DRP) upheld the validity of the reassessment proceedings, confirming the addition of unexplained cash deposits.

Issue 2: Applicability of Provisions of Section 144C of the Income Tax Act
The appellant contended that the Assessing Officer should not have exercised jurisdiction under section 144C of the Act, arguing that the provisions apply only to eligible assessees, including Non-Residents, from the assessment year 2020-21 onwards. The Tribunal clarified that the procedural law, being retrospective, applies to all pending cases, and since the reassessment proceedings were conducted after the amended provisions came into effect (w.e.f. 1.4.2020), the Assessing Officer was justified in adhering to section 144C. The Tribunal dismissed the appellant's contention, stating that the word "and" in sub-clause (i) of sub-section (15) of section 144C should be read as "or," indicating two separate categories of eligible assessees.

Issue 3: Addition of Cash Deposits under Section 69A of the Income Tax Act
The appellant challenged the addition of Rs. 1,21,40,000/- as unexplained cash deposits. The Tribunal noted that the appellant had explained the sources of the cash deposits, including withdrawals from bank accounts and money borrowed from his brother. The Tribunal found that the Assessing Officer and DRP had unreasonably disbelieved the appellant's explanation, despite the short interval between withdrawals and deposits. The Tribunal emphasized that cash withdrawn from the bank is generally treated as available for subsequent deposits unless there is evidence to the contrary. The Tribunal reversed the lower authorities' decision and directed the Assessing Officer to delete the addition of Rs. 1,21,40,000/- made under section 69A of the Act.

Conclusion:
The appeal filed by the assessee was partly allowed. The Tribunal upheld the validity of the reassessment proceedings and the applicability of section 144C but reversed the addition of cash deposits under section 69A, directing the deletion of the addition.