2023 (12) TMI 1257 - AT - Income Tax

Validity of reopening of assessment - addition u/s 69A - mandation of disposing objections of assessee - assessee has demanded during the assessment proceedings, by way of a letter stating that he was filing Income Tax Return regularly and therefore reopening of his case under section 147/148 of the Act, is not valid - HELD THAT - Assessee had objected reopening of assessment u/s 147/148 of the Act. Therefore, it was the duty of the Assessing Officer to dispose of the objections raised by the assessee in respect of reopening of his case u/s 147/148 of the Act. However, I note that Assessing Officer did not dispose of the objection raised by the assessee, by way of passing speaking order, in writing and therefore re-assessment proceedings should be quashed on this count only. Assessee had objected reopening of assessment u/s 147/148 of the Act. Therefore, it was the duty of the Assessing Officer to dispose of the objections raised by the assessee in respect of reopening of his case u/s 147/148 of the Act. However, we note that Assessing Officer did not dispose of the objection raised by the assessee, by way of passing speaking order, in writing and therefore re-assessment proceedings should be quashed on this count only. Reasons were recorded by the Assessing Officer in an arbitrary manner and there is no application of mind by the AO. For example, the reasons stated that assessee has deposited an amount in his bank account to the tune of Rs. 14,55,300/-, whereas the actual amount deposited in the bank account by the assessee was to the tune of Rs. 21,54,800/- hence reasons were recorded on arbitrary basis and there is no application of mind by the AO. Therefore, respectfully following the binding precedent of Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd 2002 (11) TMI 7 - SUPREME COURT quash the reassessment proceedings. Decided in favour of assessee. Addition u/s 69A - as per AO considering the smallness of the amount of cash deposit a suitable addition, say, @ 5% of the total cash deposit in the bank account of assessee may be sustained in the hands of assessee - HELD THAT - Admittedly, AO during the assessment proceedings made addition on account of cash deposited aggregating to Rs. 2,64,500/-, as well as amount deposited by cheques is to the tune of Rs. 4,20,355/-. The amount deposited by way of cheques in the bank account is out of known sources, hence addition should not be made in the hands of the assessee, hence addition to the tune of Rs. 4,20,355/- is hereby deleted. Cash deposit it would be in the interest of justice that only profit eliminate @ 5% should be considered on total cash deposits of Rs. 2,64,500/-. Therefore, the Assessing Officer is directed to consider net profit @ 5% of total cash deposits. Accordingly, the addition is restricted in the hands of the assessee to the tune of Rs. 13,225/-. This assessee s appeal is therefore, partly allowed in above terms.

Issues Involved:
1. Condonation of Delay
2. Ex-parte Appeal Order
3. Re-assessment Proceedings under Section 147/148 of the Act
4. Addition under Section 69A of the Act
5. Bank Interest and Deduction under Section 80C

Summary:

1. Condonation of Delay:
The assessee's appeals for AYs 2010-11 and 2011-12 were delayed by 489 days. The delay was attributed to the COVID-19 pandemic and the assessee's severe health issues. The Tribunal noted that the Hon'ble Supreme Court had extended the filing period due to the pandemic. Given the assessee's health condition and the pandemic's impact, the Tribunal found the reasons convincing and condoned the delay.

2. Ex-parte Appeal Order:
The assessee contended that the CIT(A), NFAC, Delhi passed an ex-parte order without providing adequate opportunity to be heard. The Tribunal noted that the CIT(A) decided the appeal during the COVID-19 affected period, and the assessee's non-appearance was due to health issues and pandemic restrictions. Thus, the Tribunal found merit in the assessee's claim.

3. Re-assessment Proceedings under Section 147/148 of the Act:
For AY 2010-11, the assessee argued that the re-assessment proceedings were invalid as the Assessing Officer (AO) did not dispose of the objections to the reopening of the assessment. The Tribunal agreed, citing the Hon'ble Supreme Court's decision in GKN Driveshafts (India) Ltd., which mandates that the AO must dispose of objections by passing a speaking order. The Tribunal quashed the re-assessment proceedings for AY 2010-11.

4. Addition under Section 69A of the Act:
For AY 2010-11, the AO made an addition of Rs. 28,76,000/- under Section 69A, treating it as unexplained money. The Tribunal quashed the re-assessment proceedings, rendering the addition academic and infructuous.

For AY 2011-12, the AO made an addition of Rs. 6,84,855/- under Section 69A for cash and cheque deposits in the bank. The Tribunal found that the cheque deposits were from known sources and should not be added. For the cash deposits, the Tribunal followed the precedent of making an ad hoc addition at the rate of 5% of the total cash deposits, resulting in an addition of Rs. 13,225/-.

5. Bank Interest and Deduction under Section 80C:
For AY 2010-11, the AO added bank interest of Rs. 6,376/- and disallowed the deduction under Section 80C of Rs. 27,136/-. Since the re-assessment proceedings were quashed, these additions were also rendered academic and infructuous.

Conclusion:
- The appeal for AY 2010-11 (ITA No.628/SRT/2023) was allowed, quashing the re-assessment proceedings.
- The appeal for AY 2011-12 (ITA No.629/SRT/2023) was partly allowed, reducing the addition under Section 69A to Rs. 13,225/- and deleting the addition for cheque deposits.

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