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2024 (1) TMI 262 - AT - Income TaxValidity of reopening of assessment - no valid service of the notice u/s 148 - HELD THAT - We find that the ld CIT(A) was justified in rejecting the claims so made by of the assessee by way of a detailed discussion in the light of the judicial pronouncements cited therein. Finding no merit in this ground of appeal, therefore, this Ground No. 1 taken by the assessee is rejected. Cash credit found in the bank account which remained unexplained u/s 68 - It is an admitted fact that the assessee had been getting salary from RJ. He was aged 34 years at that relevant time and therefore the saving of a meager Rs 2,50,000/- is not beyond the pre-ponderance of human probability so as to be disbelieved. Otherwise also the Id. CIT(A) has not completely rejected the contention but estimated the same at Rs. 50,000/- but without any basis. In these circumstances, we find no justification in rejecting the contention of availability of opening cash in and of Rs. 2,50,000/- as claimed and the same is also allowed. The provisions of s. 68 69 use the word may indicating discretion conferred upon the AO by the statute, who is supposed to use such discretion judiciously and is not obliged always to make an addition. In view of the above discussion and in absence of any contrary evidence brought on record by the Revenue, we do not find any justification in making the addition considered u/s. 69 of the Act by the Id. CIT(A) and the same is directed to be deleted. The Ground No. 2 taken by the assessee is allowed. Appeal of the assessee is partly allowed.
Issues Involved:
1. Validity of action taken under section 147 read with section 148. 2. Addition of cash deposits as unexplained cash credits under section 68. Summary: Issue 1: Validity of Action under Section 147/148 The assessee challenged the action taken under section 147/148, arguing that there was no valid service of the notice under section 148 and that the AO had reason to suspect rather than reason to believe. The assessee contended that the notice was never served upon him or anyone authorized, and the AO did not provide evidence of valid service. The assessee also argued that the notice could not have been served within the short period available before 31.03.2015. The authorities below contended that the notice was served within the period of limitation provided under section 149, but ignored the mandatory provisions of section 148(2), which require valid service of notice as a condition precedent for a valid assessment. The Tribunal found that the CIT(A) was justified in rejecting the assessee's claims, as there was no merit in the ground of appeal. Consequently, Ground No. 1 taken by the assessee was rejected. Issue 2: Addition of Cash Deposits as Unexplained Cash Credits under Section 68The AO added Rs. 29,98,450/- as unexplained cash credits under section 68, alleging that the assessee failed to explain the source of cash deposits in his bank account. The CIT(A) restricted the addition to Rs. 22,54,250/-, applying the peak credit theory and considering the opening cash in hand as Rs. 50,000/- instead of Rs. 2.50 lakhs claimed by the assessee. The CIT(A) also held that the addition should be made under section 69, not section 68. The assessee argued that section 68 could not be invoked as he did not maintain regular books of accounts and the credits were found in the bank passbook, which is not considered books of accounts under section 68. The assessee also contended that the CIT(A) could not introduce a new source of income under section 69 without giving an opportunity to the assessee. The assessee further explained the source of cash deposits through a cash flow statement and argued that the cash withdrawals were available for redeposit, supported by a certificate from M/s Ratnawali Jewellers. The Tribunal agreed with the assessee, noting that the AO and CIT(A) did not provide evidence to disprove the availability of cash withdrawals for redeposit. The Tribunal also found no justification in rejecting the opening cash in hand of Rs. 2.50 lakhs. Consequently, the addition of Rs. 22,54,250/- under section 69 was directed to be deleted, and Ground No. 2 taken by the assessee was allowed. In conclusion, the appeal of the assessee was partly allowed. Order pronounced in the open court on 29/09/2023.
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