2024 (1) TMI 1078 - AT - Income Tax

Reopening of assessment u/s 147 - reason to believe - notice issued beyond the period of 4 years - assessee is a non-filer of return of income - HELD THAT - Reasons recorded by the AO clearly established the assessee is a non-filer of return of income in spite of taxable income in his hand, which clearly falls under the provisions of Clause (a) of Explanation 2 of Section 147 of the Act. The AO has also brought on record the cash deposits as made by the assessee in his bank account. Therefore, we do not find any infirmity in the reasons recorded by the AO for reopening of assessment. Therefore, the reopening of assessment is hereby upheld. Validity of sanction granted u/s 151 by the PCIT-2, Rajkot - As noted here that the reopening of assessment is beyond the period of 4 years, wherein the Sanctioning Authority u/s 151 is the PCIT. Therefore, the PCIT has recorded his approval in Sl. No.13 of the above format and not the JCIT. So, this argument of the assessee is against the provisions of the Act - Thus, the reopening of assessment is held to be good in law and Ground No.1 raised by the assessee is hereby rejected. Addition on account of long term capital gain - As stated by the assessee that the above property was purchased by the assessee s father on 17.01.1985 for a sale consideration of Rs. 11,200/- only and the assessee claim of Rs. 3,48,000/- as land development charges without even proper evidences which is not sustainable in law. The registered sale deeds also does not describe that the plots were being surrounded by compound walls as on the date of sale in 2010. In the absence of any such details, we do not find any infirmity in the computation made by the AO and the assessee also failed to produce proper evidence in support of the claim of expenses incurred by the assessee. Therefore, this ground no.2 raised by the assessee is hereby rejected. Unexplained cash deposit - CIT(A) confirmed this addition solely on the ground that the sale agreement was entered by the assessee not in a stamp paper, but only in a white paper without even any witnesses and without mentioning the date of receipt of cash - HELD THAT - As evidence from the registered sale deeds, the very same two plots were sold to two different parties for a consideration by the assessee and his family members on 23.08.2010. Thereafter, the sale consideration alongwith assessee s mother past savings were deposited in assessee s bank account on 31.08.2010 of Rs. 18,50,000/-. Thus, it cannot be said that the explanation offered by the assessee is not genuine, since, the very same two plots were sold to two different persons on 23.08.2010. Therefore, in our considered view, the addition made being unexplained income of the assessee is hereby liable to be deleted. Therefore, we direct the AO to delete the addition as unexplained cash deposit in the hands of the assessee.

Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Addition of Rs. 1,70,848/- on account of long term capital gain.
3. Addition of Rs. 14,00,000/- on account of unexplained cash deposits.
4. Addition of Rs. 33,717/- on account of interest income.
5. Initiation of penalty proceedings under Sections 271(1)(c) and 271F.
6. Charging of interest under Sections 234A and 234B.

Summary:

1. Reopening of Assessment under Section 148:
The assessee, a salaried employee, failed to file a return of income for AY 2011-12 despite having taxable income. The AO issued a notice under Section 148, citing cash deposits of Rs. 32,50,000/- in the assessee's bank account. The assessee argued that the reasons recorded for reopening were not tenable as they lacked specific details. However, the Tribunal upheld the reopening, stating that the reasons recorded by the AO established a prima facie case of income escaping assessment, fulfilling the requirements under Clause (a) of Explanation 2 of Section 147.

2. Addition of Rs. 1,70,848/- on Account of Long Term Capital Gain:
The AO rejected the assessee's claim of land development expenses due to lack of proper evidence, resulting in an addition of Rs. 1,70,848/- to the long-term capital gain. The Tribunal upheld this addition, noting that the assessee failed to provide sufficient evidence to support the claimed expenses.

3. Addition of Rs. 14,00,000/- on Account of Unexplained Cash Deposits:
The AO added Rs. 14,00,000/- as unexplained income due to the absence of a stamped sale agreement and proper documentation. However, the Tribunal found that the deposits and subsequent withdrawals were consistent with the sale and repayment transactions described by the assessee. The Tribunal directed the AO to delete this addition, accepting the assessee's explanation as genuine.

4. Addition of Rs. 33,717/- on Account of Interest Income:
The assessee did not press this ground, and the Tribunal dismissed it.

5. Initiation of Penalty Proceedings under Sections 271(1)(c) and 271F:
These grounds were deemed consequential and did not require separate adjudication. The Tribunal dismissed them.

6. Charging of Interest under Sections 234A and 234B:
Similarly, these grounds were consequential and dismissed without separate adjudication.

Conclusion:
The appeal was partly allowed, with the Tribunal upholding the reopening of the assessment and the addition on account of long-term capital gain, while directing the deletion of the addition for unexplained cash deposits. The other grounds were dismissed as either not pressed or consequential.

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