2024 (2) TMI 395 - AT - Income Tax

Validity of reassessment proceedings u/s 147/148 - Additions towards u nexplained cash credit and application of section 115BB - HELD THAT - On perusal of the reasons recorded u/s 148, it is emanating that the Ld. AO has mentioned the details pertaining to information received /collected by him which was flagged by DIT (systems) in accordance with CBDT s instructions dated 04.03.2021. The details have been analyzed on the basis of information submitted by the assessee in response to a summon u/s 131(1A), wherein according to the Ld. AO, the assessee failed to explain about the cash deposit in the bank and accordingly the basis for reason to believe has formed, thereby it is construed that the income has escaped assessment. Under such circumstances, the contention of the assessee that the jurisdiction assumed by the Ld. AO u/s 147 of the Income Tax Act was invalid on account of insufficient reasons to believe and on the basis of fallacious assumption cannot be accepted. Ld. CIT(A) has, thus, rightly decided the issue against the assessee, which, therefore, does not require any interference. In the result ground no. 1 of the assessee stands dismissed. Source of cash deposit into bank - Assessee has requested the Ld. AO for verification of the veracity of documents i.e., agreements duly signed by assessee, seller party and the witnesses. Since the agreements were not registered the same were treated as fabricated, invalid and afterthought. Ld. AO have not considered it appropriate to summon the seller or to call them for personal hearing to check the genuineness of transaction, so as to arrive at the correct position pertaining to the explanations of the assessee w.r.t. cash deposits, by taking the excuse of time barring assessment. AO has placed his reliance on the assumption that the contentions and explanations offered by the assessee are beyond human probabilities, however, in order to establish that such contentions are wrong the requisite Suo moto inquiries which should have been done by the Ld. AO are not considered necessary, even after the request of the assessee. Such action of the Ld. AO was found to be against the principle of natural justice, thus, in order to check the veracity of documents and genuineness of the transactions, which are the root transactions from where the cash was generated as explained by the assessee but in the opinion of revenue authorities those documents are afterthought and fabricated. In our considered opinion before dislodging the contention or explanation of the assessee, Ld. AO should have examined the parties to the said documents. Thus we hereby find it appropriate to direct the Ld. AO to re-adjudicate the issue by confronting the parties to the transactions which is the basis and source of cash as explained by the assessee. Accordingly, we set aside the order of Ld. CIT(A) and restore the issue back to the files of Ld. AO for fresh adjudication. Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Sections 147/148 of the Income Tax Act.
2. Addition of Rs. 53,41,000/- under Section 69A for unexplained cash deposits.
3. Application of Section 115BBE on the alleged addition of Rs. 53,41,000/-.

Summary:

Issue 1: Validity of Reassessment Proceedings under Sections 147/148
The assessee challenged the validity of the reassessment proceedings initiated under Sections 147/148, arguing that the reasons recorded for the initiation were based on fallacious assumptions that bank deposits constituted undisclosed income. The assessee contended that the reasons recorded were not sufficient to establish a belief for escapement of income and relied on various judgments to support this claim. However, the tribunal found that the Assessing Officer (AO) had sufficient reason to believe that income had escaped assessment based on the information received and the assessee's failure to explain the cash deposits. The tribunal upheld the validity of the reassessment proceedings, dismissing the assessee's ground.

Issue 2: Addition of Rs. 53,41,000/- under Section 69A
The assessee argued that the cash deposits were explained as money received back from a canceled land purchase agreement. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] did not find the explanation convincing, noting that the agreement was not registered and that the bank accounts were not disclosed in the income tax returns. The tribunal observed that the AO did not summon the seller to verify the genuineness of the transaction and relied on assumptions without proper inquiry. The tribunal directed the AO to re-adjudicate the issue by confronting the parties involved in the transaction to establish the veracity of the documents and the genuineness of the cash deposits. The tribunal set aside the order of the CIT(A) and restored the issue back to the AO for fresh adjudication.

Issue 3: Application of Section 115BBE
The tribunal did not specifically address the application of Section 115BBE in detail, as the primary issue of the unexplained cash deposits was remanded back to the AO for fresh adjudication. The outcome of the reassessment on this issue would determine the applicability of Section 115BBE.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, with the tribunal directing a fresh adjudication on the issue of unexplained cash deposits after proper verification of the transactions involved. The reassessment proceedings under Sections 147/148 were upheld as valid.