2025 (1) TMI 165 - AT - Income Tax

Validity of Reassessment proceedings - unexplained deposit in the bank account - HELD THAT - Reasons for reopening of assessment namely credit entries of assessee s minor child was not clubbed the same in assessee s Return of Income. Ld. CIT(A) after considering the SBI Account which was opened in the name of Shri Vivan Joshi but later assessee s name was added as an joint account holder. The rental income from SBI Life Insurance Co. and Aditya Retail were offered for taxation by the assessee through this Bank account. Thus the assessee disclosed the transaction reflected in the bank account. CIT(A) deleted the addition as unexplained credit deposit in the bank account which was the prime facie basis for reopening of assessment. When the basic reasons recorded for reassessment itself is deleted, there cannot be any further addition in the reopened assessment, and such additions cannot sustainable in law. Since the foundation of reassessment proceedings is a valid notice, if this notice is held to be invalid, the entire edifice sought to be raised on such foundation has to collapse and therefore the entire reassessment proceedings liable to be quashed. As relying on B.P. PODDAR FOUNDATION FOR EDUCATION 2022 (9) TMI 660 - CALCUTTA HIGH COURT and JOGINDER SINGH 2015 (6) TMI 1217 - ITAT AMRITSAR no hesitation in holding that the reassessment itself is bad in law since Ld. CIT(A) deleted the impugned addition being unexplained deposit in the bank account which was clearly disclosed by the assessee in his Return of Income - Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the delay of 6 days in filing the appeal by the assessee should be condoned.
Whether the addition of Rs. 4,05,553/- as unexplained credit deposits in the bank account was justified.
Whether the reassessment proceedings were valid given that the primary reason for reopening the assessment was deleted.
Whether the addition of Rs. 6,50,000/- as unexplained income was justified.
Whether the reassessment proceedings can continue on other grounds if the primary reason for reassessment is invalid.

2. ISSUE-WISE DETAILED ANALYSIS

Delay in Filing the Appeal

Relevant Legal Framework and Precedents: The tribunal considered the reasons provided by the assessee for the delay in filing the appeal, which included being out of the country.
Court's Interpretation and Reasoning: The tribunal found the reasons satisfactory and condoned the delay.
Conclusions: The delay of 6 days in filing the appeal was condoned.

Addition of Rs. 4,05,553/- as Unexplained Credit Deposits

Relevant Legal Framework and Precedents: Section 64 of the Income Tax Act was considered, which deals with the clubbing of income of a minor child.
Court's Interpretation and Reasoning: The CIT(A) observed that the bank account in question was a joint account, and the deposits were rental income, which was disclosed in the return of income.
Key Evidence and Findings: The CIT(A) found no evidence from the AO to justify the addition, as the transactions were duly disclosed.
Application of Law to Facts: The tribunal agreed with the CIT(A) that the addition was not justified.
Conclusions: The addition of Rs. 4,05,553/- was deleted.

Validity of Reassessment Proceedings

Relevant Legal Framework and Precedents: The tribunal considered the validity of reassessment proceedings when the primary reason for reassessment is invalid.
Court's Interpretation and Reasoning: Citing precedents, the tribunal noted that if the foundation for reassessment is invalid, the entire proceedings must be quashed.
Conclusions: The reassessment proceedings were held to be invalid and quashed.

Addition of Rs. 6,50,000/- as Unexplained Income

Relevant Legal Framework and Precedents: The tribunal considered whether the addition of unexplained income was justified.
Court's Interpretation and Reasoning: The tribunal noted that the CIT(A) had partly allowed the appeal by deleting Rs. 6,50,000/- of the unexplained income.
Conclusions: The tribunal upheld the deletion of the unexplained income.

Continuation of Reassessment Proceedings on Other Grounds

Relevant Legal Framework and Precedents: The tribunal considered whether reassessment could continue on other grounds if the primary reason is invalid.
Court's Interpretation and Reasoning: The tribunal, relying on precedents, concluded that reassessment cannot continue if the primary reason is invalid.
Conclusions: The tribunal held that the reassessment proceedings could not continue.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "When the basic reasons recorded for reassessment itself is deleted, there cannot be any further addition in the reopened assessment, and such additions cannot sustainable in law."
Core Principles Established: The tribunal reinforced the principle that if the primary reason for reassessment is invalid, the entire proceedings must be quashed.
Final Determinations on Each Issue:
- The delay in filing the appeal was condoned.
- The addition of Rs. 4,05,553/- as unexplained credit deposits was deleted.
- The reassessment proceedings were quashed as invalid.
- The addition of Rs. 6,50,000/- as unexplained income was deleted.
- The reassessment proceedings could not continue on other grounds.