9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 207 - AT - Income TaxInitiation of proceedings u/s 148 - Addition of cash deposits - HELD THAT - Cash deposits in AY 2010- 11 and 2011-12 were to the tune of Rs. 12, 87, 58, 500/- and Rs. 09, 07, 73, 000/- and during the year under consideration they were to the tune of Rs. 12, 39, 90, 680/-. It is also a fact that the returns for earlier years were filed declaring an income of more than Rs. 50 lacs thus the issue of notice u/s 148 ought to have been issued by the ACIT/DCIT Mandi Gobindgarh with whom the correct jurisdiction lied and the ITO Nabha did not have any jurisdiction over the case of assessee. As such the issue of notice u/s 148 is bad in law and deserves to be quashed. The issuance of notice u/s 148 goes to the root of assumption of jurisdiction by the AO concerned and the ITO Ward- Nabha after issuance of notice u/s 148 realizing her mistake he transferred the file to the ACIT/DCIT Mandi Gobindgarh who ultimately framed the assessment on the strength of earlier notice u/s 148 dated 28, 03.2019 of ITO Ward Nabha the ACIT/DCIT should have issued a fresh notice u/s 148 for assumption the jurisdiction and thus the assessment proceedings as framed by the ACIT/DCIT Mandi Gobindgarh are required to be quashed. Cash deposits in the Bank accounts which was stated to be out of the sales of Harvester Combines and its spares and such sales have been disclosed in the regular books of accounts of the assessee and even copies of the ledger accounts of the parties to whom the sales have been made alongwith the sale invoices issued to the customers giving description of the item sold amount of sale address of the party and signatures of the buyers have been submitted. The manufacturing and trading account and the said cash realized out of the sale of stocks available with the assessee. There is no justification by the CIT (A) to uphold the addition of Rs. 12, 39, 90, 680/- as unexplained cash credit. As the books of accounts of the assessee have not been rejected either by the AO or by the CIT (A) and if the books of accounts have not been rejected there was no justification in making the addition as per binding judgment of M/s Ludhiana Steel Rolling Mills 2007 (9) TMI 31 - HIGH COURT PUNJAB AND HARYANA Thus we are of the considered view that both on legal ground of issuance of notice u/s 148 by a non jurisdictional AO and on merit also the addition as sustained by the CIT(A) on account of deposits in the bank account cannot be sustained. Assessee s appeal is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include: - Whether the initiation of proceedings under Section 148 of the Income Tax Act was valid. - Whether the Assessing Officer (AO) had valid jurisdiction to issue the notice under Section 148. - Whether the reopening of the assessment was based on a valid "reason to believe" that income had escaped assessment. - Whether the addition of Rs. 12,39,90,680/- to the assessee's income was justified on the merits. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Proceedings under Section 148 - Relevant Legal Framework and Precedents: Section 148 of the Income Tax Act allows the reopening of assessments if the AO has reason to believe that income has escaped assessment. The assessee cited judgments, including Meenakshi Overseas and Signature Hotels, arguing that mere reliance on departmental information without independent application of mind is insufficient. - Court's Interpretation and Reasoning: The Tribunal found that the AO did not independently apply his mind and relied solely on departmental information, which is contrary to established legal precedents. - Key Evidence and Findings: The AO's reliance on incorrect figures for cash deposits and failure to consider the assessee's detailed responses were significant. - Application of Law to Facts: The Tribunal concluded that the reopening was invalid due to the lack of independent reasoning. - Treatment of Competing Arguments: The Tribunal favored the assessee's argument that the AO's action was mechanical and unsupported by new tangible material. - Conclusions: The reopening of the assessment was deemed invalid. Issue 2: Jurisdiction of the Assessing Officer - Relevant Legal Framework and Precedents: Jurisdictional issues are critical as they determine the authority of the AO to issue notices. The assessee cited cases where jurisdictional errors led to quashing of proceedings. - Court's Interpretation and Reasoning: The Tribunal found that the ITO, Nabha, lacked jurisdiction, which should have been with ACIT/DCIT, Mandi Gobindgarh. - Key Evidence and Findings: The transfer of the file post-notice issuance without a fresh notice by the correct jurisdictional officer was pivotal. - Application of Law to Facts: The Tribunal held that the notice issued by a non-jurisdictional officer was invalid. - Treatment of Competing Arguments: The Tribunal rejected the revenue's argument that the subsequent transfer of the file cured the jurisdictional defect. - Conclusions: The notice under Section 148 was quashed due to jurisdictional errors. Issue 3: Merits of the Addition of Rs. 12,39,90,680/- - Relevant Legal Framework and Precedents: The addition was contested based on the argument that cash deposits were from accounted sales, supported by the books of accounts and VAT returns. - Court's Interpretation and Reasoning: The Tribunal found that the cash deposits were consistent with past practices and were properly accounted for. - Key Evidence and Findings: The Tribunal noted the consistency in cash deposits over the years and the absence of rejection of books of accounts. - Application of Law to Facts: The Tribunal applied the principle that if books are not rejected, additions cannot be made without substantial evidence. - Treatment of Competing Arguments: The Tribunal favored the assessee's evidence of legitimate cash sales and dismissed the revenue's reliance on conjecture. - Conclusions: The addition was not justified and was thus deleted. 3. SIGNIFICANT HOLDINGS - Preserve Verbatim Quotes of Crucial Legal Reasoning: "The issue of notice u/s 148 goes to the root of assumption of jurisdiction by the AO concerned...the ACIT/DCIT should have issued a fresh notice u/s 148 for assumption of jurisdiction." - Core Principles Established: The necessity of independent application of mind by the AO and the importance of jurisdictional correctness in issuing notices. - Final Determinations on Each Issue: The Tribunal quashed the notice under Section 148 due to jurisdictional errors and lack of valid reasons to believe. The addition of Rs. 12,39,90,680/- was also deleted on merits.
|
