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TMI Blog2017 (3) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favour of assessee - ITA No. 1939/Del/2016 - - - Dated:- 10-2-2017 - SHRI H.S. SIDHU, JUDICIAL MEMBER For The Assessee : Sh. Kapil Goel, Adv. For The Revenue : Sh. Amrit Lal, Sr. DR ORDER The Assessee has filed the Appeal against the Order dated 8.5.2014 of the Ld. CIT(A)-Rohtak pertaining to assessment year 2008-09 and raised the following grounds:- Jurisdictional Ground: Coram Non Judice 1. That on the facts, and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the reopening action of Ld A0 uls 148 made in violation of mandatory jurisdictional conditions stipulated under the Act; 2. That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the reopening action ofLd AO U/S 148 on non existing basis of cash deposits with Centurian Bank of Punjab which was not proved till passing of final order and an unsubstantiated vague AIR information is sole basis of entire order; 3. That on the facts and in the circumstances of the case and in law, Ld CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, the assesse had not filed any ITR for assessment year 2008-09, therefore, the case was reopened under section 147 of the I.T. Act in pursuant to various notices. In response to the notices, the asssessee s AR attended the proceedings and admitted that the assessee had not filed the return and in response to notice under section 148 of the I.T. Act, the AR filed return with an income of ₹ 1,06,490/-. The assessee was engaged in small scale business of sale / purchase of motor vehicles on commission basis. During the course of proceedings, the assessee was confronted with the fact that there were deposits in bank account and sought explanation for the same. However, on non-receipt of reply, a sum of ₹ 40,49,500/- was added as cash credit under section 68 of the I.T. Act and accordingly, the AO completed the assessment u/s. 143(3) of the Act at ₹ 41,55,990/- vide his order dated 25.3.2014. 3. Against the Order of the AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 11.1.2016 has partly allowed the appeal of the Assessee. 4. Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in Appeal before the Tribunal for challengi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhandari order dated 8.9.2016. - Delhi ITAT, SMC Bench decision in the case of Mariyam Ismail Rajwani - Praveen Kumar Jain vs. ITO in ITA No. 1331/D/2015 for the AY 2006-07 dated 22.1.2016. - Ahmedabad ITAT SMC Bench decision in the case of Muni Devi order dated 15.9.2016 - ITAT, Lucknow Bench in the case of Sh. Gyan Prakash Motwani order dated 31.8.2016 In view of the above, he requested that by following the aforesaid precedents the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee. 6. On the contrary, Ld. DR relied upon the order passed by the authorities below and stated that the AO has properly recorded the reasons for reopening by due application of mind, hence, the appeal of the Assessee may be dismissed. 7. I have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case laws cited by the assessee s counsel on the issue in dispute. In our view, it is very much necessary to reproduce the reasons recorded by the AO before issue of notice u/s. 148 for reopening of assessment which reads as under:- Reasons recorded for issuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to cash deposits in bank account but there was no material much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits represented income of the assessee; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. My view is supported by the following judgments/decisions:- A. Amrik Singh vs ITO reported in 159 ITD 329 (Asr) wherein it has been held as under and the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded and the income escaping assessment. The observations of the Hon'ble Supreme Court in the case of 'ITO vs. Lakhmani Mewal Das', 103 ITR 437 (SC), were reproduced. as under: the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. 47. It was further 'Observed as follows: 8. Let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment, in our humble understanding, cannot be drawn. 49. Now, in keeping with 'Bir Bahadur Singh Sijwali' (supra), this information cannot form a valid basis for initiating assessment proceedings under section 147 of the LT. Act. As observed in 'Bir Bahadur Singh Sijwali' (supra), the mere fact that the deposits had been made in the bank account does not indicate that these deposits constitute income which has escaped assessment. 50. Thus, it was a mere suspicion of the AO, that prompted him to initiate assessment proceedings under section 147, which is neither countenanced, nor sustainable in law. Too, the AO proceeded on the fallacious assumption that the bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the assessee. That being so, in keeping with 'Bir Bahadur Singh Sijwali' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very much necessary to reproduce the reasons recorded by the AO before issue of notice u/s. 148 for reopening of assessment which reads as under:- As per AIR information for FY 2006-07 received in this office, the assessee has made cash deposits of ₹ 49,42,000/- in bank account with Canara Bank, Pulhawas, Rewari. A query notice was issued to the assessee on 24.1.2012. But no response has been received from the assessee. I, therefore have reason to believe that the assesse has deposited cash in his bank account out of his income from unexplained sources. Accordingly, income to the extent of ₹ 49,42,000/- and any other income which subsequently comes to the notice of the undersigned has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Issue notice u/s. 148 of the I.T. Act, 1961 for the assessment year 2007-08. Sd/- (O.P. Poonia) Income Tax Officer, Ward-2, Rewari 12. After going through the reasons recorded by the ITO, Ward-2, Rewari, I am of the view that there is no nexus between the prima facie inference arrived in the reasons recorded and information; the information was restricted to cash deposits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment. In fact, the only dispute which has been raked up is the applicability or otherwise thereof to the facts of the present case, in view of the position that the initiation of the assessment proceedings U/S 147 in the present case stands preceded by the issuance of the alleged enquiry letter by the ITO. This dispute has been dealt with in detail in the foregoing paragraphs. 45. In 'Bir Bahadur Singh Sijwali' (supra), it has been held that where the AO issued a notice U/S 148 on the ground that there was ,fin escapement of income and the belief regarding such escapement of income was formed on the fallacious assumption of the AO that bank deposits constituted undisclosed income, overlooking the fact that the source of the deposits need not necessarily be the income of the assessee, the reassessment proceedings cannot be sustained. In the present case, similarly, the basis of initiation of the assessment proceedings U/S 147 was the information with the Department, of the deposits made by the assessee in his bank account. 46. 'Bir Bahadur Singh Sijwali' (supra), makes reference to 'Hindusan Lever Ltd. vs. R.B. Wadkar'. 26R TTR 332 (Born.), to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we do not have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs.l 0,24, 1 00/- has escaped assessment of income because the assessee has Rs.l0,24,100/- in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misetti Setharamamma vs. CIT reported in 57 ITR 532 has held as under:- By sections 3 and 4 the Act imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. Where however a receipt is of the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the Act lies upon the assessee. The appellant admitted that she had received jewellery and diverse sums of money from Sita Devi and she claimed that these were gifts made out of love and affection. The case of the appellant was that the receipts did not fall within the taxing provision: it was not her case that being income the receipts were exempt from taxation because of a statutory provision. It was therefore for the department to establish that these receipts were chargeable to tax. D. ITAT, Delhi Bench decision in case of Praveen Kumar Jain v ITO in ITA No. 1331/D/2015 for Assessment year 2006-07 dated 22.1.2015 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank of Director or Commissioner can exercise the said power in respect of an inquiry only with the prior approval of the Director or the Commissioner. 18. In the present case, the enquiry letter dated 13.03 .2008 was issued by the Income Tax Officer, i.e., an Officer below the rank of the Income Tax Authorities referred to in the second proviso to section 133(6). Thus, in keeping with the said second proviso to section 133(6), prior approval was required to be obtained from the competent Authority before exercising power under section 133(6). 19. There is nothing on record to suggest that any such prior approval was obtained herein. The letter, per se, also does not make mention of any such approval. Hence, the power exercised by the ITO, without compliance with the second proviso to section 133(6), would tantamount to an illegal exercise of power. 20. However, be that as it may, this is not detrimental to the cause of the Department. In the present case, the ITO did not merely ask for information from the assessee. This takes the case out of the ken of section 133(6), as shall presently be seen. 13. In view of above, I am of the considered view that the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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