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TMI Blog2019 (8) TMI 1315X X X X Extracts X X X X X X X X Extracts X X X X ..... ection of the A.R that Letters dated 26.04.2011 and 03.09.2015 were not authorized under any provision of the Act remained undisputed. It also remained undisputed that no query, of the nature alleged in the reasons recorded was given to the assessee after he furnished replies on two occasions before two different AO, dated 20.05.2011 and dated 02.02.2016 in compliance to above Letters explaining that source of cash deposits was sourced from sale of agriculture produce held and possessed by his Father and in evidence thereof proof of ownership of agriculture land was also filed. It is an undisputed position that escapement is assumed for the alleged failure to prove the source of cash deposit as called upon vide Letters dated 26.04.2011 03.09.2015. Now, the question that arises for our determination is that whether escapement of income can be presumed on the basis of non-compliance or lack of compliance or even no compliance of the above Letters. We are of the considered opinion that the reasons recorded by the Assessing officer, are no reasons in the eye of law for assuming jurisdiction in this case. - ITA No.332/Agra/2018 And ITA No.333/Agra/2018 - - - Dated:- 22-3-2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so submitted that the addition on merits has wrongly been made, furnished affidavits of self and his Father explaining that cash deposits in bank accounts represents cash realization from sale of agriculture produce, and which was deposited in bank account held jointly with the appellant. However, the learned CIT(A) rejected the appeal both on legal grounds as well on merits and confirmed the assessment order as such. 5. The learnedCIT(A) has sustained re-opening on the ground observing as under: 7.1 I find that the appellant has challenged the legal validity of the notice issued u/s 148 by stating that the A.O. failed to take cognizance of the evidences and his replies dated 20.05.2011 and 02.02.2016 which were given by his in response to the query letters issued by the Department prior to the issue of notice u/s 148. He has alleged that the reasons for escapement of taxable income have been recorded by the A.O. without application of mind and just for the purpose of verification. On a perusal of the assessment folder and the appellant's reply, it is observed that the two replies given by the appellant did contain evidence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elieve and thereafter arriving at the satisfaction for escapement of Income warranting recourse to Notice under section 148 of the Act. WITHOUT PREJUDICE TO THE ABOVE 4. BECAUSE, while confirming the addition the Ld CIT(A) failed to appreciate that amount of ₹ 12, 50, 000/- as was deposited in the joint Bank Account represented sale proceeds of agricultural produce in respect of which due explanation supported by evidences were duly filed explaining the deposits which explanation has been rejected purely on presumptions and surmises without any process of cross verification by the AO proving that the evidences filed by the appellant are not genuine. 5. BECAUSE , while confirming the addition the Ld CIT(A) failed to appreciate that undisputedly appellant had no source of Income and therefore, presumption of having any undisclosed income in the hands of the appellant do not arise at all. 6. BECAUSE, while confirming the addition Ld CIT(A) has not ignored the statement of the appellant alongwith statement of Shri Jaipal Singh and has disbelieved the Affidavits without any iota of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled reply and stated that 'my father own 52 Bighas of agricultural land and sold agricultural products. The amount so received from sales consideration is being deposited in bank account. The assessee also stated that there is no source of income except agriculture. Whereas, on perusal of reply filed by the assessee, it is found that not a single evidence of sale of agricultural product is submitted by the assessee. In view of the above facts, I have reasons to believe that the amount of cash deposit ₹ 12, 50, 000/-as above is chargeable to tax, has escaped assessment and notice u/s 148 may be issued to the assessee after prior approval of the Ld. Principal Commissioner of Income Tax-I, Agra. 9. Per contra, the learned D.R.Shri Waseem Arshad, at the outset objected to the submissions made by the learnedA.R and stated that since assessee had not challenged the validity of notice under section 148 of the Act before the authorities below therefore, it cannot be allowed to raise this objection at this belated stage and thereby taking the revenue by surprise. For this he placed reliance to Hon ble Supreme Court Judgment in the case of GKN Driveshafts (Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings although not raised earlier. It was also held that under section 254 of the Act that the Tribunal has jurisdiction to examine a question of law which though not arose before lower authorities but arose before it from facts as found by lower authorities and having a bearing on tax liability of assessee. 12. In the case of Shri Abdul Majid Vs CIT , 153 Taxman 131 (All) the Hon ble Allahabad High Court framed following question of Law for its consideration at the instance of appeal preferred by the assessee: 1. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT, was in law justified in rejecting the additional grounds challenging the validity of assessment order on the basis of illegal initiation of proceedings u/s 148 without complying the provision of Section 148 (2) The Hon ble High Court held that: Further, it has been held that the plea with regard to the jurisdiction of the Officer goes into the root of the matter, therefore, even if not raised at the first instance before the Assessing Authority, it can be raised before the Appellate Authority at a later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sk for the reasons recorded, participated in the assessment proceedings and raised objection before the learned CIT(A) about the validity of notice under section 148 of the Act. However, the Hon ble High Court directed the Revenue to supply copy of reasons to the assessee within four weeks and upon receipt of reasons assessee was required to make submission before learned CIT(A) based upon such reasons challenging the validity of re-assessment proceedings and learned CIT(A) shall decide this issue on merits after hearing the parties. From the reading of the Judgment it is not understood as to how reference to this case help the cause of the revenue in the case on hands. Therefore, the case is distinguishable on facts. 15. Further reliance on the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO , (Supra) for the proposition that the Hon ble Supreme Court has required that immediately after receipt of notice under section 148 of the Act assessee has to furnish return of income and seek reasons recorded and thereafter file objection. Thus as per his submission since assessee did not file return of income in compliance to notice under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without consideration of fact available on record as emerging from the impugned order itself. 18. Now coming to the validity of reopening of assessment based on reasons recorded. From the perusal of the reasons recorded it is evident that the reason for issuing notice dated 31.03.2016 under section 148, as evident from reasons recorded on 18.03.2016, no evidence of agriculture income was furnished vide replies furnished in compliance to letters dated 26.01.2011 03.09.2015 and that no return was filed by the assessee. 19. However, the objection of the learned A.R that Letters dated 26.04.2011 and 03.09.2015 were not authorized under any provision of the Act remained undisputed. It also remained undisputed that no query, of the nature alleged in the reasons recorded was given to the assessee after he furnished replies on two occasions before two different Assessing officers, dated 20.05.2011 and dated 02.02.2016 in compliance to above Letters explaining that source of cash deposits was sourced from sale of agriculture produce held and possessed by his Father and in evidence thereof proof of ownership of agriculture land was also filed. In above circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which any proceeding is pending as at present. However, an income-tax authority below the rank of Director or Commissioner can exercise this power in respect of an inquiry in a case where no proceeding is pending, only with the prior approval of the Director or the Commissioner; It is, therefore, evident that the pre-1995 amendment, section 133(6) could be invoked only in cases where some proceedings were pending, and not otherwise; The 1995 amendment brought in power to the revenue to gather information which, after proper inquiry, would result in initiation of proceedings under the Act. However, by virtue of the second proviso to the section, an income-tax authority below the rank of Commissioner can exercise this power in respect of an enquiry, in a case where no proceeding is pending, only with the prior approval of the Director or Commissioner; In the present case, the enquiry letter 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, prior approval was required to be obtained from the competent authority before exercising power under section 133(6); There is nothing on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at basis that the Assessing Officer can form a prima facie belief that an income has escaped assessment; that merely because some further investigations have not been carried out, which, if made, could have led to detection of an income escaping assessment, this cannot be reason enough to hold the view that the income has escaped assessment; and that there has to be some kind of cause and effect of relationship between the reasons recorded and the income escaping assessment; Now, in keeping with BirBahadur Singh Sijwali (supra), this information cannot form a valid basis for initiating assessment proceedings under section 147. 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; Thus, it was a mere suspicion of the Assessing Officer, that prompted him to initiate assessment proceedings under section 147, which is neither countenanced, nor sustainable in law. The Assessing Officer 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 bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned D.R that before the learned Assessing officer assessee raised no objection regarding its claim that Letters dated 26.04.2011 03.09.2015 are unauthorized in law. In such circumstances the issue may be remitted back to the file of Assessing officer where assessee will have due opportunity. 23. Learned A.R of the assessee strongly opposed to such a suggestion by the Sr. D.R stating that assessee is under no obligation to guide the Assessing officer on law, his duty is limited upto instructing the Assessing officer on facts of his case, applying the law to the facts of the case is the duty of the AO. He referred to Judgment of Hon ble Supreme Court in the case of Parsuram Pottery Works Co. Ltd. vs. ITO , 106 ITR 1. (S.C) wherethe Hon ble Court held that It has been said that the taxes are the price that we pay for civilization . If so, it is essential that those who are entrusted with the task of calculating and realizing that price should familiarize themselves with the relevant provisions and become well-versed with the law on the subject. Any remission on their part can only be at the cost of the national exchequer and must necessarily result in loss o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome has escaped assessment to tax .. . Therefore, the case is distinguishable on facts. 25. Learned Sr. D.R has placed reliance to Sri Banarsi Prasad vs CIT decided on 29 February, 2008, wherein no question of reopening was involved and the Hon ble High Court , context of section 68 of the Act concluded its findings holding that In the circumstances, the question referred is answered as above by holding that on the facts and circumstances of the present case, when the credits were received by the assessee from close relatives like his non-earning wife and minor son, the explanation to be furnished under Section 68 in order to qualify as satisfactory would require to disclose the source of the depositor for establishing the capacity of the creditor as above. 26. Further reliance to CIT Vs G.S Tiwari , ITA No.5 of 2008 by the Hon ble Allahabad High Court is misplaced as in the relied upon case no question of reopening was available for the valuable consideration of the Hon ble High Court. In this case the Hon ble High Court has held that in the instant case, the consistent plea of the assessee was that the sundry creditors are genuine but at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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