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TMI Blog2019 (9) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings on the preponderance of probabilities but penalty cannot be imposed on preponderance of probability. Rather, revenue has to prove that the claim of the assessee is not genuine. Merely because an addition has been confirmed in appeal or no appeal has been filed by assessee against such addition, the same cannot be the sole ground for coming to a conclusion that assessee has concealed any income. As decided in DISHMAN PHARMACEUTICALS CHEMICALS LTD, AHMEDABAD VERSUS ACIT (OSD) , RANGE-1, AHMEDABAD [ 2015 (2) TMI 1105 - ITAT AHMEDABAD] certain disallowance and/or reasons could legally be made in the assessment proceeding on the preponderance of the probabilities but no penalty could be imposed u/s 271(1)(c) of the Act on preponderance of probabilities and the revenue has to prove that the claim of the assessee was not genuine or was inflated its tax liability. we observe that merely because addition u/s 68 is accepted by the assessee that cannot be a ground for levy of penalty; penalty cannot be levied in the absence of any such concrete finding that the amount deposited is the actual income of the assessee even if such addition has been confirmed by the first app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) found such reopening of assessment u/s 148 of the Act justified and upheld the same. Hence, the instant appeal before us. Apart from that the assessee has further challenged the order passed by the Learned CIT(A) in holding that the A.Y. 2009-10 and 2010-11 were similar and in directing the Learned AO to apply the peak theory for A.Y. 2010-11 as well whereas such benefit of peak theory was not claimed by the assessee in the year under consideration. 3. At the time of hearing of the instant appeal, the Learned Counsel appearing for the assessee submitted before us that the reasons so recorded by the Assessing Officer was not provided to the assessee at any stage. Further that, the fact and/or information which has been relied upon by the Assessing Officer while reopening the case of the assessee that the assessee has made deposits in his two bank accounts lying with ICICI and HDFC does not suggests escapement of income; neither mere deposit in bank can lead to the conclusion that income has escaped assessment. He, thus, relied upon the judgment passed by the Hon ble Tribunal in the case of Mariyam Ismail Rajwani in ITA No.676/Ahd/2016 wherein on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been followed in its proper prospective by the Learned Assessing Officer. The precondition, since failed to be fulfilled by statutory authority the assessment initiated against the assessee is liable to be quashed. 5. More so, we find that no nexus between the material coming to the notice of the ITO and the formation of belief that there has been escapement of income of the assessee in that particular year because of his failure to disclose fully or truly all material facts has been shown by the Learned Assessing officer while reopening the case of the assessee. Mere cash deposits in the bank account cannot justify such belief or inference of escaping assessment. It is needless to mention that the reasons are required to read as they were recorded by the Learned AO. No substitution or deletion is permissible. Neither any addition can be made, nor any inference can be allowed to be drawn on the basis of reasons not recorded. The Learned AO needs to speak through the reasons only. But it appears that the ITO himself is not of the firm belief as to whether the impugned cash/cheque or transfer deposits in the bank account have been accounted for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be deleted from the reasons so recorded. Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332/137 Taxmann 479 , has, inter alia, observed that .It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons. Their Lordships added that The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence . . Therefore, the reasons are to be examined only on the basis of the reasons as recorded. The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated 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. 8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating to ₹ 10,24,100 have been made in the bank account of the assessee, but the mere fact that these deposits 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 donot 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 donot 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a coordinate bench in the case of Mithila Credit Services Ltd. v. ITO [IT Appeal No. 1078/Delhi of 2013; dated 23.5.2014], it is important to bear in mind the fact that it was a case in which the Assessing Officer had reopened the assessment on the basis of receipt of information from Directorate of Investigation, and, as noted by the Assessing Officer in the reasons recorded for reopening the assessment, the name of the assessee figures as one of the beneficiaries of these alleged bogus transactions in the information given by the directorate. If the assessee was a beneficiary of such a scam, the income was indeed to have been taxed in its hands but then in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen as existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. To us, there cannot be any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case before us. Nothing more than the cash deposit of ₹ 22,99,411/- in the bank account of the assessee is available to justify the reopening of assessment on apprehension that income has escaped assessment. In that event we have no other alternative but to rely upon the ratio laid down by the Hon ble Tribunal relying upon the judgment passed by the Division bench in the case of Bir Bahadur Singh Sijwali (supra) and to quash the reopening of assessment made by the Assessing Officer and the assessment order thereof. We order accordingly. Since the assessment proceeding itself has been quashed the other issues raised in the appeal by the appellant rendered infructuous and no order need be passed. 6. In the result, assessee s appeal is allowed. ITA No.3344/Ahd/2015 for A.Y. 2008-09: Since there was a delay of 3 days in preferring the instant appeal an affidavit has been affirmed and filed by the assessee explaining such delay which seems to be genuine. Hence, delay is condoned. 7. The appellant engaged in the business of agency of Idea Cellular Services and Trading of scrape, filed its return of income on 27.10.2008 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68 of the Act being a deeming fiction created by the Legislature as per which, certain sum is deemed to be income of the assessee. According to the Learned Counsel, mere operation of the fiction in the quantum proceeding does not by itself justify levy of penalty. Further that penalty on the ground of furnishing of inaccurate particulars or concealment of income can be imposed only if there is a conscious or deliberate attempt on the part of the assessee. In this particular case, only the fictional addition has been treated as income of the assessee for the year under consideration. Since it is a settled principle of law that fiction created u/s 68 cannot be extended to penalty proceeding to raise a presumption about concealment of such income, penalty cannot be levied against the assessee as also submitted by the Learned AR appearing for the assessee. In this issue the Learned AR relied upon the judgment passed in the matter of CIT-vs-Baroda Tin Works. Further reliance were also made on the order passed by the Hon ble ITAT in the matter of M/s. Dishman Pharmaceutical and Chemicals Ltd-vs.-ACIT in ITA No.1138/Ahd/2011. On the other hand, Learned DR relied upon the order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be conclusive so far as penalty proceedings are concerned. Further that it is a settled principle that parameters of judging the justification for addition made in assessment proceedings are different from penalty imposed on account of concealment of income or filing inaccurate particulars of income. Certain disallowances/additions can be legally made in the assessment proceedings on the preponderance of probabilities but penalty cannot be imposed on preponderance of probability. Rather, revenue has to prove that the claim of the assessee is not genuine. Merely because an addition has been confirmed in appeal or no appeal has been filed by assessee against such addition, the same cannot be the sole ground for coming to a conclusion that assessee has concealed any income. We take inspiration from the judgment passed by the Jurisdictional High Court in the case of CIT-vs-Baroda Tin Works in this respect. We have further considered the judgment passed in the matter of M/s Dishman Pharmaceutical Chemicals Ltd.-vs-ACIT in ITA No.1138/Ahd/2011 for A.Y. 2004-05. The relevant portion where of is as follows: 5. Before us, ld. A.R. submitted that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has disclosed all the material facts before the A.O. and has also submitted the explanation which has not been found to be false. It is a well settled law that penalty proceedings are entirely distinct from assessment proceedings and however relevant and good, the findings in assessment proceedings may not be conclusive so far as penalty proceedings are concerned. It is well settled that the parameters of judging the justification for addition made in the assessment proceedings is different from the penalty imposed on account of concealment of income or filing of inaccurate particulars of income and that certain disallowance/additions could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s.271( 1 )(c) of the Act on preponderance of probability and the Revenue has to prove that the claim of the assessee was not genuine or was inflated its tax liability. Further merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Considering the aforesaid and peculiar fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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