Issuance timing of income tax assessment notice and unexplained cash deposits upheld as valid grounds for addition.

ITAT considered whether a preliminary assessment notice issued after one year from the end of the assessment year was permissible and whether cash deposits constituted unexplained investment. The Tribunal held that there is no statutory time restriction on issuing the preliminary notice under the relevant procedure, so the notice and consequent assessment are valid. The Tribunal also found the assessee failed to prove the source of substantial cash deposits; applying the unexplained investment principle and onus rules, it sustained an addition of Rs.6,50,000. Both grounds raised by the assessee were dismissed.

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Issues Involved:
1. Validity of the assessment order passed pursuant to a notice issued u/s 142(1) beyond one year from the relevant assessment year.
2. Addition of Rs. 6,50,000/- u/s 69 of the Act as unexplained investment.

Summary:

Issue 1: Validity of the Assessment Order
The assessee challenged the validity of the assessment order on the grounds that the notice issued u/s 142(1) was beyond one year from the relevant assessment year. The CIT (A) rejected this argument, noting that the assessee had not raised a specific ground challenging the validity of the notice and had complied with statutory notices and participated in the assessment proceedings. The Tribunal held that the proviso to section 142(1), inserted by the Finance Act, 2006 with retrospective effect from 1-4-1990, allows the Assessing Officer to issue a notice u/s 142(1) after the end of the relevant assessment year. The Tribunal concluded that there is no restriction on issuing such notice before the expiry of one year from the end of the relevant assessment year. The Tribunal cited previous decisions, including those of the Hon'ble Delhi High Court and the Income-tax Appellate Tribunal, Hyderabad Bench, to support its view. Consequently, the notice issued u/s 142(1) was deemed valid, and the assessment order was upheld.

Issue 2: Addition of Rs. 6,50,000/- u/s 69
The assessee contended that the cash deposit of Rs. 6,50,000/- was from earlier withdrawals made from his NRE account between February 2002 and September 2003. The Assessing Officer and CIT (A) rejected this explanation, finding it unconvincing and against human probability. The Tribunal agreed, noting that it was incomprehensible for the assessee to keep such a substantial amount in cash for over a year without depositing it into a bank account. The Tribunal found the explanation to be a make-believe story and upheld the addition of Rs. 6,50,000/- as unexplained investment u/s 69 of the Act.

Conclusion:
The appeal by the assessee was dismissed, with the Tribunal upholding both the validity of the assessment order and the addition of Rs. 6,50,000/- u/s 69. The order was pronounced in court on 22-11-2013.

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