Tribunal quashes reassessment under Income Tax Act citing invalid reasons by Assessing Officer.

Ashish Natvarlal Vashi Versus The Income Tax Officer, Ward-1, Navsari.

Ashish Natvarlal Vashi Versus The Income Tax Officer, Ward-1, Navsari. - TMI Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act.
2. Addition of Rs. 22,77,550/- as unexplained cash deposits under section 69A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147 of the Income Tax Act:
The primary issue raised by the assessee was the validity of the reopening of the assessment under section 147 of the Income Tax Act. The assessee contended that the reasons recorded by the Assessing Officer (AO) for reopening the assessment were fundamentally flawed. The AO had stated that the assessee had not filed a return of income for the Assessment Year (AY) 2007-08, which was factually incorrect as the assessee had indeed filed the return on 01.01.2008.

The tribunal noted that the AO's reasoning was based on the assumption that the cash deposits in the bank account constituted undisclosed income, without considering that the deposits could have been from non-taxable sources such as the sale of investments, property, or agricultural income. The tribunal emphasized that reassessment proceedings cannot be initiated merely to examine the facts of a case unless there is a reason to believe, rather than suspect, that income has escaped assessment.

The tribunal referred to the Hon’ble Supreme Court judgment in NTPC Vs CIT (1998) 229 ITR 383 (SC), which held that the Tribunal has jurisdiction to examine a question of law arising in assessment proceedings even if it was not raised earlier. The tribunal also cited similar cases where reopening was quashed due to incorrect factual premises, such as the case of Rinakumar A. Shah and Hashmukhbhai B. Patel, where the AO's reasons for reopening were based on incorrect facts or mere suspicion.

The tribunal concluded that the reasons recorded by the AO for reopening the assessment were not valid, as they were based on incorrect facts and assumptions. Therefore, the reassessment proceedings initiated under section 147 were quashed as bad in law.

2. Addition of Rs. 22,77,550/- as Unexplained Cash Deposits under Section 69A of the Income Tax Act:
The second issue was the addition of Rs. 22,77,550/- as unexplained cash deposits under section 69A of the Income Tax Act. The AO had made this addition on the grounds that the assessee had failed to furnish the source of the cash deposits in his ICICI Bank account along with supporting evidence.

The tribunal noted that the AO had presumed that the cash deposits constituted undisclosed income without any concrete evidence. The tribunal highlighted that the mere fact of cash deposits in a bank account does not necessarily indicate that the deposits are from undisclosed income. The sources of the deposits could be from various non-taxable activities, and the AO had not provided any substantial reasoning or evidence to support the addition.

Given that the reassessment proceedings themselves were quashed, the tribunal found that the issue of the addition of Rs. 22,77,550/- became academic and infructuous. Therefore, the tribunal did not delve further into the merits of the addition.

Conclusion:
The tribunal allowed the appeal of the assessee, quashing the reassessment proceedings initiated under section 147 of the Income Tax Act due to invalid reasons recorded by the AO. Consequently, the issue of the addition of Rs. 22,77,550/- as unexplained cash deposits was rendered academic and infructuous. The order was pronounced on 19/04/2021.