2021 (5) TMI 750 - AT - Income Tax

Tribunal remands assessment validity issues for reevaluation, instructs fresh adjudication on cash deposits.

The Tribunal remanded the issues concerning the validity of reopening the assessment and proceedings under Section 147, as well as the service of notice ... Reopening of assessment u/s 147 - validity of initiation of proceedings u/s 147/148 for want of valid service, incorrect facts recorded by the Assessing Officer (A.O.) in the reasons for reopening and non- adjudication of these issues by the Ld. CIT (A) - HELD THAT:- From the order of the Ld. CIT (A) itself, it is clear that the new ITR was introduced for individual / Hindu Undivided Family (HUF) for the A.Y. 2007-08 and not for the A.Y. 2006-07 under consideration. Therefore, the rejection of the claim of return of income on this ground is not justified. CIT (A) has not conducted any enquiry or getting the claim of the assessee to file the return of income verified by calling upon the remand report from the A.O. Hence, to the extent of the correctness of the claim of filing return of income neither the Assessing Officer nor the Ld.CIT (A) has verified this fact. Service of notice u/s 148 of the Act, it is noted that the notice u/s 148 of the Act was issued on 28.03.2013 through registered post but the assessee has not participated in the proceedings, therefore, the objection of non service of notice u/s 148 was not before the A.O. The assessee raised this ground before the Ld.CIT (A) as the substituted grounds which are duly reproduced by the Ld. CIT (A). However, these issues of the validity of proceedings u/s 147 for want of valid service of notice u/s 148 has not been decided by the Ld. CIT (A). The Ld. CIT (A) has rather stated that these grounds are general in nature. Thus, it is a matter of fact that all these issues regarding validity of reopening of the assessment and proceedings u/s 147 of the Income Tax Act without considering the fact of return of income filed by the assessee on 09.03.2007 as well as for want of valid service notice u/s 148 of the act remained un-adjudicated at the level of the A.O. as well the Ld. CIT (A). Though these issues an legal in nature however adjudication of same certain facts and record are required to be verified which are not before this Tribunal. Thus, in the facts and circumstances of the case these issues are remanded to the record of the A.O. for deciding the same after giving an appropriate opportunity of hearing to the assessee. Additions on account of cash deposit in the bank on account of the assessee - HELD THAT:- The assessee has explained the source of deposit as the contract receipt. In support of claim the assessee has referred to the return of income filed by the assessee as well as the order/certificate of Commercial Tax Department which has been reproduced by Ld.CIT (A) in the impugned order - non consideration the claim of the assessee of filing the return of income by the Ld. CIT (A) or by the A.O. and therefore these facts are required to be verified at the level of the A.O. Accordingly without expressing any view on the merits of the issues the matter is set aside to the record of the A.O. to adjudicate the same afresh after considering the claim of the assessee of filing of the return of income as well as the source of the deposit as contract receipt. Needless to say that the assessee be given an appropriate opportunity of hearing before passing the afresh order. Appeal of the assessee is allowed for statistical purposes. Issues Involved:1. Validity of initiation of proceedings under Section 147/148 for want of valid service.2. Incorrect facts recorded by the Assessing Officer (A.O.) in the reasons for reopening.3. Non-adjudication of issues by the CIT(A).4. Validity of return filed by the assessee.5. Addition of unexplained money under Section 69A.6. Reliance on a distinguishable judgment by the CIT(A).Issue-Wise Detailed Analysis:1. Validity of initiation of proceedings under Section 147/148 for want of valid service:The assessee contended that the service of notice under Section 148 is a sine qua non for initiating and completing a valid proceeding. The CIT(A) neither orally refused the request of the appellant nor communicated reasons for not entertaining the substituted grounds of appeal. The appellant argued that the CIT(A) erred in law and on facts by not adjudicating on the issue of service of notice under Section 148, which is crucial for initiating valid proceedings. The appellant cited several judicial pronouncements to support this claim.2. Incorrect facts recorded by the Assessing Officer (A.O.) in the reasons for reopening:The A.O. initiated proceedings under Section 147 by issuing a notice under Section 148 on the premise that the appellant had deposited cash amounting to Rs. 13,63,985 in his savings bank account and had not filed a return of income. The A.O. formed a belief that the cash deposit was from undisclosed sources and had escaped assessment. The assessee contended that the return was filed manually, disclosing an income of Rs. 97,936, and the cash deposits were from contract receipts. The CIT(A) failed to consider these facts, leading to an incorrect basis for reopening the assessment.3. Non-adjudication of issues by the CIT(A):The CIT(A) did not adjudicate on the substituted grounds of appeal, despite the appellant's request. The CIT(A) incorporated the appellant's submission in the order but did not address the substituted grounds. The appellant argued that it was legally permissible to adjudicate on substituted grounds of appeal, and the CIT(A) erred by not using discretion in favor of the appellant without providing reasons.4. Validity of return filed by the assessee:The assessee filed a return of income manually in Form-2D, disclosing an income of Rs. 97,936. The CIT(A) held that the return filed in Form 2D lacked statutory status for the assessment year 2006-07. However, the appellant provided evidence that Form 2D was valid for the assessment year 2006-07. The CIT(A) failed to appreciate that the return was filed in the department's counter and should have been accepted if it was not prescribed. The A.O. should have issued a notice under Section 139(9) to correct the return if it was invalid.5. Addition of unexplained money under Section 69A:The assessee contended that the total cash deposit of Rs. 13,63,985 was not deposited in one go but throughout the year in several amounts, with corresponding withdrawals. The appellant argued that only the peak of the cash credits in the bank account should be held as unexplained money under Section 69A. The CIT(A) failed to appreciate this fact and relied on a distinguishable judgment. The appellant provided a cash flow statement showing the availability of cash on particular dates, supporting the claim that only Rs. 1,91,047 should be considered as unexplained money.6. Reliance on a distinguishable judgment by the CIT(A):The CIT(A) relied on a judgment of the Mumbai Tribunal, which was distinguishable from the appellant's case. The appellant argued that the facts of the cited case were different, as the appellant in the quoted case neither appeared before the CIT(A) nor the Tribunal, whereas there was proper representation in the appellant's case.Conclusion:The Tribunal considered the rival submissions and relevant material on record. It found that the issues regarding the validity of reopening the assessment and the proceedings under Section 147, as well as the service of notice under Section 148, remained un-adjudicated at the level of the A.O. and the CIT(A). The Tribunal remanded these issues to the A.O. for fresh adjudication after giving an appropriate opportunity of hearing to the assessee. The Tribunal also remanded the issues regarding the merits of the additions made by the A.O. on account of cash deposits in the bank for fresh adjudication. The appeal of the assessee was allowed for statistical purposes.