2021 (5) TMI 750 - AT - Income Tax

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

Mohd. Murtuza Siddiqui Versus The Income Tax Officer, Ward – 1 (3), Allahabad

Mohd. Murtuza Siddiqui Versus The Income Tax Officer, Ward – 1 (3), Allahabad - TMI 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.