2021 (10) TMI 1013 - AT - Income Tax

Tribunal dismisses jurisdiction challenges, partially allows appeal, upholds income tax addition under Section 69A

The Tribunal dismissed the challenges to the jurisdiction assumption and validity of the notice under Section 148. It partially allowed the appeal, ... Reopening of assessment u/s 147 - prior approval of the PCCIT/CCIT/CIT before issuance of notice u/s 148 obtained or not? - HELD THAT:- In the instant case, as against provisions of section 151(1) read with proviso thereto, the provisions of section 151(2) are applicable as no assessment has been completed earlier either u/s 143(3) or section 147 and in terms of mandatory condition prescribed u/s 151(2), the Assessing officer has duly sought and obtained approval from the JCIT who was the competent authority as so prescribed under law before issuance of notice u/s 148 - This is thus no oversight on part of the AO and no inherent lacunae affecting the very correctness of the notice issued under Section 148 - Therefore, the said decision is distinguishable on facts and doesn’t support the case of the assessee. Similar is the case with the other decisions relied upon by the ld A/R which stand distinguishable on facts. Therefore, the contention so advanced by the ld A/R cannot be accepted and the same is hereby dismissed. AO in the assessment order has stated that “the reasons for reopening were duly conveyed to the assessee” and therefore, on this basis itself, where the reasons have been duly communicated to the assessee, the contention so advanced by the ld A/R deserve to be rejected. As noted that the assessment was completed u/s 147 r/w 143(3) vide order dated 23.10.2015 and after completing of the assessment proceedings, the assessee is claiming to have requested the AO vide his letter dated 10.01.2017 to supply copy of the reasons. As during the entirety of the assessment proceedings, the assessee has neither sought copy of the reasons so recorded nor any objections have been filed against such reasons during the assessment proceedings and therefore, where the assessee has not sought and has infact participated in the assessment proceedings, we don’t find there is any prejudice which has been caused to the assessee and even there is no violation of any of the directions so laid down by the Courts in this regard. Thus, the contention so advanced cannot be accepted. AO had no reason to believe but reason to suspect that the income has escapement assessment and there is no honest application of mind and it was clearly a case of borrowed satisfaction - We have gone through the reasons so recorded by the Assessing officer and find that the AO was having sufficient material in his possession for formation of prima facie belief that the income has escaped assessment in the hands of the assessee. In the result, the contention so advanced cannot be accepted.In the result, ground no. 1 and 2 of assessee’s appeal are dismissed. Unexplained cash deposits - HELD THAT:- CIT(A) has returned a finding that claim of gift from the mother couldn’t be proved and copies of cheques produced were illegible and corresponding bank account of the assessee in which the same were deposited were also not produced. It has been claimed before us that the copies of cheques as well as bank statement of the assessee showing deposit of cheque were submitted before the AO and the same has not been considered by the ld CIT(A). We accordingly remand the matter back to the file of the AO to verify the said claim of the assessee and decide as per law after providing reasonable opportunity to the assessee. Tuition fee receipts from assessee’s wife - The explanation which has been submitted is that the assessee’s wife has been teaching for past several years and she has been receiving the tuition fees from the students besides there are other household savings which have been handed over to the assessee for deposit during the year. We find that such an explanation has to be supported with certain credible facts and figures for each of the past years and should be balanced and not one-sided in terms of receipts, expenditure and savings for each of the past years and availability thereof. And therefore, a mere explanation without reasonable corroboration with facts and figures remains merely an assertion and which cannot be accepted on face value. In the result, the explanation so submitted in support of source of deposit of ₹ 6 lacs cannot be accepted and is hereby dismissed. Balance claimed to be out of past savings - We find that where the assessee has already claimed deposits of ₹ 3.2 lacs out of opening cash in hand, the same is nothing the past savings which is available at the beginning of the year. In such a situation, we failed to understand how the assessee is claiming source of cash deposits out of opening cash in hands and past savings twice. In any case, no credible evidence has been placed on record in terms of past savings as so claimed and the contention so advanced is hereby dismissed. Plea of working out the peak credit - As been claimed that there are deposits which have been made out of earlier withdrawals during the year and the same has been ignored by the AO. In absence of any findings recorded by the AO, we set-aside the matter to the file of the AO to examine the said claim of the assessee and decide as per law after providing reasonable opportunity to the assessee. Issues Involved:1. Assumption of jurisdiction by the Assessing Officer under Section 147 of the Income Tax Act.2. Validity of notice issued under Section 148 without proper approval.3. Communication of reasons for reopening the assessment.4. Merits of the addition of Rs. 14,97,600 under Section 69A of the Income Tax Act.5. Acceptance of the assessee's explanation for cash deposits.6. Consideration of peak credit theory.Issue-wise Detailed Analysis:1. Assumption of Jurisdiction by the Assessing Officer under Section 147:The assessee challenged the jurisdiction assumed by the Assessing Officer (AO) under Section 147. The AO observed a cash deposit of Rs. 22,97,600 in the assessee's bank account and issued a notice under Section 148, believing that income had escaped assessment. The assessee contended that the AO did not obtain the proper approval required under Section 151.2. Validity of Notice Issued under Section 148 without Proper Approval:The assessee argued that the notice under Section 148 was issued after four years from the end of the relevant assessment year, requiring approval from the Principal Commissioner or Commissioner. However, the AO obtained approval from the Joint Commissioner, which the assessee claimed was not authorized. The Tribunal noted that the provisions of Section 151(2) required approval from the Joint Commissioner, which was obtained, and thus, the notice was valid.3. Communication of Reasons for Reopening the Assessment:The assessee claimed that the AO did not communicate the reasons for reopening the assessment. The Tribunal observed that the AO stated in the assessment order that the reasons were duly conveyed to the assessee. The assessee did not seek the reasons during the assessment proceedings, and therefore, no prejudice was caused.4. Merits of the Addition of Rs. 14,97,600 under Section 69A:The AO made an addition of Rs. 14,97,600 under Section 69A, disbelieving the assessee's explanation for the cash deposits. The assessee's explanations included an opening balance, deposits by his wife from her savings, and past savings.5. Acceptance of the Assessee's Explanation for Cash Deposits:- Opening Balance of Rs. 3,20,000: The assessee claimed it was from a gift received from his mother. The Tribunal remanded the matter to the AO to verify the claim with the provided evidence.- Deposits by Wife of Rs. 6,00,000: The Tribunal found the explanation insufficient as it lacked credible facts and figures. The explanation was dismissed.- Past Savings of Rs. 5,77,600: The Tribunal noted that the assessee could not claim the same amount twice as opening cash and past savings. The explanation was dismissed.6. Consideration of Peak Credit Theory:The assessee argued that deposits were made out of earlier withdrawals during the year. The Tribunal remanded the matter to the AO to examine the claim and decide as per law.Conclusion:The Tribunal dismissed the grounds related to the assumption of jurisdiction and the validity of the notice under Section 148. It partly allowed the appeal for statistical purposes, remanding the issues of the opening balance and peak credit to the AO for further examination. The Tribunal upheld the AO's rejection of the explanations for deposits by the wife and past savings.