2021 (11) TMI 257 - AT - Income Tax

Tribunal cancels penalty under section 271(1)(c) for unexplained cash deposits

The Tribunal partially allowed the quantum appeal by deleting the addition of unexplained cash deposits in AXIS Bank and canceled the penalty order under ... Reopening of assessment on account of escapement of income - scope of reassessment under section 147 - examination of other incomes after reassessment only if addition on the reopened issue is sustained - deletion of addition on reopened issue precludes fresh additions beyond reasons recorded for reopening - penalty under section 271(1)(c) contingent on sustaining the assessment additionReopening of assessment on account of escapement of income - examination of other incomes after reassessment only if addition on the reopened issue is sustained - Whether, after reopening assessment for a specific escapement relating to difference between stamp valuation and registered sale consideration, the Assessing Officer could make an independent addition of unexplained cash deposits when the addition for which the assessment was reopened was deleted by the first appellate authority. - HELD THAT: - The assessment was reopened on the basis of escapement of income equal to the difference between stamp-value and documented sale consideration. The CIT(A) examined the evidence (registered sale deed and submissions) and deleted the addition originally made on that specific ground, holding there was no difference between the registered sale value and stamp valuation. The Tribunal applied the settled construction of the provision governing reassessment - that the AO may 'assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently' only where other issues come to the AO's notice as a consequence of, or after, addition on the issue for which reassessment was initiated. Since the primary addition (the ground recorded for reopening) was deleted by the CIT(A), no addition survived on that reopening-ground and therefore the AO could not validly examine or make the subsequent addition of unexplained cash deposits. Reliance was placed on the jurisdictional High Court authority to the same effect; on that basis the Tribunal deleted the addition of unexplained cash deposits. [Paras 5, 8]Addition of unexplained cash deposits made by the AO after reopening the assessment was deleted because the addition for the specific ground of reopening was itself deleted by the CIT(A), precluding examination of other additions.Penalty under section 271(1)(c) contingent on sustaining the assessment addition - Whether penalty under section 271(1)(c) could be sustained where the assessment addition on which the penalty was based has been deleted. - HELD THAT: - The penalty order was predicated on the addition of unexplained cash deposits. As the Tribunal deleted that addition in the quantum proceedings, there remained no consequential income against which the penal provision could operate. Following the deletion of the impugned addition, the Tribunal held that the vigour of the penal provision could not be invoked and therefore the penalty must be cancelled. [Paras 10]Penalty under section 271(1)(c) imposed on account of the deleted addition is cancelled.Final Conclusion: Quantum appeal is partly allowed by deleting the addition of unexplained cash deposits; penalty appeal is allowed and the penalty under section 271(1)(c) is cancelled. Issues:1. Assessment reopening under section 148 of the Income Tax Act.2. Addition of unexplained cash deposits in AXIS Bank.3. Quantum appeal regarding assessment proceedings.4. Penalty appeal under section 271(1)(c) of the Act.Assessment Reopening under Section 148:The appeals were filed against orders of the ld. CIT(A)-5, Ahmedabad for the Asstt. Year 2010-2011. ITA No. 924/Ahd/2019 pertained to assessment proceedings under section 143(3) read with section 147, while ITA No. 923/Ahd/2019 was related to penalty proceedings under section 271(1)(c). The assessment was reopened due to the difference in the value of the immovable property for stamp duty and registration purposes. The ld. CIT(A) deleted the addition made by the AO, stating that there was no difference in the value as per the registered sale deed and the stamp valuation authority. The Tribunal held that since no addition remained on the issue for which the assessment was reopened, no other issues could be examined or additional amounts added.Addition of Unexplained Cash Deposits:The appellant challenged the addition of unexplained cash deposits in AXIS Bank amounting to Rs. 4,24,500. The Tribunal noted that since the addition on the primary issue for reopening the assessment was deleted by the ld. CIT(A), no further additions could be made. Relying on the judgment of the Hon'ble Gujarat High Court, the Tribunal held that if no additions were made on the issue for which the assessment was reopened, other issues could not be examined. Therefore, the addition of Rs. 4,24,500 was deleted, and the quantum appeal was partly allowed.Quantum Appeal - Assessment Proceedings:The Tribunal observed that the ld. CIT(A) had deleted the addition for which the assessment was reopened, indicating that no further additions could be made. The Tribunal referred to the provision of section 147, emphasizing that if no additions were made on the issue for which the assessment was reopened, other issues would not be examined. Consequently, the addition of unexplained cash deposits in the AXIS Bank was deleted, and the quantum appeal was partly allowed.Penalty Appeal under Section 271(1)(c):Regarding the penalty appeal under section 271(1)(c) of the Act, the Tribunal canceled the penalty order as no addition existed in the hands of the assessee after deleting the impugned addition during the quantum appeal. Therefore, the penalty appeal was allowed, and the penalty order under section 271(1)(c) of the Act was canceled.In conclusion, the Tribunal partially allowed the quantum appeal by deleting the addition of unexplained cash deposits and also allowed the penalty appeal by canceling the penalty order under section 271(1)(c) of the Act due to the absence of any additions in the hands of the assessee.