2022 (1) TMI 118 - AT - Income Tax

Tribunal upholds assessment reopening, deletes addition, grants relief to assessee in cash credit issue.

The Tribunal upheld the reopening of the assessment under section 148, finding the Assessing Officer's actions in accordance with due procedure. It ... Reopening of assessment u/s 147 - AO on the basis of information received from DIT (I&CI) reopened the case of the assessee by issuing notice u/s 148 - investment regarding purchase of the property was not disclosed - HELD THAT:- AO has reopened the case after recording the reasons and following due procedure of law. During the appellate proceedings, the assessee raised the ground that notice u/s 148 of the Act has been issued on borrowed satisfaction and notice has not been served on the assessee, therefore, in our view the reopening was done after properly recording the reasons and following the due procedure of law. While examining the reasons for reopening, it is important to see the nature of information rather than the source of information. The assessee has raised the issue that notice was not served on him. It was submitted that notice was issued on old address which has been left by the assessee. We observed from the record that the assessee never informed the AO regarding change of address. The assessee filed the return of income in compliance to notice issued u/s 148 of the Act and also participated in the assessment proceedings. This itself indicates that the notice was received by the assessee - we are of the view that the ld. CIT(A) and passed a speaking order discussing all the facts and circumstances of the case, therefore, we do not find any reason to interfere into or deviate from the findings so recorded by the ld. CIT(A). Hence, we uphold the proceedings with regard to initiation of proceeding U/s 147. Unexplained cash credit u/s 68 of the Act for purchase of property - HELD THAT:- No additions can be made until and unless the evidences filed by the assessee were rebutted and discarded and by bringing any contrary evidences and materials and no addition can be made on the basis of assumption/ presumptions and guess work. Further when the husband of the assessee from the starting has confirmed of giving cash of ₹ 8.50 lacs as he is a regular income tax assessee and all the data given by him were very well available before the AO. Therefore, on the basis of the documents, no addition could be made. If the A.O. was having any doubt regarding the source of cash of ₹ 8.50 lacs by the Shri Naveen Sharma (Husband of the assessee) he could have made the addition in his hands but not in the hands of the assessee. Thus, in view of the above discussion as well as material placed on record, we found merit in the contention of the ld. AR and hence we directed to delete the addition of ₹ 9,00,000/- sustained by the Ld. CIT (A). We order accordingly Appeal of the assessee is partly allowed. Issues Involved:1. Validity of reopening the assessment under section 148.2. Timeliness and service of notice under section 148.3. Addition of Rs. 9,00,000 as unexplained source.4. Addition made without providing show cause notice.5. Providing proper and sufficient opportunity of being heard.6. Application of section 115BBE of the Income Tax Act.7. Rejection of affidavits provided by the assessee and her spouse.8. Time-barred notice under section 143(2).9. Reassessment based on borrowed satisfaction.Issue-wise Detailed Analysis:1. Validity of reopening the assessment under section 148:The Tribunal upheld the reopening of the assessment under section 148, stating that the Assessing Officer (AO) had recorded reasons and followed due procedure. The AO acted on information from the DIT(I&CI) that the assessee had purchased a flat with unaccounted cash. The Tribunal emphasized that the sufficiency of the reasons recorded by the AO cannot be questioned, citing the Supreme Court's decision in Raymond Woollen Mills Ltd. vs. ITO. The Tribunal dismissed the assessee's contention that the notice was based on borrowed satisfaction, referencing multiple judicial precedents supporting reassessment based on information received from investigation wings.2. Timeliness and service of notice under section 148:The Tribunal found that the notice under section 148 was issued on 26/09/2016, and the assessee filed a return in compliance on 09/10/2017. The subsequent notice under section 143(2) was issued on 11/10/2017, which was deemed timely. The Tribunal also dismissed the assessee's claim that the notice was not served, noting that the assessee participated in the assessment proceedings and filed the return, indicating receipt of the notice.3. Addition of Rs. 9,00,000 as unexplained source:The Tribunal examined the addition of Rs. 9,00,000 out of Rs. 11,00,000 made by the AO under section 68 for unexplained cash credit. The assessee explained that the cash was sourced from her own funds and a loan from her husband. The Tribunal noted that the assessee and her husband provided detailed cash flow statements and affidavits confirming the sources. The Tribunal found that the AO did not effectively rebut the evidence provided. It concluded that the assessee had satisfactorily explained the source of the Rs. 11,00,000 and directed the deletion of the Rs. 9,00,000 addition.4. Addition made without providing show cause notice:The Tribunal did not find explicit discussion on this specific issue in the judgment. However, the Tribunal's overall conclusion suggests that it found the AO's procedures, including the issuance of notices and opportunities for the assessee to respond, to be adequate.5. Providing proper and sufficient opportunity of being heard:The Tribunal observed that the assessee was given opportunities to present her case and provide evidence. The AO had issued notices and allowed the assessee to file returns and additional evidence during the appellate proceedings. The Tribunal found that the assessee had participated in the proceedings, indicating that she was given a fair opportunity to be heard.6. Application of section 115BBE of the Income Tax Act:The Tribunal did not provide a detailed analysis specifically on the application of section 115BBE. However, by addressing the main issue of the unexplained cash credit and directing the deletion of the addition, the Tribunal implicitly resolved concerns related to section 115BBE.7. Rejection of affidavits provided by the assessee and her spouse:The Tribunal noted that the assessee had submitted affidavits and supporting documents to explain the source of the cash used for the property purchase. The Tribunal found that the AO did not effectively rebut these affidavits and other evidence. It concluded that the affidavits, along with other documentation, satisfactorily explained the source of the funds.8. Time-barred notice under section 143(2):The Tribunal addressed the issue of the time-barred notice, concluding that the notice under section 143(2) was issued within the permissible time frame. The return was filed on 09/10/2017, and the notice was issued on 11/10/2017, which was within the statutory period.9. Reassessment based on borrowed satisfaction:The Tribunal dismissed the assessee's contention that the reassessment was based on borrowed satisfaction. It emphasized that the AO had recorded reasons based on information from the DIT(I&CI) and followed due procedure. The Tribunal cited judicial precedents supporting reassessment based on information received from investigation wings.Conclusion:The Tribunal upheld the reopening of the assessment and the issuance of notices, finding them procedurally correct. It directed the deletion of the Rs. 9,00,000 addition, concluding that the assessee had satisfactorily explained the source of the funds used for the property purchase. The appeal was partly allowed, providing relief to the assessee on the main issue of unexplained cash credit.