2022 (12) TMI 1274 - AT - Income Tax

Tribunal partially allows appeal, vacates additions under sections 68 and 14A, upholds AO jurisdiction.

Shri Harjindar Singh Bal Ward- No. 29, Hospital Colony, Durg Versus The Income Tax Officer-2 (1), Bhilai (C. G.).

Shri Harjindar Singh Bal Ward- No. 29, Hospital Colony, Durg Versus The Income Tax Officer-2 (1), Bhilai (C. G.). - TMI Issues Involved:1. Validity of the jurisdiction assumed by the A.O for initiating proceedings u/s 147 of the Act.2. Validity of the notice issued u/s 148 of the Act.3. Validity of the assessment order passed u/s 147 r.w.s 143(3) of the Act.4. Legality of the assessment proceedings.5. Opportunity provided by CIT(A) during the appeal process.6. Acceptance of the returned income of Rs.7,01,600/-.7. Addition of Rs.15,58,000/- as unexplained cash credit u/s 68 of the Act.8. Disallowance of expense u/s 14A of the Act.9. Deletion of interest charged in the income tax computation.10. Validity of the sanction granted by the PCIT u/s 151 of the Act for initiation of reassessment proceedings.Detailed Analysis:1. Validity of the Jurisdiction Assumed by the A.O for Initiating Proceedings u/s 147 of the Act:The assessee challenged the jurisdiction of the A.O on multiple grounds, including misconceived facts, vague reasons to believe, change of opinion, absence of tangible material, and mechanical sanction by the PCIT. The tribunal found that the A.O had a bonafide belief based on specific facts, such as unexplained cash deposits and interest expenditure not offered for disallowance u/s 14A. Thus, the tribunal rejected the assessee's contentions and upheld the validity of the jurisdiction assumed by the A.O.2. Validity of the Notice Issued u/s 148 of the Act:The notice u/s 148 was issued based on the A.O's belief that the income chargeable to tax had escaped assessment. The tribunal found the reasons for reopening the assessment to be clear and specific. Therefore, the notice issued u/s 148 was deemed valid.3. Validity of the Assessment Order Passed u/s 147 r.w.s 143(3) of the Act:The tribunal upheld the assessment order, rejecting the assessee's claim that it was illegal and bad in law. The tribunal found that the A.O had validly assumed jurisdiction and followed due process in framing the assessment.4. Legality of the Assessment Proceedings:The assessee contended that the assessment proceedings were null and void. However, the tribunal found no merit in this claim and upheld the legality of the assessment proceedings.5. Opportunity Provided by CIT(A) During the Appeal Process:The assessee argued that the CIT(A) dismissed the appeal without providing a reasonable and proper opportunity. The tribunal did not find any procedural lapses on the part of the CIT(A) and upheld the dismissal of the appeal.6. Acceptance of the Returned Income of Rs.7,01,600/-:The assessee requested that the returned income of Rs.7,01,600/- be accepted in toto. However, the tribunal upheld the A.O's findings and did not accept the returned income as filed by the assessee.7. Addition of Rs.15,58,000/- as Unexplained Cash Credit u/s 68 of the Act:The tribunal found that the bank account statements could not be treated as books of accounts of the assessee. Therefore, no addition could be made u/s 68 for the cash deposits in the bank accounts. The tribunal relied on the judgment of the Hon'ble High Court of Bombay in CIT Vs. Bhaichand H. Gandhi and other similar cases. Consequently, the addition of Rs.15,58,000/- was vacated.8. Disallowance of Expense u/s 14A of the Act:The A.O disallowed the entire interest expenditure of Rs.45,861/- u/s 14A, assuming it was incurred for earning exempt income. The tribunal found that the A.O failed to provide specific reasons or satisfaction for the disallowance. Citing the judgment of the Hon'ble High Court of Bombay in CIT Vs. Sociedade De Fomento Industrial (P). Ltd., the tribunal vacated the disallowance made u/s 14A.9. Deletion of Interest Charged in the Income Tax Computation:The assessee's request for deletion of interest charged was not specifically addressed in the tribunal's order. However, given the partial allowance of the appeal, it can be inferred that the tribunal did not find merit in this claim.10. Validity of the Sanction Granted by the PCIT u/s 151 of the Act for Initiation of Reassessment Proceedings:The tribunal found that the PCIT had duly recorded his satisfaction and granted the sanction for issuing notice u/s 148. Therefore, the sanction was not granted mechanically, and the reassessment proceedings were valid.Conclusion:The tribunal partly allowed the appeal, vacating the addition of Rs.15,58,000/- made u/s 68 and the disallowance of Rs.45,861/- made u/s 14A. The other grounds raised by the assessee were rejected, and the validity of the jurisdiction assumed by the A.O and the assessment proceedings were upheld.