2023 (10) TMI 562 - HC - Income Tax

Tribunal's Decision Overturned: Case Remanded for De Novo Examination and Thorough Review of AO's Findings.

Dinesh Dahiya Versus Principal Commissioner Of Income Tax -Delhi 20

The HC ruled in favor of the appellant/assessee, overturning the Tribunal's decision. The case was remanded to the Tribunal for a de novo examination, ... Unexplained cash deposit - loss suffered by the appellant/assessee while trading in equities and commodities - assessee had not filed his Return of Income (ROI) - assessee’s submission that both the CIT(A) as well as Tribunal have failed to notice that the AO had made no addition with regard to the presumptive income said to have been earned by him on account of trading in equity and commodities, the submission being that if the loss in trading and equity was considered then the addition made by the Tribunal would get set-off - HELD THAT:- A plain reading of paragraph 5 does indicate that after considering the reply of the appellant/assessee, the AO dropped the proposed addition with regard to the profit said to have been made by the appellant/assessee while trading in equity and commodities. This aspect somehow was not noticed both by the CIT(A) as well as the Tribunal. As noticed hereinabove by us, the Tribunal only dealt with the addition made on account of cash deposit which it chose to scale down to Rs. 2,50,000/- from Rs. 5,82,385/-. Question of law, as framed, must be answered in favour of the appellant/assessee for statistical purposes. Issues Involved:1. Whether the Tribunal misdirected itself on facts and in law regarding the addition of Rs. 2,50,000/- as unexplained cash deposit.2. Validity of the reopening of assessment under Section 147 of the Income Tax Act, 1961.3. Determination of presumptive profit from trading in equity and commodities.Summary:1. Misdirection by the Tribunal on Unexplained Cash Deposit:The High Court admitted the appeal to consider whether the Tribunal misdirected itself by directing the addition of Rs. 2,50,000/- as unexplained cash deposit without considering the appellant/assessee's losses in equities and commodities trading. The appellant/assessee had initially failed to file his Return of Income (ROI) and was later served notices under Sections 133(6), 148, and 142(1) of the Income Tax Act, 1961. The Assessing Officer (AO) accepted part of the cash deposit as explained but added Rs. 5,82,385/- as unexplained income. The CIT(A) and Tribunal reduced this addition, but the High Court found that the Tribunal did not fully consider the AO's findings.2. Validity of Reopening of Assessment:The CIT(A) upheld the reopening of the case under Section 147, noting that the AO had reasonable grounds based on significant cash deposits and share transactions. The appellant/assessee had not objected to the reassessment proceedings during the assessment stage. The Tribunal also dismissed the appellant/assessee's objections regarding the legality of the reopening, maintaining that the AO had recorded substantial transactions and non-filing of ROI.3. Determination of Presumptive Profit:The AO initially noted a presumptive profit of Rs. 1,59,127/- from share transactions but did not sustain this after considering the appellant/assessee's claimed losses. The CIT(A) adjusted the presumptive profit rate from 8% to 5%, which the Tribunal upheld. However, the High Court noted that the AO had seemingly dropped the proposed addition for presumptive profit after evaluating the appellant/assessee's reply, a detail overlooked by both the CIT(A) and Tribunal.Conclusion:The High Court answered the question of law in favor of the appellant/assessee, setting aside the Tribunal's order. The matter was remanded to the Tribunal for a de novo examination, emphasizing the need to consider the AO's findings in paragraph 5 of the assessment order. The appeal was disposed of with instructions for the parties to act based on the digitally signed copy of the order.