NRI assessee wins appeal against cash deposit additions under section 147 as tribunal finds no adverse evidence

The ITAT Surat ruled in favor of an NRI assessee regarding cash deposit additions under section 147 reopening. The AO added cash deposits as unexplained income, arguing the assessee failed to provide cash flow statements and used cash deposits for demand drafts. The tribunal found the AO provided no adverse evidence that the assessee spent money elsewhere, noting only a time gap between ATM withdrawals and deposits. Given the assessee's NRI status, minimal business activity, brief India stays, and sufficient funds in NRE/NRO accounts, the tribunal held the additions were based on mere probability without supporting evidence. The appeal was allowed and additions deleted.

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Issues Involved:
1. Re-opening of assessment under Section 147 and issuance of notice under Section 148 of the Income Tax Act.
2. Non-issuance of notice under Section 143(2) of the Income Tax Act.
3. Jurisdictional error in issuing notice under Section 148.
4. Addition of Rs. 27,50,000/- under Section 69A of the Income Tax Act on account of alleged unexplained cash deposits.

Summary:

Issue 1: Re-opening of assessment under Section 147 and issuance of notice under Section 148
The assessee contested the re-opening of the assessment under Section 147 and the issuance of notice under Section 148, arguing that no proper reasons were recorded. The Tribunal noted that these issues were not raised before the CIT(A). The Tribunal acknowledged the detailed submissions and decisions cited by the assessee but deferred the discussion of these contentions to a later stage.

Issue 2: Non-issuance of notice under Section 143(2)
The assessee argued that the assessment order was void-ab initio due to the non-issuance of notice under Section 143(2) after filing the return in response to the notice under Section 148. The Tribunal observed that this issue was also not raised before the CIT(A).

Issue 3: Jurisdictional error in issuing notice under Section 148
The assessee claimed that the notice under Section 148 was issued by ITO, Ward 1(3)(3), whereas it should have been issued by the Jurisdictional Assessing Officer, i.e., ITO (International Taxation). The Tribunal noted that this issue was not raised before the CIT(A) and deferred its discussion.

Issue 4: Addition of Rs. 27,50,000/- under Section 69A
The Tribunal examined the merits of the addition of Rs. 27,50,000/- under Section 69A for unexplained cash deposits. The assessee explained that the cash deposits were from previous withdrawals kept for emergency needs for his ailing mother. The Tribunal found that the assessee provided sufficient evidence of withdrawals and deposits, including bank statements and details of investments. The Tribunal noted that the lower authorities did not bring any adverse material to dispute the assessee's claims and that the addition was based on human probability without concrete evidence. Consequently, the Tribunal held that the addition was not justified and allowed the appeal on this ground.

Conclusion:
The Tribunal allowed the appeal of the assessee on the substantive ground of deleting the addition of unexplained cash deposits. Consequently, all other grounds of appeal became academic and were not addressed further. The appeal was allowed, and the order was announced in open court on 09th February, 2024.

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