Assessment reopening under sections 147/148 upheld despite technical objections on notice validity

ITAT Surat upheld the validity of assessment reopening under sections 147/148, rejecting the assessee's technical plea that no notice was issued under section 148, as the AO had clearly mentioned issuing the notice on 29.03.2019. The AO's reasons for reopening based on unexplained bank deposits were found valid, supported by tangible material. Regarding unexplained cash deposits, the tribunal accepted the assessee's partial explanation that deposits included redeposited withdrawn cash and agricultural income. The tribunal directed the AO to disallow only 10% of the balance amount instead of the entire deposit, deciding partly in favor of the assessee.

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Issues Involved:
1. Validity of reopening of assessment u/s 147.
2. Confirmation of total addition of Rs. 14,50,659/- u/s 69A.
3. Consideration of maximum peak credit in bank.

Summary:

Issue 1: Validity of reopening of assessment u/s 147

The assessee challenged the reopening of assessment u/s 147, arguing that the notice issued u/s 148 was "bad in law and without jurisdiction." The tribunal examined the assessment order and found that the Assessing Officer (AO) had valid reasons to believe that income had escaped assessment based on tangible material. The tribunal rejected the assessee's technical plea regarding the issuance of the notice u/s 148, noting that the AO had clearly mentioned the issuance of the notice on 29.03.2019. The tribunal concluded that the reopening of assessment u/s 147 was valid and dismissed ground No.1 raised by the assessee.

Issue 2: Confirmation of total addition of Rs. 14,50,659/- u/s 69A

The AO noted that the assessee had made cash deposits amounting to Rs. 11,02,500/- and other credit entries of Rs. 6,84,646/- in the bank account, totaling Rs. 17,87,146/-, which remained unexplained. The AO treated this amount as unexplained money u/s 69A and added it to the total income. The CIT(A) partly allowed the appeal, reducing the addition to Rs. 14,50,683/- after considering some explained amounts. The tribunal found that the assessee failed to provide cogent evidence to explain the cash deposits but acknowledged that the assessee had some agricultural income and cash withdrawals from the bank. The tribunal directed the AO to disallow 10% of the balance amount of Rs. 14,50,683/-, resulting in an addition of Rs. 1,45,068/-.

Issue 3: Consideration of maximum peak credit in bank

The assessee argued that the addition should consider the maximum peak credit in the bank account. The tribunal noted that the assessee provided some explanation for the cash deposits, including agricultural income and redeposited cash withdrawals. The tribunal found merit in the argument that not the entire cash deposit should be treated as income and directed the AO to disallow 10% of the balance amount, thereby partly allowing the appeal.

Conclusion:

The tribunal upheld the reopening of the assessment u/s 147, confirmed part of the addition u/s 69A, and directed a 10% disallowance of the balance amount, partly allowing the assessee's appeal. The order was pronounced on 08/04/2024.

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