2024 (10) TMI 1569 - AT - Income Tax

Section 148 reopening assessment upheld despite limitation challenge; peak credit principle applied for cash deposit additions

ITAT Chennai upheld the validity of reopening assessment under section 148, rejecting the assessee's limitation plea since the notice was issued on ... Validity of reopening of assessment - service of notice u/s. 148 as barred by limitation - HELD THAT:- CIT(A) has noted that the notice u/s. 148 was issued on 31.03.2017 which was the last day for validly issuing notice u/s. 148. Since the AO had issued the notice u/s. 148 of the Act on 30.03.2017 and there is no evidence to prove that the same has been issued after 31.03.2017, and even if the assessee received the notice only on 03.04.2017, according to us, it would not vitiate the notice issued u/s. 148 of the Act; and in the absence of any evidence to show that the notice has been issued after 31.03.2017, we are not inclined to accept such a plea and reject the same being devoid of merit. Challenging action of the PCIT granting approval for re-opening of assessment - PCIT has granted sanction/ approval for 172 cases on a single day - Since the assessee didn’t file any RoI, the AO reopened the assessment to verify the source of the deposits. Therefore, the action of the AO to re-open the assessment can’t be faulted as such; and it is further noted that like assessee, department flagged the cases of 172 similar persons who all didn’t file any return of income for the year under consideration and similarly deposited cash in their respective bank account, therefore, the AO in order to verify the nature and source of the cash deposit, has consolidated the cases for approval of the PCIT to reopen which was granted by Ld.PCIT, which action cannot be faulted. It is further noted that the AO in this case has given the reasons for reopening in the format on 27.03.2017, which proposal was put up before the JCIT who gave his recommendation on 29.03.2017 and the Ld.PCIT granted approval on 30.03.2017 and pursuant thereto, AO had issued notice u/s. 148 of the Act on 31.03.2017 which action can’t be faulted on the peculiar facts and circumstances of the case. Addition of cash deposits - Since the bank account maintained in Corporation Bank has not been disclosed by the assessee to the department, and the assessee has owned up the money deposited and withdrawn as her own money, the highest bank balance in the bank during the relevant year under consideration is deemed to be undisclosed money of the assessee. The Hon’ble Allahabad High Court in the case of Bhaiyalal Shyam Behari. [2005 (1) TMI 424 - ALLAHABAD HIGH COURT] observed that the assessee was entitled to take up the plea of the addition of the peak credit which only need to be treated as the income of the assessee. In order to make a plea of peak credit, the assessee has to lay down the factual foundation that all cash credit entries in the books of accounts belongs to the assessee i.e. it is the assessee’s own money. Then only the question of peak credit can be validly raised. In the present case, the assessee has owned up the cash which was deposited & withdrawn as her own money, and therefore, the plea of the assessee that the peak-credit need to be only taken into consideration as her income in the facts and circumstances of the case needs to be accepted especially considering the fact that the AO for AYs 2011-12 & 2012-13 has accepted the RoI filed by the assessee to the to the tune of Rs. 1,79,420/- and Rs. 2,19,610/- and finding that the peak-credit in the bank is to the tune of Rs. 5,66,533/- and taking opening balance as on 01.04.2009 i.e. Rs. 54,526/-, the maximum highest balance in the bank during ‘365’ days in respect to AY 2010-11 is found to be Rs. 5,12,007/- and the assessee returned income is Rs. 2,47,280/-, balance amount of Rs. 2,64,727/- is directed to be sustained and the balance amount to be deleted [i.e. assessee gets a relief of Rs. 26,74,240 minus 2,64,727 = Rs. 24,09,513/-]. Appeal filed by the assessee is partly allowed. Issues:1. Validity of notice u/s. 148 of the Income Tax Act.2. Approval for re-opening of assessment.3. Addition of cash deposits to the tune of Rs. 24,26,960/-.Analysis:Issue 1: Validity of notice u/s. 148 of the Income Tax ActThe appeal challenged the addition of Rs. 24,26,960/- by the Ld.CIT(A) due to a notice served under section 148 of the Act. The notice was issued on 31.03.2017, the last day for valid issuance. The argument was that the notice was received by the assessee on 03.04.2017, beyond the deadline. However, the Tribunal held that the notice's issuance before the deadline was sufficient, rejecting the plea as devoid of merit.Issue 2: Approval for re-opening of assessmentThe next ground of appeal was against the re-opening of assessment by the Ld.PCIT. The AO re-opened the assessment due to cash deposits in the assessee's bank account. The AO had given reasons for re-opening on 27.03.2017, approved by Ld.PCIT on 30.03.2017, and notice u/s. 148 was issued on 31.03.2017. The Tribunal upheld the re-opening, citing Explanation 2(a) of section 147, which deems cases where no return of income is filed as cases of income escaping assessment.Issue 3: Addition of cash depositsRegarding the addition of Rs. 24,26,960/- due to cash deposits, the AO added the entire amount as the assessee did not provide an explanation. The Tribunal noted that the assessee frequently deposited and withdrew money for money-lending purposes. The peak-credit in the bank account was found to be Rs. 5,12,007/- after considering the opening balance and transactions. The Tribunal accepted the plea that only the peak-credit should be treated as income, aligning with previous assessment years' treatment, resulting in a relief of Rs. 24,09,513/- for the assessee.In conclusion, the appeal was partly allowed, and the order was pronounced on October 23, 2024, in Chennai.