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of <h1>ITAT upholds reopening under Section 147; deletes addition on suppressed purchases after demonetization cash deposit case</h1> <h3>Adesh Bhujangrao Nagawade, Shri Swami Samarth Enterprises Versus ITO, Ward-1, Ahilyanagar</h3> ITAT Pune upheld the reopening of assessment under section 147 within four years, finding the AO's reasons for reopening valid regarding cash deposits ... Reopening of assessment u/s 147 - reason to believe - addition u/s 69A - cash deposit which is claimed by the assessee to be out of cash sales during the de-monetization period - HELD THAT:- The basic purpose of the reopening is to examine the source of cash deposited during demonetization period and the figure of such cash deposits mentioned in the reasons recorded is correct. Further since the reassessment proceedings have been carried out within 4 years from the end of the assessment year, under the given facts and the reasons recorded, find that AO was well within his jurisdiction for issuing notice u/s 148 and also to carry out reassessment proceedings. Addition u/s. 69A - source is stated to be the cash sales made during the demonetization period - AO on one hand is satisfied with the opening cash balance at Rs. 63,49,021/- but has only disputed the genuineness of cash deposit of Rs. 8,00,000/- during the demonetization period. Assessee is consistently carrying out sale of sand for past many years and details of cash sales are duly maintained. We are satisfied with the source of alleged cash deposits of Rs. 8,00,000/- and the same stands explained with the details placed. Addition of estimated profit on suppressed purchase - Since correct amount of purchase has been apportioned during the year at Rs. 2,47,75,641/-, therefore Ld. AO grossly erred in calculating suppressed purchases at Rs. 1,63,45,514/- and further erred in making the addition for estimated profits at Rs. 13,07,642/-. Therefore set aside the finding of CIT(A) and delete the impugned addition of Rs. 13,07,642/- made on alleged suppressed purchases and allow ground No. 4 raised by the assessee. ISSUES: Whether the notice issued under section 148 of the Income Tax Act, 1961 was validly issued based on a proper 'reason to believe' for reopening the assessment.Whether the addition of Rs. 8,00,000 made under section 69A of the Income Tax Act, 1961 as unexplained cash deposit was justified.Whether the addition of Rs. 13,07,642 on account of estimated profit on suppressed purchases based on Tax Collected at Source (TCS) was justified.Whether the principle of natural justice was violated by giving only one-day time to respond to the show cause notice.Whether the assessing officer properly appreciated the submissions and documentary evidence furnished by the assessee during assessment and appellate proceedings. RULINGS / HOLDINGS: On the validity of notice under section 148: The Court held that the reopening notice was valid as it was issued within four years from the end of the assessment year and the reasons recorded, particularly regarding cash deposits during the demonetization period, provided a sufficient 'reason to believe.' The contention regarding incorrect gross turnover figures was rejected.On addition under section 69A of Rs. 8,00,000: The Court found that the source of the cash deposit was satisfactorily explained by 'details placed before me' including opening cash balance and cash sales during demonetization period, and therefore deleted the addition.On addition of Rs. 13,07,642 on suppressed purchases: The Court held that the assessing officer erred in relying solely on TCS figures to estimate suppressed purchases, as the assessee furnished a reconciliation statement and demonstrated consistent accounting practices including apportionment of purchases, supported by prior and subsequent assessment orders. The addition was deleted.On violation of natural justice: No separate adjudication was required as the additions challenged were deleted on merits.On appreciation of submissions: The Court found that the assessing officer and CIT(A) failed to properly appreciate the documentary evidence and consistent accounting practices of the assessee, leading to erroneous additions. RATIONALE: The Court applied the statutory framework under the Income Tax Act, 1961, particularly sections 147 (reassessment), 148 (notice for reassessment), and 69A (unexplained money). The validity of reopening depends on existence of 'reason to believe' which here was supported by cash deposit details during demonetization.The Court emphasized the importance of documentary evidence and consistent accounting practices in explaining cash deposits and purchases, rejecting mechanical reliance on TCS figures for estimating suppressed purchases.The Court recognized the principle that reopening must be based on credible reasons and that additions must be supported by cogent evidence, applying precedents that require proper appreciation of assessee's submissions.No dissent or doctrinal shift was indicated; the decision follows established principles regarding reassessment validity and evidentiary standards for unexplained cash and purchases.
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