2025 (10) TMI 348 - AT - Income Tax

Reassessment upheld for failure to respond to section 148A(b); unexplained cash addition under section 69 deleted

ITAT held reassessment valid because the assessee did not respond to notice under section 148A(b), distinguishing an earlier co-ordinate bench decision ... Validity of Reassessment - as argued initiation of reassessment was bad in law as more than 3 years’ had elapsed and amount in figured was less than 50 lacs - HELD THAT:- The assessee case is distinguishable from the case of Kalpana Vijay Kadam [2025 (5) TMI 2194 - ITAT PUNE] wherein the assesses therein furnished requisite details in response to notice u/s. 148A(b) from which it was clear that her share in the purchase of property was 50% which was less than the threshold limit of Rs. 50 lacs and hence the order u/s. 148A(d) was held to be bad in law by the co-ordinate bench. In the present case, the assessee did not file any response to the notice u/s. 148A(b) issued by the Ld. AO the action of the Ld. AO cannot be found fault with. We reject the argument advanced by Ld. AR in respect of this Ground. Addition u/s. 69 - sale of gold jewellery as well as the deposit of Rs. 2 lacs by cheque - HELD THAT:- Assessee has given explanation with regard to the source of Rs. 7 lacs. Due to lapse of considerable time, he is unable to produce the requisite documentary evidences in support of its explanation. We also note that the assessee has shown sufficient withdrawal from its Canara Bank NRE account wherein his salary/remittance received from his employer in Dubai has been credited. We are of the view that it is not uncommon for a person to dispose off his old jewellery in order to finance the purchase of house. Further the assessee has substantial income by way of salary earned as well as sufficient withdrawals during the year. The total amount invested in the purchase of property was Rs. 60,80,854/- out of which loan of Rs. 27,74,580/- was taken from M/s. India Bulls Balance amount has been financed out of remittances from Dubai due to assessee’s employment, gift from mother and sale of old jewellery. The above explanation has not been found fault with by the DRP. Section 69 can be invoked if the assessee is unable to offer explanation or the explanation offered by the assessee is found to be not satisfactorily. There is nothing on record filed by the revenue to come to such a conclusion. No addition was called for with regard to Rs. 7 lacs comprising of cheque deposits of Rs. 2 lacs and cash deposits of Rs. 5 lacs for which the assessee has given a plausible explanation. Hence the addition of Rs. 7 lacs is hereby deleted. ISSUES PRESENTED AND CONSIDERED 1. Whether initiation and completion of reassessment proceedings under sections 147/148 was invalid as time-barred because the alleged escapement of income (as per draft order) was below the statutory threshold for reopening beyond three years. 2. Whether the reassessment notices and subsequent proceedings complied with the requirements of section 148A (and specifically the consequences of non-response to notice under section 148A(b)). 3. Whether additions made under section 69 (income from undisclosed sources) amounting to Rs. 7,00,000 (cash deposits Rs. 5,00,000 and cheque deposits Rs. 2,00,000) were sustainable where the assessee furnished explanations of sale of jewellery, cash withdrawals from an NRE account and receipts by way of remittances/gift/loan. 4. Whether section 115BBE could be applied to tax the impugned additions (raised but not argued before the Tribunal). 5. Whether the case law relied upon by the assessee (coordinate bench decision) required following or distinguishing in the factual matrix of non-response to statutory notice. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reopening beyond three years (time-bar): Legal framework Section 147/148 as amended restricts reopening beyond three years unless escapement of income exceeds prescribed monetary threshold. The legal question is whether the quantum stated in preliminary/draft proceedings (here Rs. 31,33,620 in draft) or the quantum ultimately sustained (here reduced to Rs. 7,00,000) governs the limitation analysis. Precedent Treatment The assessee relied on a coordinate bench decision holding reopening beyond three years invalid where disclosed quantum fell below threshold. The Tribunal treated that authority as distinguishable. Interpretation and reasoning The Tribunal examined the factual sequence: the assessee did not respond to the notice under section 148A(b). In that factual setting, the AO proceeded to issue 148A(d) and initiate reassessment. The Tribunal found the coordinate bench decision inapplicable because in that case the assessee had furnished details in response to 148A(b) proving the share/quantum below threshold; here no such response was filed. Ratio vs. Obiter Ratio: Where an assessee fails to respond to section 148A(b) notice, the coordinate-bench authority holding reopening invalid on quantum grounds (when the assessee had responded) is distinguishable and does not automatically invalidate reopening beyond three years. Conclusion The argument that reassessment was time-barred on the ground that alleged escapement was below Rs. 50 lacs was rejected as factually distinguishable; the AO's action could not be faulted given non-response to 148A(b). Issue 2 - Compliance with section 148A and consequences of non-response: Legal framework Section 148A prescribes issuance of notice and an opportunity to explain before finalising reassessment; non-response permits AO to proceed under section 148A(d) and complete reassessment. Precedent Treatment No new precedent overruled; the Tribunal applied statutory scheme and factual matrix to determine consequence of non-response. Interpretation and reasoning The Tribunal held that because the assessee did not respond to the 148A(b) notice, AO lawfully issued 148A(d) and proceeded; therefore, procedural challenge based on 148A response was not available to the assessee to impugn initiation. Ratio vs. Obiter Ratio: Non-response to section 148A(b) empowers the AO to proceed under 148A(d); a later contention that escapement quantum fell below the reopening threshold cannot succeed where the assessee did not avail the statutory opportunity to disclose facts at the 148A(b) stage. Conclusion Ground attacking initiation for failure of compliance with section 148A(b) was rejected on facts; reopening held valid on procedural grounds. Issue 3 - Validity of additions under section 69 (undisclosed cash/cheque deposits): Legal framework Section 69 permits additions where unexplained money or investments are not satisfactorily accounted for by the assessee. The provisions require that where the assessee furnishes a satisfactory explanation and supporting evidence, no addition should follow. Precedent Treatment The Tribunal referred to established principle that section 69 is invokable only when the explanation is either absent or unsatisfactory and that corroborative material and overall facts must be considered. The DRP/AO view that lack of documentary proof alone renders explanation unsatisfactory was reviewed in light of circumstantial evidence. Interpretation and reasoning Factual findings: the assessee, a non-resident, showed (i) sale of old jewellery (computation showing sale consideration and indexed cost), (ii) substantial cash withdrawals from an NRE account (bank statements showing withdrawals and remittances/salary credits), (iii) financing of property by loan and remittances/gift. The Tribunal accepted that due to lapse of time original bills could not be produced and that the assessee provided plausible and consistent explanation supported by bank records and family/ employment facts. The DRP had reduced the draft addition from Rs. 31,33,620 to Rs. 7,00,000 but maintained that Rs. 7,00,000 remained unexplained; the Tribunal found revenue produced no positive contrary evidence to displace the explanation. Ratio vs. Obiter Ratio: Where an assessee furnishes a plausible explanation for cash and cheque deposits supported by bank records, remittance history, and contemporaneous transactions (even if original bills for decade-old sale cannot be produced), and revenue adduces no contradictory evidence, section 69 additions cannot be sustained. Obiter: Observations that it is 'not uncommon' to sell jewellery to finance house purchase and that lapse of time may excuse production of original bills are contextual to these facts. Conclusions The Tribunal deleted the addition of Rs. 7,00,000 under section 69, holding the explanation satisfactory in view of overall facts (sale of jewellery, NRE withdrawals, loan and remittances) and absence of contrary evidence from revenue. Cross-reference: because the appeal succeeded on merits under Issue 3, certain legal grounds (e.g., eligibility under section 144C and other procedural/limitation grounds) were left open and not adjudicated. Issue 4 - Application of section 115BBE: Legal framework and adjudication Section 115BBE prescribes special tax treatment for undisclosed income in certain circumstances. The assessee argued that section 115BBE should not be applied; however, no argument was advanced before the Tribunal. Interpretation and reasoning The Tribunal noted the contention but did not adjudicate the issue due to absence of submissions. Ratio vs. Obiter Obiter: No substantive ruling on applicability of section 115BBE was rendered. Conclusion Ground relating to section 115BBE remained unadjudicated for want of argument. Issue 5 - Treatment of coordinate bench precedent relied upon by assessee: Legal framework A coordinate bench decision may be followed unless distinguishable on facts. The assessee relied on such decision to contend reopening beyond three years invalid. Interpretation and reasoning The Tribunal distinguished the coordinate bench authority on the factual matrix: in the cited decision the assessee had responded to 148A(b) establishing quantum below threshold; in the present case there was no response to 148A(b), rendering the precedent inapplicable. Ratio vs. Obiter Ratio: Coordinate bench precedent is distinguishable where facts differ materially with respect to statutory opportunity under section 148A(b); factual non-response justifies different outcome. Conclusion The reliance on the coordinate authority was rejected as distinguishable; the reopening was not invalidated on that basis.