Reopening beyond three years and unexplained cash deposits were upheld in part, with limited relief allowed on available cash

Reassessment validity is tested on the material available at the time of reopening, not on later assessment results; on that basis, reopening beyond three years was upheld because the Assessing Officer had information of a non-filer's property purchase and cash deposits. The cash deposits were treated as unexplained investment under section 69 because the explanation of consultancy income and husband's funds lacked support, but limited relief was granted on a pragmatic view of available cash in hand. The addition was therefore sustained only in part, with relief allowed to the extent of the accepted cash availability.

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Issues: (i) Whether reassessment initiated beyond three years was without jurisdiction when the material available at the stage of reopening indicated escapement exceeding the monetary threshold. (ii) Whether the cash deposits of Rs. 10,08,800 were rightly treated as unexplained investment under section 69, and if not, to what extent relief was allowable.

Issue (i): Whether reassessment initiated beyond three years was without jurisdiction when the material available at the stage of reopening indicated escapement exceeding the monetary threshold.

Analysis: The validity of reopening is to be tested with reference to the material available before the Assessing Officer at the time of initiation of proceedings, and not by the final additions ultimately sustained in the assessment. At the commencement stage, the Assessing Officer had information that the assessee, a non-filer, had purchased immovable property for Rs. 1.10 crore and had also made cash deposits of Rs. 10,08,800. The subsequent non-addition of the property investment did not retrospectively invalidate the jurisdiction already assumed.

Conclusion: The reopening beyond three years was held to be valid and was not without jurisdiction.

Issue (ii): Whether the cash deposits of Rs. 10,08,800 were rightly treated as unexplained investment under section 69, and if not, to what extent relief was allowable.

Analysis: The explanation that the cash deposits were sourced from consultancy income and funds from the assessee's husband was not supported by any material. The explanation was therefore not accepted. However, on a reasonable and pragmatic view, some availability of cash in hand out of accumulated savings and incidental receipts was accepted to the extent of Rs. 2,50,000.

Conclusion: The addition was sustained to the extent of Rs. 7,58,800, while relief of Rs. 2,50,000 was allowed to the assessee.

Final Conclusion: The assessee obtained only partial relief, with the reassessment upheld and the addition reduced to the extent indicated.

Ratio Decidendi: The legality of reassessment is determined from the material available at the time of initiation, and an unexplained cash deposit addition may be partly sustained where the explanation is unsubstantiated but a limited cash availability is reasonably accepted.

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