TaxTMI 
TaxTMI 
2015 (7) TMI 617
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....4. During the course of hearing, the ld. counsel for the assessee has invited our attention that the original returns accompanied with copies of audited balance sheet, profit and loss account with tax report filed for the impugned assessment years were processed under section 143(1) of the Act. Later on the Assessing Officer received information/report from the DDIT (Investigation)-II, Kanpur and on the basis of the report, the assessment was reopened under section 147 of the Act after recording the following reasons:- "From the perusal of records and information received from Dy. Director of Income-tax, Range-2, Kanpur vide his letter F. No. DDIT(Inv.)2/KNP/gift/RCFSI/07-08/1860 dated 21.3.2008, it is transpired that the ase has made cash deposits amounting to Rs. 2,03,72,500/- on different dates in Bank a/c No.62205046398,Bank A/c No.2633 and Bank A/c No.31126 maintained with Standard Chartered Bank, Kanpur, Punjab National Bank, Shastri Nagar, Kanpur and State Bank of India, Naveen Market, Kanpur respectively during assessment year 2002-03 relevant to assessment year 2003-04 as per following details:- Bank A/C No.622-0-5046398 (Standard Chartered Bank) Date Of Deposit ....
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....cash 8-7-2002 1000000 cash 12-7-2002 250000 cash 17-5-2002 500000 cash 17-5-2002 5000 cash 20-8-2002 1500 cash 19-9-2002 10000 cash 30-10-2002 500000 cash 8-10-2002 150000 cash 9-10-2002 10000 cash 20-1-2003 52000 cash 20-1-2003 1000000 cash 20-1-2003 340000 cash 16-12-2002 80000 cash Total 10483500 The dy. Director of Income Tax (Inv.)-2, Kanpur in his report had stated that the assessee had failed to prove the source of cash deposits in the above mentioned bank accounts. However, in view of the above facts, the assessee-company was given one more opportunity by the undersigned to explain the source of acquisition of the above cash deposits amounting to Rs. 2,03,72,500/- in above Bank Accounts for which a shown cause letter was issued on 2.3.2009, fixing date for compliance on 9.3.2009. It was specifically mentioned in the shown cause letter that failure on part of the assessee company would entail the under signed to initiate proceedings under section 147 of the Income-tax Act, 1961 for concealing the ....
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....sp; Sd/- &nb....
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.... Kanpur" 5. The return was filed in response thereto and the Assessing Officer has made an addition of Rs. 2,03,72,500/-, under section 68 of the Act having observed that cash deposit in the banks were not duly explained by the assessee. Our attention was also invited by the ld. counsel for the assessee, Shy Ajay Wadhwa, Advocate that for the similar reasons the assessment was also reopened for assessment years 2000-01, 2001-02 and 2002-03 and the v....
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....arriving at the conclusion that the deposits represented unexplained income. In other words the AO had just suspicion in his mind and since it is trite law that an assessment cannot be reopened solely on the basis of suspicion, the initiation of proceedings u/s 147 of the Act on the basis of this aspect also was not valid in the eyes of law. 19. In view of the above facts and circumstances we are of the opinion that initiation of proceedings u/s 147 of the Act, so far as allegation of escapement of income on account of unexplained deposits in bank is concerned, was illegal and bad in law and cannot be sustained. 19.1 From the above noting it is clear that there was no application of mind by Assessing Officer." 6. This order of the Tribunal was later on followed in assessment years 2001-02 and 2002-03 where the reopening was done for the same reasons and the Tribunal again held the reopening to be invalid and quashed the assessment framed consequent to the bad reopening. These orders of the Tribunal are available at pages 104 to 128 of the compilation of the assessee. The relevant observations of the Tribunal for assessment year 2002-03 are extracted hereunder for the sake ....
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....00-01 has escaped assessment. Accordingly, issue notice u/s 148 of the Income Tax, Act, 1961 for the A. F. 2000-2001". The reasons recorded for re-opening the assessment for assessment 2002-03 are as under: From the perusal of records and information received from Dy. Director of Income Tax (Inv)-2, Kanpur vide his letter F No. DDIT(lnv)-2/KNP/ gift/RCFSL/0708/1860 dated 24.03.08, it is transpired that the assessee has deposited cash deposits amounting to Rs. 3,16,07,800/- on different dates in Bank A/c No.622-05046398, Bank a/c No.2633 and Bank a/c No.31126 maintained with Standard Chartered Bank, Kanpur, Punjab National Bank, Shastri Nagar, Kanpur and State Bank of India, Naveen Market, Kanpur respectively during the F.Y: 2001-02 "relevant to A.Y. 2002-03 as per following details:- Date of Deposit Amount Mode of deposit The Dy. Director of Income Tax (Inv)-2 Kanpur in his report had stated that the assessee had failed to prove the source of cash deposits in the above mentioned Bank Accounts. However in view of the above facts, the assessee company was given one more opportunity by the undersigned to explai....
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....bove noting it is clear that there was no application of mind by Assessing Officer. 20. So far as second reasons for initiating proceedings u/s 147 is concerned the same as noted for reasons recorded is as under:- "From the perusal of P/L Account, it is seen that the assessee has shown interest at Rs. 500575/- as against the interest shown at Rs. 1573555/- in the A.Y. 1999-00. The Loans & Advances shown are more than the preceding year i.e. Rs. 67163442/-in the year relevant to A.Y. 2000- 2001 and Rs. 6628S442/- in A.Y. 1999-00. This shows that the assessee has shown short receipt of interest of approximately Rs. 1100000/- in the A.Y. 2000-2001". 21. After having considered the rival submissions, facts and circumstances of the case here again, we are of the opinion that the AO having not referred to any material which could justify his conclusion that assessee should have earned more interest than interest in the previous year, the initiation can not be said to be valid, there being any detail as to the period for which the advances/loans were given or how much interest was received or could have received as per agreements, simply to doubt that interest received by the ass....
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....hat at the stage of issuing of notice under Section 148 of the Act, it is required that the belief of the AO must be that of 4 an honest and reasonable person based upon reasonable ground and not on mere suspicion, gossip or rumours. While deciding the appeal for the assessment year 2000-01, this Bench of the Tribunal has categorically held that the reassessment proceedings have been initiated on suspicion and for making roving enquiries and since it is trite law that proceedings under Section 147 cannot be initiated either on the basis of mere suspicion or making fishing or roving enquiries, the initiation of proceedings under Section 147 of the Act on this ground was also illegal and bad in law. Thus, the above decision supports the view taken by the Tribunal in assessment year 2000-01. 6.4(ii) Shri Praveen Kumar, Id.D.R. also relied on the decision of the Supreme Court in the case of Raymond Woollen Mills Ltd. vs. ITO the Hon'ble Supreme Court held that - "The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open ....
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....01 and therefore, we are not inclined to interfere with the order of the Id.CIT(A) on this issue." 7. The ld. counsel for the assessee has further invited our attention to the fact that for assessment year 2000-01 the Tribunal has delivered its order on 18.11.2009 and this order was followed by the ld. CIT(A) in assessment years 2001-02 and 2002-03 having noted that the reopening was done on the same facts and reasons in those assessment years. But in the impugned assessment year, the ld. CIT(A) has taken all together a different view having noted that the principle of res-judicata would not be applicable in Income-tax proceedings. The ld. CIT(A) even did not agree to the proposition of law that in Income-tax proceedings the rule of consistency is to be followed. Whereas in the preceding assessment year where the reopening made on same facts and reasons was held to be invalid and the assessment framed consequent thereto was quashed by the Tribunal, the same order should have been followed in the impugned assessment year, as the reopening was done on the basis of same facts. The ld. counsel for the assessee has further contended that in the light of these facts, the reopening mad....
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....l is filed by the assessee for assessment year 2007-08 and in the assessee's appeal the sole issue involved is with regard to the addition of Rs. 1,58,72,000/- made by the Assessing Officer on account of cash deposit in different bank accounts of the assessee. The said addition was confirmed by the ld. CIT(A) as the assessee even could not produce the books of account. 12. Now the assessee is in appeal before the Tribunal and has placed reliance upon various judicial pronouncements in support of his contention that wherever books of account are lost or not available for any reason, the net profit of the assessee should be estimated. 1. P.K. Noorjahan, 155 CTR (SC) 509 ( 237 ITR 570). 2. Naim Ali Khan vs. ACIT, 86 TTJ 721 (Agra). 3. Jindal Udyog vs. Income Tax Officer, 78 TTJ 820 (Chd). 4. Pragati Engineering Corporation vs. Income Tax Officer, 225 Taxman 231. 5. CIT vs. Jay Engg. Works, 113 ITR 389. 13. It was further contended that the computer in which the accounts are maintained was not working properly and in 2007 it was discovered that the employee of the assessee-company, Shri. Ramsevak had perhaps stolen some jewellery and in order to cover up the trail,....
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.... may kindly be deleted. 15. In the alternative, the ld. counsel for the assessee has further contended that if any addition is called for, it can be only for income to be generated on money lending business of the assessee and not the entire deposits in the bank. 16. The ld. D.R., on the other hand, has submitted that the books of account were not produced by the assessee in any of the assessment year though there was substantial amount of cash deposit in different bank accounts of the assessee. If the assessee has deposited cash on its receipt from the earlier borrowers, it could have furnished the details of the borrowers from whom cash was received. The Assessing Officer has afforded number of opportunities to the assessee, but he did not produce the same. In the absence of any details of the borrowers and the books of account, the contentions of the assessee cannot be accepted and the Assessing Officer has rightly made the addition of the cash deposits. 17. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the cash books were never produced before the Assessing Officer either in the impugned assessment yea....
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....hearing, the ld. counsel for the assessee has filed the details of deposits in the bank account and from its perusal we find that certain credit entries are related to the transfer entries and cannot be part of cash deposits. We find force in the contention of the Revenue that whenever cash deposits are in the bank accounts, the onus is upon the assessee to explain the source and nature of deposit. During the course of hearing, the ld. counsel for the assessee has filed the statement of loan and advances and interest received during the impugned assessment year. But from the details it is not clear whether the deposits made by the assessee were actual receipts from the earlier borrowers. Our attention was invited to various judicial pronouncements in which it has been held that once the books of account are rejected, the net profit of the assessee can be estimated on the gross turnover of the assessee. But in the instant case, it is not clear as to how much loan was advanced and how much was received by the assessee. Copy of the balance sheet is placed on record. Though it was contended on behalf of the assessee that it was on the verge of closing of its business and whatever amoun....
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.... that the assessee-company had applied for membership for trading with Bombay Stock Exchange by depositing an earnest money of Rs. 5 lakhs. As per provisions of Bombay Stock Exchange, it would make members with only trading rights for which it would take deposit of Rs. 1 crore. The said application of the assessee was accepted by the Bombay Stock Exchange and accordingly to the rules, the assessee-company was given two months to deposit the balance amount. Since the assessee-company failed to comply with the requirements, Bombay Stock Exchange forfeited the earnest money and communicated the same to the assessee-company in July, 2006. The assessee-company accordingly written off the said amount in its books of account as revenue expenditure which was disallowed by the Assessing Officer after treating it to be capital expenditure. 23. The assessee preferred an appeal before the ld. CIT(A) with the submission that the assessee had applied for the membership of Bombay Stock Exchange for limited rights of trading in shares which was in pursuit of its objects enshrined in its memorandum of association. It was further contended that such payment was in normal course of business of the....
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....firmity in the order of the ld. CIT(A), we confirm his order on this issue. 28. So far as the other ground relating to deletion of addition of Rs. 15.40 lakhs is concerned, we find that during the course of assessment proceedings, the Assessing Officer has noticed from the Schedule-6 forming part of the profit and loss account that the assessee has claimed a sum of Rs. 16.40 lakhs as against Rs. 80,000/-claimed in the immediately preceding year under the head "office rent". From the perusal of balance sheet and reply dated 28.10.2009, the Assessing Officer noticed that in Schedule-3 of the balance sheet, an amount of Rs. 7.70 lakhs has been shown as advance to be recovered in cash or in kind or for value to be received as on 31.3.2006. Likewise, another amount of Rs. 7.70 lakhs has been shown as rent paid under protest as on 31.3.2006. However, under these two heads, the amount has been shown as Nil on 31.3.2007. The Assessing Officer observed that it appears that these two amounts of Rs. 7.70 lakhs each (Rs.15.40 lakhs) appearing in the balance sheet as on 31.3.2006 under the head "loans and advances" have been debited in the profit and loss account under the head "rent". The a....