TaxTMI 
TaxTMI 
2016 (7) TMI 665
X X X X Extracts X X X X
X X X X Extracts X X X X
....it of cash in hand being available with the assessee out of the withdrawals made from bank or making subsequent deposit in bank. (c) That the ld. CIT(A), has erred in not appreciating that the deposit of Rs. 1,00,000/- in the bank account on 28.04.2005 represented transfer of funds from the bank account of father and did not represent cash deposited in bank account. This amount should have been excluded from the cash flow statement prepared by the CIT(A), at para 6.7 of his order in view of the submission made. The credit of Rs. 1,00,000/- stood fully explained. (d) The ld. CIT(A), has erred in not allowing benefit of some cash in hand being available with the assessee at the starting point of the cash flow statement. The ld. CIT(A) has also not erred in not allowing benefit of funds available with the real brother - Sh. Amrik Singh. 4. The ld. CIT(A), has erred in enhancing the income by Rs. 60,000/- which according to him was the estimated income from taxi driving. Not only this source of income could not have been a part of enhancement of income but no show cause notice was given thereby violating the principles of natural justice." 2. The brief facts of the case are that as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompliance from the assessee, the Assessing Officer proceeded to complete the assessment in this case on the basis of the material on record, vide order dated 18.11.2009 passed under section 143(3) read with section 147 of the Act, at an assessed income of Rs. 4,15,738/-. While completing the assessment, the Assessing Officer made the following additions: (i) Addition on account of undisclosed cash deposit in the bank account of the assessee Rs.4,07,900/- (ii) Addition on account of undisclosed interest income Rs.7,838/- 3. The ld. CIT(A) confirmed the addition of Rs. 4,07,900/- made by the A.O. Besides, the assessee being a taxi driver, an estimated income of Rs. 60,000/- from taxi driving was also added, thereby enhancing the assessee's income by Rs. 60,000/-. 4. At the outset, the ld. counsel for the assessee has stated at the bar that Ground no. 1 is not pressed. Rejected as not pressed. 5. Apropos Ground no.2, the ld. counsel for the assessee relied on 'Bir Bahadur Singh Sijwali vs. I.T.O.', 53 Taxman.com 366 (Delhi - Trib.) to contend, as held therein, that where the AO proceeds on a fallacious assumption that bank deposits constitute undisclosed income and ov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g Officer, the Deputy Commissioner (Appeals), the joint Commissioner or the Commissioner (Appeals) may, for the purposes of this Act,- (6) require any person, including a banking company or any officer thereof, to furnish information in relation to such points or matters, or to furnish statements of accounts and affairs verified in the manner specified by the Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals), giving information in relation to such points or matters as, in the opinion of the Assessing Officer, the Deputy Commissioner (Appeals), the Joint Commissioner or the Commissioner (Appeals), will be useful for, or relevant to, any enquiry or proceeding under this Act." 11. Thus, as per section 133(6), the concerned Income Tax Authority may require any person, inter-alia, to furnish information in relation to such points or matters, as in their opinion would be useful for, or relevant to, any enquiry or proceeding under the Act. 12. Section 133(6) corresponds to section 38 of the Income Tax Act, 1922. It was amended in 1995 and the words 'enquiry or' were inserted before the word 'proceedings' and the second proviso wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cases where some proceedings were pending, and not otherwise, as taken note of in 'D.B.S. Financial Services Pvt. Ltd. vs. Smt. M. George, Second Income Tax Officer and Others', 207 ITR 1077 (Bom.) and 'Grindlays Bank Ltd. vs. Income-Tax Officer and Others', 231 ITR 612 (Cal.). 15. The 1995 amendment brought in power to the Department to gather information which, after proper inquiry, would result in initiation of proceedings under the Act. However, by virtue of the second proviso to the section, an Income Tax Authority below the rank of Commissioner can exercise this power in respect of an enquiry, in a case where no proceeding is pending, only with the prior approval of the Director or Commissioner, as held in 'Karnataka Bank Limited vs. Secretary, Govt. of India', 255 ITR 508 (SC) and U.G. Upadhya, General Manager, Janatha Co-operative Bank Ltd; UDUPI vs. Director of Income Tax And Another', 255 ITR 502 (Kar.) [the S.L.P. where-against was dismissed by the Hon'ble Supreme Court vide their order reported at 251 ITR (St.) 51]. 16. In 'Karnataka Bank Ltd. vs. Secretary, Government of India' (supra), the Hon'ble Supreme Court observed as under: "It is clear from the mere reading ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... present case, the ITO did not merely ask for information from the assessee. This takes the case out of the ken of section 133(6), as shall presently be seen. 21. The letter dated 13.03.2008 requires the assessee to produce, inter-alia, cash book and ledger and documentary evidence for the source of the deposit of cash. As such, the ITO may be said to have invoked the provisions of section 131(1) of the Act, which section deals with the power regarding, inter-alia, production of evidence. 22. Section 131(1) reads as follows: Power regarding discovery, production of evidence, etc. 131. (1) The Assessing Officer, Deputy Commissioner (Appeals)], Joint Commissioner, Commissioner (Appeals), Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner and the Dispute Resolution Panel referred to in clause (a) of sub-section (15) of section 144C shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely :- (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a banking....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld, (i) that no proceedings were pending when the ITO issued the summons and, therefore, the summons were liable to be quashed; (ii) that the reason for issuing the summons, as stated by the ITO in his letter, was to investigate whether the assessment for the first two years should be reopened u/s 147; (iii) that it was for the ITO to first decide whether he had reason to believe that the income had escaped assessment; (iv) that only if he decided that question in the affirmative, could he initiate proceedings u/s 147 and only thereupon could he become entitled to invoke section 131(1); and (v) that, therefore, the impugned summons were liable to be quashed. For holding so, the Hon'ble High Court observed that the Officers mentioned in section 131(1) of the I.T.Act, 1961, are conferred with the same powers as are vested in a Court under the Code of Civil Procedure, 1908, when trying a suit; that the Code of Civil Procedure confers upon a Court powers, for the exercise whereof, existence of a suit or a proceeding is a sine qua non, that in pari materia, therefore, powers in respect of matters mentioned in section 131(1) of the Act, namely, (a) discovery and inspection; (b) enforcin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g an assessment or trying a suit, when it comes to the exercise of the power conferred u/s 131(1); that the powers exercisable while making an enquiry or investigation have been specifically and separately classified u/s 131(1) and the same are to be exercised by the concerned Authority for making an assessment; that the Code of Civil Procedure confers upon the Court the power to issue commissions while trying a suit and the pendency of a suit or proceeding before the Court is a sine qua non for the exercise of such powers; and that similarly, when it comes to Income tax proceedings, the power u/s 131(1) of the Act can be exercised by the concerned officer only if a proceeding is pending before them, and not otherwise. The Tribunal referred to, inter-alia, 'Jamnadas Madhavji & Co. and Another' (supra), and 'James Joseph and Others' (supra). 31. In 'G.M. Breweries Ltd. and Another vs. Union of India and others', 241 ITR 446 (Bom.), the assesses contended before the ITO that no proceedings whatsoever were pending before him, for the purpose of which, the books of account and documents called for could have been required. The jurisdiction of the ITO to issue the summons was also ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es that where the Authority has reason to suspect concealment or likely concealment of income by any person or class of persons within their jurisdiction, it shall be competent for the Authority to exercise powers conferred u/s 131(1), notwithstanding that no proceedings with respect to such person or class of persons are pending before him, or before any other Income tax Authority. For ready reference section 131(1A) is reproduced hereunder: "Section 131(1A): If the Principal Director General or Director General or Principal Director or Director or Joint Director or Assistant Director or Deputy Director, or the authorised officer referred to in sub- section (1) of section 132 before he takes action under clauses (i) to (v) of that sub-section, has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt while trying a suit, where no proceedings are pending, is not envisaged by the provisions of section 131(1), no such enablement can be read into the section, particularly in view of the existence of such enablement by the express language contained in sections 131(1A) and 131(2). This is apart from the decided cases discussed hereinabove. 37. In this regard, in 'Jamnadas Madhavji & Co. and Another' (supra), it was observed that under section 131(1A), if the Assistant Director of Investigation has reason to suspect that any income has been concealed, then, for an inquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred u/s 131(1), notwithstanding that no proceedings with respect to such person are pending before him or before any other Income Tax Authority; that it is thus, obvious, that whereas an officer mentioned in section 131(1) can exercise powers thereunder only if a proceeding is pending before him, the officer mentioned in section 131(1A) can exercise such powers notwithstanding that no such proceedings are pending before him, or before any other officer. 38. For the above reasons, since in the present case, no proceedin....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., non-response by the assessee to the enquiry letter cannot be said to constitute material before the AO which could lead him to form any belief of escapement of income. 43. Thus, the only material left with the AO to enable him to form a belief that income had escaped assessment was the information regarding the cash deposits. Now, whether this information can be said to constitute material which could lead to such a belief ? 44. It is this question which takes us back to the applicability/nonapplicability of the decision in 'Bir Bahadur Singh Sijwali' (supra). The ratio thereof has not at all been disputed by the Department. In fact, the only dispute which has been raked up is the applicability or otherwise thereof to the facts of the present case, in view of the position that the initiation of the assessment proceedings u/s 147 in the present case stands preceded by the issuance of the alleged enquiry letter by the ITO. This dispute has been dealt with in detail in the foregoing paragraphs. 45. In 'Bir Bahadur Singh Sijwali' (supra), it has been held that where the AO issued a notice u/s 148 on the ground that there was an escapement of income and the belief regarding such es....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment." 47. It was further observed as follows: "8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating to Rs. 10,24,100/- have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we do not have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined ....