TaxTMI 
TaxTMI 
2017 (3) TMI 521
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....and in law, Ld CIT-A erred in sustaining the reopening action of Ld AO uls 148 wherefrom assessee's affidavit that he has no bank a/c with Centurian Bank of Punjab (dated 22/512014) filed before Ld CIT-Appeals along with remand report dated 1811212014 stating HDFC bank statement being first time obtained in appellate proceedings vide letter dated 11.12.2014 by Ld A0, being post mortem exercise, cannot rescue an inherently invalid reopening; 4. That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the reopening action of Ld A D uls 148, where reasons recorded are totally silent on a) contents of information available to Ld AO and b) no details whatsoever of any bank ale are mentioned and c) mere cash deposits is treated to be equivalent to income escaping assessment; 5. That on the facts and in the circumstances of the case and in law, Ld AO erred in reopening the case uls 148 of the Act, without legal and valid mandatory service of notice u/s 148 of the Act; 6. That on the facts and in the circumstances of the case and in law, Ld AO erred in sustaining the addition of Rs. 14,69,823/- out of total addition of Rs. 40,49,500 witho....
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.... no.1 & 2, as aforesaid. 5. At the time of hearing, Ld. Counsel of the assessee has only argued the legal ground and stated that the reopening action of the AO and confirmation thereof by the Ld. CIT(A) is in violation of mandatory jurisdictional conditions stipulated under the Act. It was further stated that the reopening action of AO u/s. 148 of the Act on non existing basis of cash deposits with Centurian Bank of Punjab which was not proved till passing of final order and an unsubstantiated & vague AIR information is sole basis of entire order. It was further stated that in this case reasons recorded are totally silent on a) contents of information available to Ld AO and b) no details whatsoever of any bank ale are mentioned and c) mere cash deposits is treated to be equivalent to income escaping assessment. It was the further contention that reopening in the case uls 148 of the Act is without legal and valid mandatory service of notice u/s 148 of the Act. There is no nexus between the prima facie inference arrived in the reasons recorded and information available with the office of the AO. He further stated that the information was restricted to cash deposits in bank account....
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....the case of Sh. Harmeet Singh, 2/54, Geeta Colony, New Delhi for the assessment year 2008-09. 27.03.2013 Information based on Non-filter AIR data available on the ITD system reveals that Sh. Harmeet Singh has deposited cash of Rs. 40,49,500/- in the saving bank account on various dates during the FY 2007-08 pertaining to AY 2008-09. Perusal of the database in the ITD system shows that the assessee has not filed any ITR for the AY 2008-09, thereby it can be concluded that the disclosed income is below taxable limits and in absence of disclosed sources of income /cash, it is reasonably concluded that income equivalent to the cash deposits has escaped assessment and the same is chargeable to tax for AY 2008-09. The onus to disclose the true and full particulars of income lies on the assessee, hence it can be concluded that assessee has failed to disclose sources of cash deposits. In view of the explanation 2 of proviso 2 of section 147 of the Act, since no return of income has been furnished and income exceeds taxable limits, case of the asessee needs to be reopened u/s. 147/148 of the Act to bring to tax the income equivalent to cash deposit of Rs. 40,94,500/- which has escaped....
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....pplicability/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 ,fin escapement of income and the belief regarding such escapement of income was formed on the fallacious assumption of the AO that bank deposits constituted undisclosed income, overlooking the fact that the source of the deposits need not necessarily be the income of the assessee, the reassessment proceedings cannot be sustained. In the present case, similarly, the basis of initiation of the assessment proceedings U/S 147 was the information with the Department, of the deposits made by the assessee in his bank account. 46.....
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.... that cash deposits aggregating to Rs.l0,24,100/- 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 is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs.l 0,24, 1 00/- has escaped assessment of income because the assessee has Rs.l0,24,100/- in his bank account but then such an opinion proceeds on the fallacious assumption tha....
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.... in the impugned order, are cancelled. Ground No.2 is, accordingly, accepted." B. ITAT, Delhi Bench decision in case of Praveen Kumar Jain v ITO in ITA No. 1331/D/2015 for Assessment year 2006-07 dated 22.1.2015 wherein it has been held as under:- "12. Thus it is clear that the basic requirement for reopening of assessment that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment was found to be missing when the AO proceed to reopen the assessment which is in nature of a post mortem exercise after the event of reopening of the assessment. Therefore the reopening of the assessment was found to be invalid as it does not satisfy the requirement of law that prior to the reopening of the assessment the AO has to apply his mind to the material and conclude that he has reason to believe that income of the assessee has escaped assessment. Applying the above proposition of law it leaves no doubt in the mind that in the case on hand the AO has reopened the assessment mechanically without application of mind to conclude that the said amount of Rs. 6 lac deposit in the bank account of the assessee constit....
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....ome of the assessee; that even the communication dated 24.1.2012 could not be made a basis to assume jurisdiction in view of the fact that such an enquiry letter is an illegal enquiry letter and thus cannot be relied upon; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is nonapplication of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. My view is supported by the following judgments/decisions:- A. Bir Bahadur Singh Sijawali reported in 68 SOT 197 (Del) wh3rien it has been held as un....
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....at the reasons must point out to an income escaping assessment and not merely need of an enquiry which may result in detection of an income escaping assessment. It was observed that it is necessary that there must be something which indicates, even if it does not establish, the escapement of income from assessment; that it is only on that basis that the AO can form a prima-facie belief that an income has escaped assessment; that merely because some further investigations have not been carried out, which, if made, could have led to detection of an income escaping assessment, this cannot be reason enough to hold the view that the income has escaped assessment; and that there has to be some kind of cause and effect of relationship between the reasons recorded and the income escaping assessment. The observations of the Hon'ble Supreme Court in the case of 'ITO vs. Lakhmani Mewal Das', 103 ITR 437 (SC), were reproduced. as under: "the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the noti....
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.... cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escapement assessment." 48. The Tribunal concluded thus: "but then in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen is existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. There cannot be any, and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment, in our humble understanding, cannot be drawn." 49. Now, in keeping with 'Bir Bahadur Singh Sijwali' (supra), this ....
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....terials in order to have reasons to believe that the income of the assessee escaped assessment was found to be missing when the AO proceed to reopen the assessment which is in nature of a post mortem exercise after the event of reopening of the assessment. Therefore the reopening of the assessment was found to be invalid as it does not satisfy the requirement of law that prior to the reopening of the assessment the AO has to apply his mind to the material and conclude that he has reason to believe that income of the assessee has escaped assessment. Applying the above proposition of law it leaves no doubt in the mind that in the case on hand the AO has reopened the assessment mechanically without application of mind to conclude that the said amount of Rs. 6 lac deposit in the bank account of the assessee constitutes the income of the assessee and the same has escaped assessment. The decision relied upon by the ld DR is not applicable in the facts of the present case because in the said case not only the accommodation entry were found by the investigation wing but the modus operandi was also detected and therefore it was found that the AO was having the sufficient material and inform....