TaxTMI 
TaxTMI 
2019 (9) TMI 1292
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....ged in the business as an agent of Idea Cellular Services, filed its return of income on 30.03.2012 declaring total income at Rs. 1,74,630/- through electronic media. On the basis of AIR details from ITD to this effect that the assessee has deposited cash exceeding Rs. 10,00,000/- with his saving bank account, the details whereof were called for from his bankers, whereupon total amount to the tune of Rs. 22,99,411/- were found to have been deposited by the assessee into bank accounts lying with ICICI and HDFC Banks. He was, therefore, of the reasonable believe that the said income to the extent of Rs. 22,99,411/- escaped assessment for the A.Y. 2010-11 within the meaning of section 147 of the Act. Resultantly, the case was reopened by issuance of notice u/s 148 of the Act dated 19.04.2012 upon the assessee. In appeal, the issue of reopening was challenged by the assessee along with other grounds that such proceeding was wrongly initiated by the Assessing Officer. Further that, no reasons for such reopening has been provided to the appellant by the Learned AO thereby violated the basic principle of natural justice and thus, the entire proceeding is liable to be quashed. However, the....
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....Subsequently, pursuant to the application dated 10.10.2018 the revenue has supplied the copy of the reasons recorded by the ACIT(OSD), Ward - 1(1), Bhavnagar dated 19.04.2012 by and under a forwarding letter dated 16.10.2018. A copy whereof has been furnished to us. The relevant portion of the said reason so recorded by the Learned AO is as follows: "...It is not clear as to whether the above cash/cheque/transfer deposits in the above bank account have been accounted for or not in the regular books of account of the assessee" Apart from that, it is a fact on record that though the assessee has requested for the reason to be supplied the same was never furnished by the authorities below, hence the opportunity of being heard to the assessee was admittedly denied. Though the Learned AO was bound to furnish the reason within the reasonable time in order to enable the assessee to file objection to the issuance of notice and further that in the second phase it is the duty incumbent upon Assessing Officer to dispose of such objection raised by the assessee, if any, against such reopening by way of a speaking order before proceeding with the reassessment; admittedly such pro....
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.... on 14th September 2009 as a mention about the fact of service of notice is set out in the recorded reasons itself. It is only elementary that the reasons are to be recorded before issuance of notice, and in the absence of any reasons for reopening having been recorded prior to reopening of assessment, the reassessment proceedings fail for this short reason alone. Hon'ble Bombay High Court, in the case of Prashant S. Joshi v. ITO [2010] 324 ITR 154/189 Taxmann 1 has observed: "The AO must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under s. 147". In other words, when no reasons are recorded for reopening the assessment prior to issuance of notice, the reassessment proceedings must fail for that reason alone. However, for the reasons we will set out now, the conclusions will be no different even if it is presumed that this communication, extracts from which are reproduced before, only conveys the reasons already recorded prior to issuance of notice. 7. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined ....
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....e escaping the assessment. The latter category consists of the facts, which, if established to be correct, could legitimately lead to further inquiries which may lead to detection of an income which has escaped assessment. There has to be some kind of a cause and effect relationship between reasons recorded and the income escaping assessment. While dealing with this aspect of the matter, it is useful to bear in mind the following observations made by Hon'ble Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, " 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 notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should....
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.... belief that income has escaped assessment. She has relied upon the decisions in the cases of CIT v. Nova Promoters & Finlease (P.) Ltd [2012]342 ITR 169/206 Taxmann 207/18 taxmann.com 217 (Delhi) but then none of the questions before Honble High Court had anything to do with reopening of assessment and this decision can not, therefore, be taken as an authority on the legal issue which did not even come up for specific adjudication before Their Lordships. As for her reliance on Honble Supreme Courts judgment in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456/69 Taxmann 627, that was case in which Their Lordships concluded that the AO "rightly initiated the reassessment proceedings on the basis of subsequent information, which was specific relevant and reliable, and after recording the reasons for formation of his own belief that in the original assessment proceedings, the assessee had not disclosed the material facts truly and fully and, therefore, income chargeable to tax had escaped assessment" and we are unable to see anything on the facts of the present case which are materially similar to the facts of the said case. As regards her reliance on the decision of a co....
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....e mere cash deposit in the bank account cannot justify such belief or interference the Co-ordinate Bench was pleased to quash the entire proceeding following the judgment passed in the matter of Bir Bahadur Singh Sijwali-vs-ITO (supra). The relevant portion whereof is as follows: "6. In the present case also, there is nothing more than cash deposit of R.12,76,000/- in the bank account to justify the reopening of assessment by holding the belief that income has escaped assessment. A mere cash deposit in the bank account, however, cannot justify such a belief or inference. In this view of the matter, and respectfully following the division bench order in the case of Bir Bahadur Singh Sijwali (supra), I hold that the very initiation of reassessment proceedings, on the facts of this case, were unsustainable in law. I, therefore, quash the reassessment proceedings and the impugned reassessment order. As the reassessment itself stands quashed, all other issue raised in the appeal are rendered infructuous and do not call for any adjudication." More so, the fact which was considered by the Learned Tribunal in the above matter is also identical to that of the case before us. Not....
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....)(c) of the Act for furnishing of inaccurate particulars of income. The addition made u/s 68 of the Act by the Learned AO to the tune of Rs. 42,02,709/- was modified by the Learned CIT(A) by directing the Learned AO to restrict such addition to peak balance as a result whereof, Rs. 8,95,166/- as worked out peak was finally added by the Learned ACIT(OSD), Ward-1(1), Bhavnagar by and under the order dated 23.04.2012 as it appears at Page 27 of the paper book filed before us by the assessee. Finally the revised total income of the assessee has been modified to Rs. 11.42,720/- upon considering the rectification application u/s 154 of the Act preferred by the assessee. In the penalty proceeding, on the basis of such peak balance of Rs. 8,95,166/- penalty of Rs. 3,15,890/- was levied, which was in turn confirmed by the Learned CIT(A). Hence, instant appeal before us. 8. At the time of hearing of the appeal, the Learned Counsel appearing for the assessee submitted before us that the penalty has been levied on the basis of the addition made by virtue of section 68 of the Act being a deeming fiction created by the Legislature as per which, certain sum is deemed to be income of the ass....
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....ds before us was accepted by the authorities below. The Learned CIT(A) never whispered about furnishing of inaccurate particulars of income neither concealment of income on the part of the assessee. It is also a fact as it appears from the records that the penalty has been levied by the Assessing Officer by virtue of the provision laid down u/s 68 which is nothing but a deeming fiction created by the Legislature as per which certain sum is deemed to be the income of an assessee as rightly pointed out by the Learned AR before us. We must note that the quantum proceedings and the penalty proceedings are different in nature. Section 68 creates a legal fiction whereby cash credit received are deemed to be unexplained for want of necessary evidences and consequently addition is made u/s 68 of the Act. However, penalty does not follow as a natural corollary to an addition especially when such addition has been made by invoking legal fiction as in the case before us. Therefore, the finding in the assessment proceeding, howsoever relevant and good may not be conclusive so far as penalty proceedings are concerned. Further that it is a settled principle that parameters of judging the justifi....
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.... of the assessee was in excess of Rs. 50 crore and the profits of business was in excess of Rs. 3.26 crore. In such cases, it would be highly improbable that assessee would indulge in furnishing inaccurate particulars with respect to Rs. 15 lacs which is a very small figure as compared to the turnover and profit to avoid the tax liability. He also relied on the decision in case of Amitabh Construction P. Ltd. vs. ACIT, 335 ITR 523 (Jharkhand), CIT vs. Pancham Dass Jain, 156 Taxman 50 (Allahabad) and the decision in case of Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158 (SC). He therefore submitted that the penalty levied u/s. 271(1)(c) be deleted. Ld. D.R. on the other hand supported the orders of A.O. and CIT(A). 5. We have heard the rival submissions and perused the material on record. It is undisputed facts that on the addition of Rs. 15 lacs made u/s. 68 by A.O. penalty u/s. 271(1)(c) has been levied by A.O., which has also been confirmed by CIT(A). It is also a fact that assessee has disclosed all the material facts before the A.O. and has also submitted the explanation which has not been found to be false. It is a well settled law that penalty proceedings a....