TaxTMI 
TaxTMI 
2022 (3) TMI 122
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.... in confirming the action of Ld. A.O. in making an addition to the extent of Rs. 14,00,000/- u/s 69 of the Act on account of cash deposits in bank account, without considering the submissions of the assessee and facts of the case and without observing the principles of natural justice. 4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 3. Vide Ground No. 2 the grievance of the assessee relates to the validity of reopening the assessment under section 147 r.w.s 148 of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). 4. Facts of the case in brief are that the A.O. issued notice dt. 28/03/2018 to the assessee under section 148 of the Act by recording the following reasons: " As per information and documents available with the department an amount totaling to Rs. 35,01,000/- and was deposited in cash in the bank account No. 03523000047712 maintained with Punjab & Sind Bank, Mota Singh Nagar, Jalandhar, Punjab of Sh. Gurdish Kaur Khullar during the F.Y. 2010-11. As per office records, the assessee has not file....
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....u/s 147 as envisaged under the Income Tax Act, 1961. Sir, in this regard it is submitted that notice u/s 148 was issued to the assessee on account of cash deposit of Rs. 35,01,000/-. The sole reason for reopening the assessment is to enquire about the alleged unaccounted income in the hands of the assessee on account of cash deposit of Rs. 35,01,000/-. There was no other information in possession of the Ld. AO which could lead to the belief that this cash deposit was the income of the assessee and which could possibly form the basis for initiating proceedings u/s 147 of the Act. Further, no verifications letters u/s 133(6) of the Act, were issued by the Ld. AO to the assessee to enquire about the cash deposits. Sir, it is further submitted that on perusal of these reasons would reveal that there is no nexus between the material in the possession and the belief of escapement of income formed about escapement of income. In other words no cause and effect relationship has been established with regard, to material in his possession and belief based upon such material. In fact there was no material on record that could lead your good self to a belief that income has es....
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....essee-Whether the grounds are adequate or not is not a matter for the Court to investigate-Only the existence of belief can be challenged by assessee-Expression "reason to believe" does not mean a purely subjective satisfaction on the part of ITO-It must be held in good faith-Powers of ITO to reopen assessment, though wide, are not plenary- Interest allowed as deduction in original assessment subsequently ITO found that creditors -were name-lenders-Confession from creditors-There was nothing to show that the confession related to a loan advanced to assessee-The live link or close nexus between material before ITO and belief he was to form regarding escapement of income was missing-Said material could not have led to formation of the belief that income escaped assessment because of assessee's failure or omission to disclose fully and truly all material facts-Pre-conditions for exercise of jurisdiction under s. 147 were not fulfilled. Further reliance is placed on the decision of CIT Vs. Smt. Paramjit Kaur, (2009) 311 ITR 38, where it was held as under: "Sec, 147 empowers the AO to assess or reassess income chargeable to tax if he has reasons to believe that the....
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...., the Asessing Officer shall, before issuing any notice under sec. 148, record his reasons for issuing notice under the said section. In the case of the appellant, the Assessing Officer received information that the appellant engaged in circulating unaccounted income through entry providers which could have led to a reasonable doubt that the total income of the appellant as declared in the return was incorrect. The Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. quoted supra, has considered and explained the meaning of the phrase 'reasons to believe'. As observed by the Hon'ble Supreme Court, the word 'reason' in the expression 'reason to believe' would mean cause or justification and if the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reasons to believe that income had escaped assessment. It is further observed by the Supreme Court that the expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. At the initiation stage, what is required is "reason to believe",....
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.... Not only has the Supreme Court, but also a number of High Courts held that, at the stage of recording of reasons and issuance of notice u/s 148, all that the AO has to do is to have sufficient reasons to entertain the belief to arrive at the conclusion that income has escaped assessment. This was the ratio laid down by the Full Bench of the Delhi High Court in CIT v. Usha International Ltd. (2012) 348 ITR 485, and in the later decisions of Delhi High Court namely AGR Investment Ltd. (197 Taxman 177), India Terminal Connector System Ltd. (21 taxmann.com 69), Nipun Builders and Developers Pvt. Ltd. (350 ITR 407), Nova Promoters & Finlease Pvt. Ltd., Allahabad High Court in the case of Pankaj Hospital Ltd. (44 taxmann.com 230), High Court of Gujarat in the case of Peass Industrial Engineers (P) Ltd. (72 taxmann.com 302) and by the Kerala High Court in Innovative Foods Ltd. V. UOI (2013) 356 ITR 389 (Ker). 6. Now the assessee is in appeal. 7. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the A.O. without applying his mind issued the notice under section 148 of the Act and treated whole of the amount depos....
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.... the A.O. reopened the assessment by recording the reason that as per the information available with the department cash amounting to Rs. 35,01,000/- was deposited in the bank account of the assessee and the assessee had not filed the return of income, he, therefore had reason to believe that income of Rs. 35,01,000/- chargeable to tax had escaped assessment for the year under consideration which clearly shows that only on the basis of the information the A.O presumed that the total amount deposited in the bank account as escaped income of the assessee. 9.1 On a similar issue the ITAT, Chandigarh Bench 'B' in the case of Smt. Charanjit Kaur Vs. ITO (supra) held as under: 16. So far as, the application of mind by A.O. is concerned, the reasons recorded by A.O. for reopening of the case prima facie indicate that he has not applied his mind and proceeded on assumption that the bank deposit constitutes unexplained income of the assessee. As pointed out by the learned counsel, the Delhi Bench of the Tribunal in the case of Bir Bahadur Singh Sijwali Vs. ITO (supra) has set aside the action of A.O. in reopening the case of the assessee initiated on fallacious assumption that b....