TaxTMI 
TaxTMI 
2022 (8) TMI 678
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.... on account of unexplained cash deposits in the various bank accounts of the assessee ? 2. Whether on the facts and circumstances of the case and on the points of the law Ld. CIT(A) was justified in concluding that addition of Rs. Rs.5.228 Crores was part of turnover of the assessee, as against the finding of the AO that the assessee has failed to provide names and address of the parties who had purchased yarn from him, thereby the assessee not being able to establish the genuineness and authenticity of the transactions of cash deposits in its various bank accounts? 3. Whether on the facts and circumstances of the case and on the points of the law Ld. CIT(A) was justified in concluding that cash deposits in the bank accounts of the assessee represents the sale proceeds from various sundry debtors, as against the findings of the AO that the assessee has failed to establish the genuineness and authenticity of the cash deposits in the bank accounts of the assessee in spite of several opportunities? 4. Whether on the points of law and on facts and circumstances of the case, the Ld. CIT(A) has erred by giving a finding which is contradictory to the evidence on....
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....se of the assessee was reopened by the A.O u/s.147 of the Act. During the course of the re-assessment proceedings, it was observed by the A.O that there were cash deposits amounting to Rs. 5,22,81,663/- in the following bank accounts of the assessee: (i) ICICI Bank Ltd. Rs.2,63,10,772/- (ii) ING Vysa Bank Ltd. Rs. 47,88,660/- (iii) Union Bank of India Rs.1,14,55,181/- (iv) State Bank of India Rs. 97,27,050/- Total Rs.5,22,81,663/- On being queried about the nature and sources of the aforesaid cash deposits, it was the claim of the assessee that the same were the cash sale proceeds which were deposited by the outstation based purchasers of yarn in his bank accounts. However, the assessee on being called upon to furnish the complete addresses of the parties who had deposited the impugned amount of cash sale proceeds expressed his inability to do so and came forth with only the locations of the parties concerned. Observing, that the assessee had failed to substantiate the nature and source of the cash deposits in his bank accounts on the basis of supporting documentary evidence, the A.O after rejecting his explanation held the ent....
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....opening the case of the assessee u/s.147 of the Act. Adverting to the cross-objection filed by the assessee, it was submitted by the ld. AR that the same involved a delay of 1722 days. Elaborating on the reasons leading to the delay in filing the cross-objection, it was submitted by the ld. AR that the same was for the reason that the assessee (since deceased) in the course of the proceedings before the CIT(Appeals) was detected for cancer and thus, could not attend to his business/finance/tax matters. It was submitted by the ld. AR that the assessee had thereafter expired on 30.11.2018. It was submitted by the ld. AR that as Shri. Alochan Agrawal, the assessee's only son was new in the business and was not handling the tax matters earlier, thus, he had no knowledge about the order of the first appellate authority and the appeal filed by the department before the Tribunal. Apart from that, it was averred by the ld. AR that as the counsel who was pursuing the assessee's litigation in the appellate forums was not the regular counsel of the assessee, therefore, Shri. Alochan Agrawal, legal heir of the assessee had no occasion to learn about his statutory right of filing a cross-object....
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....ted on the basis of facts available on record, therefore, the assessee even otherwise without filing a cross-objection was well within his right to support the order appealed by the Revenue by urging a legal issue which prima-facie went to the root of the jurisdiction that was assumed by the A.O for initiating the reassessment proceedings. In support of his aforesaid contention the ld. AR had relied on the judgment of the Hon'ble High Court of Bombay in the case of Peter Vaz &Ors. Vs. CIT & Ors. (2021) 436 ITR 616 (Bom). 7. Per contra, the ld. Departmental Representative (for short "DR") objected to the seeking of condonation of delay in filing of the cross-objection by the assessee 8. After having given a thoughtful consideration to the aforesaid contentions of the Ld. AR, we find substance in the same. Admittedly, it is a matter of fact that the assessee (since deceased) was in the course of the proceedings before the CIT(Appeals) diagnosed as suffering from cancer. Assessee had thereafter expired on 20.02.2018. Considering the illness with which the assessee was struggling with during the period 23.02.2016 [date of order of the CIT(Appeals)] to 20.02.2018 (supra), the same....
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....eter Vaz & Ors. (supra), wherein the Hon'ble Court had observed that an assessee even otherwise without filing a cross-objection was well within his right to support the order appealed by the department by urging a legal issue which prima-facie went to the roots of the jurisdiction that was assumed by the A.O for initiating the reassessment proceedings. Be that as it may, we herein admit the objection raised by the assessee respondent/cross-objector as regards the validity of the jurisdiction assumed by the AO for reopening the case under Sec. 147 of the Act. 9. As the assessee respondent/cross-objector has challenged before us the validity of the jurisdiction assumed by the AO for reopening his case under Sec. 147 of the Act, therefore, we shall first deal with the same. Before us, the Ld. AR has assailed the validity of the re-assessment proceedings on multiple grounds which are deliberated upon as herein under: (A). Reopening the case without application of mind by the A.O: 10. At the very outset, it was the claim of the Ld. AR that the case of the assessee had been reopened by the AO de-hors any application of mind to the material as was there before him at the relevan....
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.... in the case before us, through the A.O had referred to the material/information but there is a clear absence of formation of a bonafide belief on his part that the income of the assessee chargeable to tax had escaped assessment within the meaning of section 147 of the Act. We would not hesitate to observe that a perusal of the "reasons to believe" reveals nothing but the reopening of the case of assessee on the basis of information received by the A.O from the DDIT(Inv.)-III, Raipur. Nothing is discernible from a perusal of the reasons to believe which would reveal any application of mind by the AO qua the material/information before him, on the basis of which he had arrived at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment u/s.147 of the Act. We though are not oblivious of the settled position of law that an A.O at the stage of reopening of a concluded assessment u/s. 147 of the Act is not required to conclusively prove escapement of income of the assessee from chargeability to tax, but the statutory obligation so cast upon him i.e. formation of bona-fide belief on the basis of material available before him that the income of the assess....
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....ent for A.Y 2007-08 needs to be reopened by issue of Notice u/s 148. Accordingly Notice u/s 148 issued. Yours faithfully Sd/- (Rita G. Tolani) Income-tax Officer-24(1)(4), Mumbai" On a perusal of the aforesaid reasons to believe we find that though the A.O had referred to the material/information on the basis of which the case of the assessee was sought to be reopened under Sec. 147 of the Act i.e the information received from the DGIT(Inv.), Mumbai, but then there is nothing discernible therefrom on the basis of which it could be gathered that there was any independent formation of a bonafide belief by the A.O that the income of the assessee chargeable to tax had escaped assessment. All that can be gathered from the aforesaid "reasons to believe" is that the A.O by merely referring to the information received from the DGIT(Inv.), Mumbai, wherein it was conveyed that the assessee was a beneficiary of the accommodation entries given by two concerns, had observed, that he had a reason to believe that the income of the assessee in respect of such accommodation entries had escaped assessment. Although, the A.O had at the outset of his reasons observed that informat....
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.... to believe that the income of the assessee chargeable to tax had escaped assessment is found amiss, the reopening of the assessment cannot be held to be justified. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd. (2017) 395 ITR 677 (Delhi). In the aforesaid case, the Hon"ble High Court observed that the A.O had proceeded to send a notice u/s 147/148 of the Act solely on the basis of information received from the DIT(Inv.). It was noticed by the High Court that after writing about the nature of the impugned accommodation entry and without mentioning the nature of transaction which was effected for alleged accommodation entry as well as dispensing with the date of recording of the reasons, the A.O, without any further verification, examination or any other exercise had jumped to the conclusion that the assessee had received accommodation entries. The Hon'ble High Court in the backdrop of the facts involved in the case before them observed that as the crucial link between the information made available by the DIT (Investigation) to the A.O and the formation of belief was absent, the reassessment pr....
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....Pvt. Ltd. (supra) had observed, that as the A.O in the case before them had merely acted upon the information received from the Investigation Wing without undertaking any further enquiry on his part thus, the link between the tangible material and the formation of the reasons to believe that the income of the assessee had escaped assessment was not discernible therefrom and accordingly the reopening of the assessment u/s 147 was to be held as bad in law. Further, in the case of CIT Vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del), it was inter alia observed by theHon'ble High Court that in the case before them the A.O had received information from the Dy. Director of IT (Inv.), Gurgaon that the assessee had raised a bogus claim of having earned long-term capital gains on account of sale/purchase of shares by obtaining entries. After deliberating on the facts, it was inter alia observed by the Hon'ble High Court that a mere reference to the information received from the Dy. Director of IT (Inv.) cannot constitute valid reasons for initiating reassessment proceedings in the absence of anything to show that the A.O had independently applied his mind to arrive at a belief that inco....
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....mption of jurisdiction by the A.O u/s 147 of the Act, the consequential assessment framed by him u/s 143(3) r.w.s 147, dated 29.03.2015 cannot be sustained and is quashed." 12. As the A.O in the case before us had clearly failed to apply his mind to the material available before him, and had reopened the case of the assessee by merely referring to the information that was received by him from the DDIT (Inv.)-III, Raipur, therefore, we concur with the claim of the Ld. AR that the A.O had wrongly assumed jurisdiction for dislodging the concluded assessment of the assessee without discharging the statutory obligation that was cast upon him for validly reopening the case of the assessee u/s.147 of the Act. (B) Reopening of the assessment in absence of any failure on the part of the assessee in fully and truly disclosing all material facts necessary for assessment :- 13. Admittedly, it is a matter of fact borne from record that the original assessment in the case of the assessee was framed by the A.O u/s. 143(3) of the Act, dated 18.06.2010. Notice u/s.148 of the Act was thereafter issued by the A.O on 23.03.2015. Accordingly, as the case of the assessee was reopened beyond a p....
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....facts", but it is neither required to disclose the "secondary facts" nor required to give any assistance to the A.O by disclosure of the other facts and it is for the A.O to decide what inferences are to be drawn from the facts before him. It was categorically observed by the Hon'ble Apex Court that the extended period of limitation for initiating proceedings under the "first proviso" to Section 147 of the Act would only get triggered where the assessee had failed to disclose fully and truly all material facts necessary for its assessment. 15. As the assessee in the case before us had disclosed all material facts necessary for its assessment, therefore, we are of the considered view that the A.O as per the limitation provided in the "first proviso" to Sec. 147 was divested of his jurisdiction for reopening the concluded assessment of the assessee beyond a period of four years from the end of the relevant assessment year i.e, AY 2008-09. As in the case before us the original assessment had been framed by the A.O vide his order passed u/s.143(3), dated 18.06.2010 therefore, in absence of any allegation on the part of the department that the income of the assessee chargeable to tax....
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....sits in the bank accounts of the assessee were very much there before the A.O in the course of the original assessment proceedings, but in fact the same had duly been considered and accepted by him as the duly accounted sale proceeds of the assessee. On the basis of our aforesaid deliberations, we are of a strong conviction, that as stated by the Ld. AR, and rightly so, as the case of the assessee had been reopened with a purpose to re-visit the assessment on the basis of a mere change of opinion, which we are afraid is not permissible in the eyes of law, thus, the assessment framed by the AO is liable to be struck down for want of jurisdiction on his part on the said count. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC). Hon'ble Apex Court in its aforesaid order, had held, that the case of an assessee cannot be reopened on the basis of a mere "change of opinion", by observing as under:- "On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and ....
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.... AO. It was pointed out that the meaning of the expression, "reason to believe" had been explained in a number of Court rulings in the past and was well settled and its omission from s. 147 would give arbitrary powers to the AO to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended s. 147 to reintroduce the expression "has reason to believe" in place of the words "for reasons to be recorded by him in writing, is of the opinion". Other provisions of the new s. 147, however, remain the same." Further, the Hon'ble High Court of Bombay in the case of Asteroids Trading & Investment P. Ltd. Vs. DCIT (2009) 308 ITR 190 (Bom), had held, that an A.O is precluded from assuming jurisdiction to initiate reassessment proceedings on the basis of a "change of opinion", observing as under: "8. Perusal of the record shows that the petitioner had made full disclosure necessary for claiming deduction under s. 80M. The AO after applying his mind to the relevant records had made a specific order allowing the deduction. A perusal of the record shows that now respondent No. 1 proposes to reopen the assessment because according....
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....ed from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator (supra) referred to above, has taken a clear view that reopening of assessment under s. 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent No. 1 to issue notice under s. 148". Further, the Hon'ble High Court of Bombay in the case of ICICI Prudential Life Insurance Co. Ltd. Vs. ACIT (2010) 325 ITR 471 (Bom), after relying on the judgment of the Hon'ble Supreme Court in the case of Kelvinator of India (supra), had held as under: "23. Though the power to reopen an assessment within a period of four years of the expiry of the relevant assessment year is wide, it is still structured by the existence of a reason to believe that income chargeable to tax has escaped assessment. The Supreme Court, in a recent judgment in Kelvinator of India Ltd. (supra) while drawing upon the legislative history of s. 147 held that the expression "reason to believe" needs to be gi....
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....f a "Change of opinion", had held as under:- "There is merit in the submission which has been urged on behalf of the assessee that there was no tangible material before the AO on the basis of which the assessment could have been reopened and what is sought to be done is to propose a reassessment on the basis of a mere change of opinion. This, in view of the settled position of law is impermissible. No tangible material is shown on the basis of which the assessment is sought to be ITA No.1212/Mum/2019 A.Y. 2012-13 M/s Medley Pharmaceuticals Ltd. Vs. DCIT-10(2)(2) reopened. In the absence of tangible material, what the AO has done while reopening the assessment is only to change the opinion which was formed earlier on the allowability of the deduction. The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. There is no tangible material in the present case. At this stage, we may herein observe, that as per the mandate of law even where a concluded assessme....
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....edit u/s.68 of the Act. For the sake of clarity the relevant observations of the CIT(Appeals) are culled out as under: "Decision- I have considered the rival submission of both the parties. The assessee imports the silk from China and received the import items at Chennai and as per standing instruction the forwarding agent at Chennai despatches the goods on the destinations. From the facilitation counter the weavers deposit the cash and received the delivery of the silk, so as to work upon the yarn. He has furnished the import evidence and payment of custom duty. He had furnished the cash book and sales account. He had furnished the invoices issued in the names of various persons as mentioned by the learned AR. I am not able to convince myself with the findings of the learned AO because he had made addition of Rs.5.228 crores which was part of turnover of the assessee. The inability of the assessee to furnish the names of the parties who had purchased the yarn from him can be understood but the basic fact should not have been forgotten by the AO that he should also have tried to confirm at least from sales account viz-a-viz the bank account of the assessee. After ....