TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 462
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....ruments like drafts, cheques etc. under the name and style of M/s. Sanjay Enterprise. The assessee was earning commission of Rs. 50 per lakh for such transaction. The assessee has filed his Returns of Income for all the three assessment years, declaring income from Sanjay Enterprise whereas the Assessing Officer received information from ADIT (Inv)-1, Rajkot that the assessee had made high value of cash deposits and issued DD/Cheque in lieu of cash through his bank accounts to the extent of Rs. 10,73,29,000/- relating to the Assessment Year 2008-09. The above sum deposited by the assessee is required to be taxed as unexplained investment being not fully disclosed. Therefore the Assessing Officer was satisfied this is a fit case of an escaped income within the meaning of Section 147 of the Act and the assessee failed to disclose fully and truly all material facts necessary for the assessment as per explanation 2(b) of 147 of the Act. Hence issued a notice u/s. 148 of the Act. 2.2. In response, the assessee filed a letter to treat the original return filed u/s. 139(1) as the return in response to the notice issued u/s. 148 of the Act. The assessee raised various objections as agains....
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....resent case, the available information (from ADIT) tells the A.O. that the appellant, a Shroff by trade; had deposited huge cash in his bank accounts. It is but natural to presume that such deposits were made in due course of business, i.e. after receiving the cash from customers for issuing them cheques/DD for earning commission income. The ADIT's report to A.O. was apparently not contradicting this primary and logical presumption. In such circumstances, A.O., without conducting any independent verification, was not justified in forming the reason to believe that cash deposits represent undisclosed income of the appellant. The decision of the Hon'ble ITAT 'C' Bench Ahmedabad in the case of ITO s. Dineshchand Shantilal Shah (HUF) (2013) 34 taxmann.com 187 (Ahmedabad Trib.) is very pertinent as it explains that cash deposits and subsequent issue of cheque to the customers being routine business activities of the assessee cannot be treated as loans/deposits/similar unexplained income in the hands of the assessee, unless A.O./ADIT had some evidences to suggest that these cash deposits represent assessee's own money and they came back to assessee in cash from custom....
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....er a gap of few months, the ADIT once again issued summon on 19.11.2010 calling copy of cash book for AY 2008-09 to 2010-11, details of cash deposited with the names of the persons bank account number etc. The same were furnished on 06.04.2011. Therefore, the entire information was furnished as and when called for. Thereafter, the ADIT after a gap of four years once again issued a summon u/s 131(1 A) on 01.08.2014 calling similar information for the above period. The same were furnished on 08.08.2014 which also included commission income account for the period 01.04.2007 to 31.03.2011. Again summons were issued on 25.02.2015 and 19.05.2015 wherein the details of persons who obtained cheques/DD from the appellant was called for. The appellant furnished the same. The ADIT had conducted the verification exercise in detail and there is nothing to suggest that any adverse inference was drawn by him and communicated to the A.O. The A.O., after receiving the communication from ADIT, would have been aware of the entire proceeding of the verification having been conducted by the ADIT. He would have also been aware that ADIT was not in possession of any adverse inference. It is apparent from....
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....ch a case, the reasons recorded do not reflect the requisite belief that income has escaped the assessment and the basic requirement of Section 147 is not fulfilled and therefore, the proceedings u/s. 147 were quashed. In another judgment of Inductotherm India Pvt. Ltd. (356 ITR 481), the Hon'ble Gujarat High Court once again held that the power of reassessment cannot be exercised for the purpose of verification. The relevant observation of the Hon'ble High Court in this judgment is reproduced hereunder: (Quote) "18. Reverting to the facts of the present case, we notice that in two out of four reasons recorded by the Assessing Officer for reopening the assessment, he stated that he need to verify the claims. In the second ground, he had recorded that admissibility of the bad debts written off required to be verified. In the fourth ground also, he had recorded that admissibility of royalty claim was I required to be verified. We are in agreement with the contention of the counsel for I the petitioner that for mere verification of the claim, power for reopening of assessment could not be exercised. The Assessing Officer in guise of power to reopen an assessment, cannot seek t....
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....red for assuming valid jurisdiction u/s. 147. It is a trite law that mere a suspicion which requires further verification cannot be the basis for reopening. 5.11 It is also a settled position of law that validity of the reassessment should be judged only from the reasons as recorded by the A.O. and the reassessment cannot be justified on the basis of any other contention or material which does not form part of the reasons recorded. In this context, it will be relevant to refer to the Bombay High Court judgment in case of Hindustan Lever Ltd. (268 ITR 332) wherein the Hon'ble Court held as under: (Quote) "The reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. R....
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....son to believe", there should be "cause" or "justification" in material available with the A.O. which could prompt a normal, reasonable person to form a belief that income had escaped assessment [Rajesh Jhaveri 291 ITR 500 (SC)]. In the present case, the material available is only instances of a "shroff depositing cash in his bank accounts before issuing cheque/DD to his customers/clients. Can a normal, reasonable person form a belief in these circumstances that this activity involves unaccounted income of the appellant which had escaped assessment ? Definitely, more verification is required to find out further tangible material to form such belief. And this is why ADIT had conducted a prolonged investigation and that is why A.O. admits in the assessment order that verification was the prime reason for reopening the assessment. I fully agree with the Ld. AR that the notice issued u/s. 147 with the purpose of verifying the affairs further is legally invalid. Reliance is placed on the Hon'ble Jurisdictional High Court's decisions in the cases of Bakulbhai Ramanlal Patel vs. ITO 56 DTR 0212, Inductotherm (India) Pvt. Ltd. vs. DCIT 356 ITR 0481 and Shankerlal Nagji & Co. vs. IT....
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....His business itself demands that customers will provide cash which will be converted into banking instruments for a fees by the appellant. The cash received from the customers will be deposited into his bank accounts by the appellant in order to achieve sufficient balance before issuing the cheque/DDs to the customers. This modus operandi had been accepted by all, the appellant, the DDIT (Inv) who investigated the case very thoroughly for a long time as well as by the A.O. Here the cash received by the appellant (to be deposited in the bank) amounts to turnover of the business of the appellant. I agree with Ld. AR that this sum which had been treated as stock-in-trade by the appellant is not available to be treated as an unexplained cash deposit. The amount of bank deposited is not remaining with the appellant nor is it ploughed back in his business for next business/trade cycle; it is going out of the business sphere of the appellant to the possession of the customers. This is not the case that appellant is bringing out his undisclosed (untaxed) money to be used in his business in the guise of loan capital. It cannot be expected from a businessman to bring out his undisclosed inco....
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....) It is, therefore, prayed that the order of the C.I.T.(A) may be set aside and that of the A.O. be restored to the above extent. 5. Ld. CIT-DR Shri Shramdeep Sinha appearing for the Revenue vehemently argued that the Ld. CIT(A) erred in holding that the reassessment is bad in law on the incorrect observation that "verification" was the prime reason for reopening of assessment. On merits of the case also, the ld. CIT(A) erred in deleting the addition of Rs. 9,80,77,641/- holding that the entire list of persons to whom cheques were issued was submitted by the assessee. Thus the onus shifted to the A.O. while making addition. However the Ld. CIT(A) in Para 6.5 of his order observed that there was non maintenance of proper details like PAN, Postal Address of the Customers, etc. Thus pleaded that the entire reassessment order is correct in law and set aside the order passed by the Ld. CIT(A) and restore that of the Assessing Officer. 6. Per contra, Ld. A.R. Mr. Mehul Ranpura appearing for the Assessee submitted before us a Paper Book which contains various details namely the 148 notice and copy of the Licence issued to the assessee for Money Lending business under Mumbai Money Lendi....
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....e u/s 148 of the I. T. Act accordingly. 6.2. For the above reasons, the Assessing Officer has recorded the assessee had made high value transaction of cash deposits and issued DD/Cheques in lieu of cash through his bank accounts. Thus the Assessing Officer himself well known that the cash deposited in the bank accounts are transformed into DD/Cheques. Hence the same cannot be treated as the unexplained income of the assessee. The Ld. CIT(A) after considering the Money Lenders Licence issued by the Registering Authorities from time to time accepted cash deposits as the business transactions/stock in trade and deleted the additions. Therefore the same does not require any interference and Revenue appeal is liable to be dismissed. 7. We have given our thoughtful consideration and perused the materials available on record including the Paper Book filed by the assessee. As Seen from the detailed appellate order passed by the Ld. CIT(A), the mandate of Section 147 namely 'reason to believe' that income has escaped assessment is absent in the reasons recorded by the Assessing Officer namely "high value cash deposited and issued cash/cheque in lieu of cash in his bank account". Therefor....
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....ng the year under consideration. We do not find any ambiguity in the order passed by the learned CIT(A) and he has rightly directed the learned AO to compute the commission income @ 0.25 paise per lakh deposited in the bank account. 6.3. Further the Ld. Counsel drawn our attention to the Jurisdictional High Court Judgment in the case of Shree Sidhnath Enterprise vs. ACIT reported in [2016] 71 taxmann.com 55 wherein Hon'ble High Court held as follows: 14. It may be noted that in the affidavit-in-reply filed by the respondent, it is the case of the respondent that the petitioner is engaged in the business of cheque discounting and shroff. The firm charges commission for cheque discounting facility provided to its customers. The firm receives cash from the beneficiary and gives cheque in lieu thereof. The cheque is drawn in favour of the beneficiary. For arranging this transaction, the firm charges commission. Reference has been made in the reply to instances where the petitioner has received cash from parties and has issued cheques in lieu thereof which were deposited by such parties in its account and the cheques were cleared at Rajkot. Based on this, the Assessing Officer had....
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....present any unaccounted income of the assessee. Ld. CIT(A), we find also took note of the fact that reopening resorted by the A.O. for the impugned year also subsequent to passing of the assessment order was dropped by him taking note of the decision of the Hon'ble Gujarat High Court. 8. Moreover even Assessment Year 2006-07, the ITAT found no merit in the reopening resorted to in that year also for an identical reason following the decision of the Hon'ble Gujarat High Court in the case of the assessee. Therefore, it is clear that the issue of cash deposits in the bank account of the assessee has been examined exhaustively at various levels and no merit has been found in the contention of the revenue that it represented by any undisclosed income of the assessee. Noting the fact that the assessee into business of Shroff and earned only commission on the mandatory transactions carried out by it, the cash deposits representing money belonging to his customers. 9. In view of the above, we see no reason to interfere in the order of the Ld. CIT(A) deleting the addition made of cash deposits amounting to Rs. 224.53,23,993/-. The grounds of the appeal raised by the revenue is dismiss....