TaxTMI 
TaxTMI 
2024 (3) TMI 525
X X X X Extracts X X X X
X X X X Extracts X X X X
....alleged to have had escaped income, was not added to the declared income and therefore, the additions of any other amount, are completely without jurisdiction and deserves a complete deletion. Consequently, the impugned assessment framed u/s 148 dated 13.03.2015 also kindly be quashed. 1.2. The CIT (A) also erred in law as well as on the facts of the case in rejecting the contentions raised that no notice u/s 143(2) of the Act was ever issued/served within the stipulated period as prescribed u/s 148 r/w 143(2) of the Act. Hence, the impugned assessment order dated 31.03.2015 is barred by limitation and hence, deserved to be quashed. 1.3. The impugned order u/s 148 dated 13.03.2015 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence, the same kindly be quashed. 2. Rs. 16,98,502/-: The Id. CIT (A) erred in law as well as on the facts of the case in confirming the impugned addition made of the amount of the opening cash-in-hand of Rs. 16,98,502/- alleging the same to be income from undisclosed sources of the current year, which is completely beyond jurisdiction and also contrary to the settled legal position. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8,01,815/- (Rs. 10,00,000/- less Rs. 1,98,185/- declared) has escaped assessment. During the year under consideration the appellant filed his ROI on 24.12.2010 declaring total income of Rs. 1,74,190/- (Remuneration of Rs. 2,00,000/- from M/s Nutan Deco Mark P. Ltd. and Rs. 1,48,500/- from job work income less deduction under Chaper-VI of Rs. 93,813/-) and Rs. 24,000/- from Agriculture Income. The assessment was completed by the AO vide order dated 13.03.2015 u/s 143(3)/147 by making addition of Rs. 16,98,502/- on account of undisclosed income and disallowance of Rs. 3,00,000/- on account of household expenses. 4. Aggrieved from the order of the assessment, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: "6.3. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order of the Income tax act, 1961 for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under- The appellant argued that no addition of opening ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the CBI at the office and residential premises of Shri Nitin Jain on 25.05.2010. During the course of search, the CBI seized cash amounting to Rs. 2.41 Crore from his residential premises as well as bank lockers at Jaipur. The CBI lodged a written complaint against Sh. Nitin Jain and others. To explain the nature and source of acquisition of the money, Sh. Nitin Jain explained that apart from receiving Rs. 97 Lakh from Shri Nitin Bolia as advance against MOU dated 22.10.2009 executed between his mother Smt Sushila Jain and Shri Nitin Bolia in respect of immovable property situated at AA-11, Anita Colony, Bajaj Nagar, Jaipur. He was also in receipt of amount from other persons. On being asked by the CBI as regards the funds arranged by Shri Nitin Bolia, he stated that Rs. 58.00 Lakhs were arranged by him from the persons tabulated at Pg-2 of the assessment order which included Rs. 10 lakhs advance given by the assessee Shri Naveen Bolia. Thereafter, on the basis of information received and pursuant to CBI search conducted, the case of the assessee was reopened alleging that after discreet enquiries the CBI is of the opinion that the funds have been build up for exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....indly refer Gangasharan & Sons Pvt. Ltd. v/s ITO & Anr. (1981) 130 ITR 1 (SC) and Hon'ble Supreme Court in the case of ITO v/s Lakhmani Mewal Das (1976) 103 ITR 437 (SC) has held that: "12. The powers of the ITO to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening to the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. ------------ The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. ------" Also refer Ajit Jain vs. Union of India & Ors. (2000) 242 ITR 302 (Del.) affirmed in Union of India vs. Ajit Jain & Anr. (2003) 260 ITR 0080 (SC) 2.2 The belief of the officer should be as to escapement of income and the belief should not be a product of imagination or specu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ggest even remotely that the advance of Rs. 10,00,000/- was escaped income. 2.3.6 Unfortunately, the AO despite having the assessment record being the ITRs, Balance Sheet, etc. of preceding years choose to ignore them completely even though were most relevant. 2.3.7 On this aspect, reliance is placed in the case of Balaji Health Care (P) Ltd. Vs. ITO (2019) 199 TTJ (Jp) 966 (DPB 16-26). It was held as under; "AO having reopened the assessment by arriving at a conclusion that the assessee-company has routed back its undisclosed income in the form of share capital/share premium solely on the basis of the report of the Director of IT, Investigation Wing, in the cases of some accommodation entry providers without carrying out his own examination in order to discover any link between the said persons and the assessee, the assumption of jurisdiction and initiation of proceedings under s. 147 by the AO does not satisfy the requirement of law and is set aside". 2.4 The ld. CIT(A) however, rejected these contentions, saying that AO analyzed the information received from CBI but ignored that the opinion was formed by the CBI (as specifically mentioned in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cific addition of Rs. 8,01,815/- or Rs. 10,00,000/-. No doubt, an opening cash in hand of Rs. 16,98,502/- has been made but that is something different in as much as this was the closing cash in hand as on 31.03.2009 (sourced from credit/ receipts) whereas the advance of Rs. 10,00,000/- is on debit side and different provision of law deal them differently. The addition of credit appearing of Rs. 16,98,502/- is not the same thing as being the addition on account of advance which are to be dealt with u/s.68 and not u/s 69. The nature and scope of both the additions/ disallowance is altogether different, the statutorily prescribed procedure of recording reasons and issuance of notice u/s 148 with respect to amount of Rs. 6,98,502/- has not been admittedly observed. In any case, the enhancement in the figure of the initially alleged income of Rs. 10 Lakh (being Rs. 6,98,502/-), was without jurisdiction. Thus, once the addition on account of the income believed to have been escaped, has not been made, no addition of any other income could be made u/s 147, more so when prescribed legal procedure was not followed. 3.2 The ld. CIT(A) however without appreciating ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ein, it was held that the AO had jurisdiction to reassess income other than the income in respect of which proceedings u/s 147 were initiated but he was not justified in doing so when the very reasons for initiation of those proceedings ceased to survive. Legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction u/s 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiries and thereby including different items of income, not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. It was further held that the Tribunal was right in holding that the AO had the jurisdiction to reassess issues other than the issues in respect of which proceedings were initiated but he was not so justified when the reasons for initiation of those proceedings ceased to survive. The observations of the Hon'ble High Court on pages 147 and 148 of in 336 ITR 136 are worth noting. 3.4. Also kindly refer CIT vs Mohmed Juned Dadani (2013) 355 ITR 172 (Guj). 4. Complete non application of mind- Borrowed Satisfaction: 4.1 To assume a valid j....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rather again confirmed that his formation of belief was based only on the CBI Information as was given by the higher authorities to him with a direction to take suitable action. The facts simpliciter that the assessee also lent Rs. 10,00,000/- to Shri Nitin Bolia does not by itself show any justifiable reason that some income up to Rs. 10,00,000/- existed this year much less some escaped income. 4.3. Incorrect factual allegations: His further allegation that when CBI enquires were in progress in May, 2010 no ROI was filed by that time but it was filed belatedly on 24.12.2010 showing advance of Rs. 10,00,000/-, is also irrelevant being incorrect in the present context in as much as again the vital fact ignored by him, was that the assessee had already filed return for A.Y.2009-10 in due course on dated 31.07.2009 (PB 8) showing closing balance of cash in hand of Rs. 16,98,502/- in his Balance Sheet which became the opening cash in hand of this year. Thus, the proved source of advance given of Rs. 10,00,000/- lakhs were already available. Furthermore, the allegation that the CBI found the explanation of Nitin Jain as receipt of advance against sale of mother's property w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n routed back in form of share capital-Thus, the conclusion of the AO that the amount received by the assessee-company by way of share capital/premium is undisclosed income without establishing the nexus cannot be accepted-There is nothing in the reasons recorded by the AO to show that he has gone through the statements of said two persons recorded during the course of search and the seized material to indicate that assessee's undisclosed income was routed back in the from of share capital-This shows that the AO has merely gone by the report of the Director of IT, Investigation Wing and the said report even didn't have the statements of these persons-No further examination was carried out by the AO-Though the AO can rely on the report of Detractor of IT, Investigation Wing, where he is assuming jurisdiction under s. 147, he is required to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment-In absence thereof, the assumption of jurisdiction under s. 147 has no legal basis-Therefore, the assumption of jurisdiction and initiation of proceedings under s. 147 by the AO to reopen the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g.7 of the Appellate order) that there was absence of clear facts as regard the filling of the legal objections and no disposal thereof by the AO, in as much as, the appellant vide letter dt. 03.02.2014 (PB 23-25) has clearly raised legal objections against the very initiation of the proceedings u/s 148, which was also before the CIT (A) however, the same was completely ignored. Hence, proceedings u/s 147 and the consequent assessment please be quashed. GOA-1.2. No Notice u/s 143(2) - Invalid proceedings: The CIT (A) rejected the ground ignoring detailed submissions without any justification at Pg. 16 Pr. 9.3. Hence this ground. Submission: 1. On this aspect following submissions were made before the CIT (A): "Additional GOA: Impugned assessment u/s 148/143(3) is without jurisdiction in absence of notice u/s 143(2): The admitted facts are that the assessee in this case filled ROI on 24.12.2010 manually which was processed u/s 143(1) on 23.02.2011 (Refer AO Pg-1). Thus, the assessment to this stage stood completed and only because of this a notice u/s 148 dated 05.08.2013 was issued, in response to which the assessee filed a letter dated 09.09.201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....books and bills and vouchers. In response thereto the assessee filed Balance Sheet for A.Y. 2010-11, showing advance against purchase of property at Jaipur of Rs. 10,00,000/- (PB 5) and also filed Balance Sheets for earlier years i.e. A.Y. 2008-09 and 2009-10. After examining the same the AO concluded that the assessee has invested the entire savings earned in the NDMPL Shares, and in Nutan Elec. Deco Rs. 1,52,837/-, in Nutan Deco Mark (P) Ltd. Rs. 80,000/- etc. When asked, the A/R of the assessee stated that in support of the opening cash as on 01.04.2009, the assessee filed Balance Sheets, Capital Accounts etc. of previous years. Finally, the AO assumed that the assessee was not able to have cash in hand from the past savings and that cash in the hands of the assessee was `Nil` hence, added opening cash Rs. 16,98,502/- as undisclosed income of the assessee. The CIT (A) rejected the ground ignoring detailed submissions without any justification at Pg. 13 Pr. 6.3. Hence this ground. Submissions: 1. Source of cash in hand fully explained and established: 1.1.1 At the outset, it is submitted that the AO has repeatedly recorded incorrect fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- in this year (PB 5). He even admitted the availability of closing cash in hand of Rs. 16,98,502/- in A.Y. 2009-10. It is beyond one`s comprehension that when each and every entry of the Balance Sheet for the preceding year i.e. A.Y. 2009-10 and current year i.e. A.Y. 2010-11 have been accepted (and no dispute raised w.r.t. the correctness of these figures and the facts), there is no reason as to why the AO should not accepted the closing cash in hand as having been available with the assessee in A.Y. 2009-10. Also consequently therefore, again when he has admitted rather not disputed any of the entries of the Balance Sheet for the current year, the opening cash in hand of the subjected amount of Rs. 16,98,502/- must have been accepted as was available with the assessee. As per the settled principle of accountancy when all the figures debit and credit are admitted except one which is under dispute, the same is only the balancing figure which, the AO was bound to accept. 1.3 No addition legally permissible unless accounts rejected: Needless to say that the accounts so maintained in the regular course of business has a binding evidentiary value u/s 145 of the Act r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was shown as closing capital of that year - carried forward amount of the previous year does not become an investment or cash credit of the relevant year. This decision squarely applies on fact of the present case also, hence on this plea alone the entire addition has to be deleted here itself. 3.1 Utilization of income earned not established by the AO/CIT (A): The main reason of the not considering the availability of the cash in hand was the suspicion of the AO that such amount might have been utilized by the assessee towards incurring of expenditure or in making investment. Thus, on one hand he admitted that the assessee was earning income and was in receipts of funds and the same were even available with the assessee till the A.Y. 2009-10 however, only because of suspicion he presumed non availability of the same. In fact, the AO was not justified to make any presumption ones the Balance Sheets of the current year as also the preceding years have clearly shown the outgoings / expenditure / investment etc. and the AO did not found any fault therewith. 3.2 Further with regard to the discussion that the assessee has utilized the available cash towards so many wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er years the assessee continued filing ROI and declaring the income similarly and was also assessed by the department. Kindly refer the copies of the ROIs filed for AY 2007-08 to 2012-13 (PB 6-22). The mere fact that the ROIs were processed u/s 143(1), cannot, in any way, reduce the evidentiary value thereof. 6. Supporting Case Laws: 6.1 Kindly refer CIT v/s P.V. Bhoopathy (2006) 205 CTR 495 (Mad) held "Appeal (High Court)-Substantial question of law-Income from undisclosed sources-AO did not accept various sources of income explained by the assessee and made additions under ss. 68 and 69 in respect of difference between the investments and the sources accepted by him-Tribunal accepted the explanation of the assessee vis-a-vis availability of funds with the assessee from the sale proceeds of jewellery belonging to his mother-in-law, receipt from a party and also the amount of opening balance and savings from earlier years and deleted all the additions-Findings recorded by the Tribunal are purely findings of fact-There is no reason to interfere with the same-No substantial question of law arises-CIT vs. Pradeep Shantaram Padgaonkar (1983) 143 ITR 785 (MP) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....counts and formed part of business assets and thereafter used in day-to-day business activities-Questions which were raised and the answers given during the survey show that the additional income declared on account of advances and the cash found emanated from and related to the real estate business only- Even the Principal CIT has admitted in the impugned order that this income pertains to recovery of cash amounts of advances made by the assessee to the other persons for purchase of land/plots-Undisputedly the assessee is engaged in the real estate business and there is no undisclosed or unknown source of income and the source of additional income so admitted is clearly identifiable and is the regular business of real estate-Since the additional income is related to the real estate business it is certainly assessable as business income and cannot be considered as income falling under s. 68/69A-AO having applied his mind in accepting the said additional income as business income, there was no error in the assessment order-Thus, the Principal CIT was not justified in expecting the AO to apply s. 115BBE as also s. 271AAC by merely imposing and substituting his own opinion, which is n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-08 relevant to asst. yr. 2008-09-Said advances were thereafter regularly reflected in terms of outstanding balances net of recoveries from time to time in the financial statements and balance sheets for the subsequent financial years which were also placed on record and examined by the AO-Tax returns for all earlier assessment years including that of the subsequent asst. yr. 2017-18 have been filed by the assessee and accepted by the Revenue which is again a clear affirmation on the part of the Revenue that the financial statements represent true and fair view of assessee's affairs-In such a scenario, it cannot be said that the AO could entertain any apprehension that the debtors and advances so reflected and accepted in the earlier years are not genuine and have to be enquired again afresh in terms of identity, creditworthiness and genuineness of individual transactions-AO has taken a prudent, judicious and reasonable view in accepting the explanation of the assessee in support of the cash deposits after considering the entire material available on record-Thus, order passed under s. 143(3) cannot be held as erroneous insofar as prejudicial to the interest of Revenue-Impugned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he jurisdictional high court judgment submitted that once the revenue accepted the opening balance which is supported with earlier year no addition can be made. 8. The ld DR is heard who has relied on the findings of the lower authorities has raised similar contentions that has been recorded in the order of the ld. AO and that of the ld. CIT(A). 9. We have heard the rival contentions and perused the material placed on record and have also gone through the various judicial precedent cited to drive home to the respective contentions raised by both the parties. The bench noted that in this case there were two type of grounds one challenging the legality of the assessment and other on the merits of the case. On merits of the case the addition the bench noted that the ld. AO has repeatedly recorded findings that the assessee did not filed any ROI for A.Y. 2008-09 (AO Pg 4) and again alleged that the assessee has not filed ROI for preceding years (AO Pg-5). Against this set of facts it is evident that the return of income for AY 2007-08 was filed on dated 31.07.2007 along with the copy of balance sheet and P&L A/c (PB 21-22) followed by the ROI for AY 2008-09 filed on dated 31.07.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erefore, again when he has admitted rather not disputed any of the entries of the Balance Sheet for the current year, the opening cash in hand of the subjected amount of Rs. 16,98,502/- should have been accepted as available balance with the assessee. Thus, once the assessee based on the all the evidence which are not under dispute submit that the same is out of the opening cash in hand no addition can be made in the year under consideration. The ld. AO assumed opening cash balance as `Nil` on the suspicion that whatever the assessee had earned in the preceding years stood utilized towards expenses or in making the investments and also alleged that the assessee failed to prove the existence of cash in hand and accordingly he considered Rs. 16,98,502/- as undisclosed income of the current year. Thus, what the ld. AO added was the opening balance of cash in hand in this year which is legally impermissible on the face of it. Although the ld. AO has not invoked any particular provision of law yet however, assuming that it was a case of S.68 (or even u/s 69A), the provision speaks of the credit found during the previous year in the books of account maintained by the assessee. Therefore,....