TaxTMI 
TaxTMI 
2025 (6) TMI 1527
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.... relevant portion of the order of learned CIT(A) is reproduced as under: 2. Aggrieved by the above order the assessee filed further appeal before the CIT(A) raising following Statement of facts & Grounds of Appeal :- Statement of Facts :- 1. That the appellant is engaged in the business of wholesale trading business of PVC Pipe fittings and Sanitary Goods. That the assesse had maintained proper Books of Accounts and accounts of the assesse has been audited by Chartered Accountant. 2. The appellant has filed his return of income for F.Y. 2016-17 on 24/10/2017 showing net income amounting to Rs. 754790/-. That the assesse has deposited Rs. 16,10,000/- in his bank account during the period of demonetization. However a notice u/s 133(6) was received from Deputy Director of income tax investigation, Lucknow and he ask to explain source of cash deposit of Rs. 3510000/- in his bank account during the period 08/11/2016 to 31/03/2017. That the reply was filed in compliance to this notice on 01/03/2021. 3. That the case of the assesse has been reopened u/s 147 and a notice u/s 148 of Income tax Act, 1961 was issued on 30/03/2021. During the e- assessment proceedings in compliance t....
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....as required were filed through e-filing portal before the Assessing Officer. Before making submission on the above ground, your honor I would like to make you aware about the facts of the case. The brief note of the case history is as under -: 2. That the appellant is carrying on wholesale trading business of PVC Pipe fittings and Sanitary Goods. That the assesse had maintained proper Books of Accounts and accounts of the assesse has been audited by Chartered Accountant. 3. The appellant has filed his return of income for F.Y. 2016-17 relate to A.Y. 2017-18 on 24/10/2017 showing net income amounting to Rs. 7,54,790/-. That the assessee has deposited only Rs. 16,10,000/- in his bank account during the period of demonetization. The same was even disclosed in ITR filed for A.Y- 2017-18 on 24/10/2017 at Page no. 15 of ITR. 4. A notice u/s 133(6) was received from Deputy Director of income tax investigation Lucknow and he has asked to explain source of cash deposit of Rs. 35,10,000/- in his bank account during the period 08/11/2016 to 31/03/2017. That the reply was filed in compliance to this notice on 01/03/2021. In the reply filed it has been mentioned that the appellant has d....
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....essee had escaped assessment on the basis of information that the assessee had total receipt of about Rs.1,76 crores as per Form No.26AS and further that the assessee had not filed the return of income for the year under consideration. However, on the receipt of notice u/s 148 of the Act, the assessee filed objections against the reopening of the assessment stating therein that the information on the basis of which the Assessing Officer had form belief of escapement of income was, in fact, a wrong information. In fact, the assessee had duly filed his return of income and further all the receipts could not be construed as the income of the assessee. In our view, as per the above factual position, when it has been brought to the knowledge of the Assessing Officer that the ITA No. 6925/Del/2018 24 | P a g e information on the basis of which he (Assessing Officer) had formed belief of escapement of income was in fact a wrong information, then the very belief of the Assessing Officer of escapement of income of the assessee on the basis of such information also ceased to exist. The Assessing Officer, under the circumstances, should have applied his mind afresh to the fresh information br....
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..../03/2021 making as addition of Rs. 35,10,000/- towards the income of the appellant. As per Bank statement and bank certificate it was clear that the appellant had deposited only Rs. 16,50,000/- in his bank account. Since the assessing Officer has reopened the case based on wrong information, due to which to safeguard his position he has not accepted the bank certificate and bank statement and wrongly added Rs. 35,10,000/- towards the income of the appellant against the principles of natural justice. Therefore the addition made of Rs. 35,10,000/- deserves to be deleted. Ground No. 2 Because the learned assessing officer erred both on facts and in law in making an addition of 35,10,000.00 as addition of unexplained money and taxed u/s 69A of the IT ACT,1961. The assessee was issued notice on the basis of information received that assessee has deposited cash to the tune of 35,10,000/- in his bank account. The learned Assessing Officer has failed to appreciate the fact that the total amount appearing as deposit in the account was not cash credit. Even the cash amount deposited in his bank A/c No- 036740150001485 of Punjab National Bank (formally known as Oriental Bank of Commer....
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....ssing officer has passed the order making addition u/s 69A of the I.T. Act, 1961 without considering the evidences filed before him during the assessment proceedings. When the amount of Rs 16,50,000/- is already included in the books of the appellant, therefore the addition made of the same is tantamount to double addition in the hands of the appellant which is illegal and the addition made deserves to be deleted by quashing the impugned order passed. The learned assessing officer has passed the order against the principles of natural justice by ignoring the reply submission of the appellant, which is purely a harassment for the honest taxpayer. 4. Adjudication of the relevant grounds of appeal :- 4(a). In these grounds, the assessee mainly contested the addition of Rs. 35,10,000/- made by the AO on account of unexplained money u/s. 69A of the IT Act. 4(b). I have considered the facts & submissions of the case. I have also considered the assessee's submissions. During the course of assessment proceedings, the appellant stated that the cash deposits were mainly from sale of PVS pipes and fitting and sanitary goods and also due to available opening cash balance but the asse....
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....d from the investigation is for Rs. 35,10,000/-. The learned assessing officer has issued the notice for reopening of the case without verifying the bank statement of the appellant. The actual cash deposit during the demonetization period was Rs. 16,50,000/- out of business transactions and cash in hand. The books of accounts are audited and the transaction of sales are already mentioned in the financials. These facts have been verified by the learned CIT (Appeal) and agreed upon the same after verifying the evidences that the cash deposit is actually Rs. 16,50,000/- and not Rs. 35,10,000/-. Thus, the case has been reopened on wrong information and reason for reopening of the case is wrong and without application of mind, thus the order passed deserves to be quashed. 3. The learned CIT (Appeal) has verified the cash book and sales details again submitted before him. These details are found correct that cash has been deposited out of cash in hand and from sales proceedings and that too Rs. 16,50,000/- and not Rs. 35,10,000/-. The notice issued u/s 148 is bad in law and the order passed by the learned assessing officer is bad in law. 4. The Learned CIT (Appeal) has allowed appeal....
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....he following aspects with regard to the law of reopening of assessment under section 147 of the Act which is well settled legal propositions wherein, it is held as under: 32. The law as regards the reopening of the assessment under Section 147 of the Act 1961 is well-settled. (i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedin....
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....essee either (a) to make a return of income under section 139 or in response to the notice issued under sub- section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. (x) The Assessing Officer, being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. (xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression "....
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....rial facts, which if not disclosed, would not allow the Assessing Officer to make the necessary inquiries. (xix) The word "information" in Section 147 means "instruction or knowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute i....
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....rted in [1995] 5 SCC 302 as well has held that if a statutory authority has been vested with the jurisdiction, it has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. The cases reopened on the basis of information received from the other departments are also governed by the aforesaid principle of making an independent inquiry and recording of satisfaction by the Assessing Officer issuing notice under Section 148 of the Act. 37. A third party information is only an information and does not constitute 'reason to believe' until and unless the third party information is subjected to investigation and, on the basis thereof, independent reasons are recorded by the Assessing Officer before issuance of notice under Section 148 of the Act. 9.5 Considering the above conspectus of law, we are unable to look into the material referred to and relied upon by learned Senior Standing Counsel Mr.Patel to justify the reasons recorded so as to draw a presumption by us that the Assessing Officer has committed an error ....