TaxTMI 
TaxTMI 
2025 (8) TMI 1591
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.... the outcome of the lead case shall apply mutatis mutandis to the remaining other matters. 3. The grounds of appeal along with additional ground of appeal raised by the assessee, assailing the impugned orders in all the aforesaid appeals are extracted as under: Ground of appeal in ITA no. 158/RPR/2024 (2015-16) 1. On the facts and circumstances of the case and in law, reopening u/s 148/147 is invalid as based on borrowed satisfaction of escaped income of Rs. 3,59,78,500 on 'cash withdrawal from bank', which is related *to receipts from debtors against accounted sales; it is only 'reason to suspect',merely verifying the 'cash withdrawal'; there is live link/ nexus between the 'information of cash withdrawal' & 'formation of believe' for alleged escaped income of Rs.3,59,78,500;'in absence of pre-requisite condition for assuming jurisdiction u/s147, reopening *u/s 148/147 would be. invalid; liable to be quashed; relied on Lakhmani Mewaldas (1976) (SC); Shodiman Investments (P) Ltd (2018) (Born); Meenakshi Overseas (P) Ltd (2017) (Del HC); Smt Sudesh Rani (2023) (Chd-Trib); Jai Prakash Gupta (2021) (Kol-Trib); 2. On t....
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.... circumstances of the case and in law, reassessment made u/s 147 is invalid as there is addition made of Rs. 41,55,130 on count of undisclosed business income (i.e., u/s28) which is not the issue of the 'reasons recorded'; the 'very basis' of reopening was 'unverifiable/ unexplained deposits/ credits into bank' (i.e., u/s 69A/68) and no addition made on the 'very issue'; addition made on an 'independent issue' of 'business income', which is not the part of the 'reasons recorded' earlier, is not permissible in the eyes of law; reassessment made u/s 147 would be invalid & is liable to be quashed; relied on Shri Ram Singh (2008) (Raj); Prosperous Buildcon (P) Ltd (2023) (Del HC). 3. On the facts and circumstances of the case and in law, reopening u/s 148/147 is invalid as based on borrowed satisfaction of escaped income of Rs. 8,31,02,597 on the count of 'deposits/ RTGS credits into bank', which is related to receipts from debtors against accounted sales; it is only 'reason to suspect' merely for verifying the 'deposits/ RTGS credits into bank'; there is no live link/ nexus between the 'inform....
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.... circumstances of the case and in law, assessment made u/s147 rws. 144B dt.26-3-22 is invalid as Id AO has not issued notice u/s143(2) after filing letter dt.8-3-22 enclosing original ROI filed on 9-3-18 showing income of Rs. 49,810 by mentioning that in response to notice issued u/s148; in absence of a notice u/s143(2), assessment made u/s147 rws.144B would be invalid and is liable to be quashed." Grounds of appeal in ITA no. 160/RPR/2024 (2017-18) 1. On the facts and circumstances of the case and in law, approval granted u/s151(2) by JCIT is invalid; JCIT has not cared/ not pointed out the mistake of the AO in proposal form u/s151(2) i.e., incorrect amount of Rs. 1,88,67,200 which is,'cash,withdrawal *from bank'; while as per annexure to the proposal form, escaped income is 'Rs. 5,95,39,179 on the different issue of 'deposits/ credits into bank'; approval granted u/s 151(2) without application of mind in a mechanical manner without verifying the facts/issue involved; in absence of a valid approval granted u/s 151(2) by JCIT as mandated by law u/s 151; impugned reopening u/s 148/147 would be invalid; is liable to be quashed; relied on Kalpana Shanti....
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....lter, modify or withdraw any grounds before or at the time of hearing. Additional ground of appeal in ITA no. 160/RPR/2024 "I. On the facts and circumstances of the case and in law, assessment made u/s 147 rws.144B dt.26-3-22 is invalid as Id AO has not issued notice u/s143(2) after filing letter dt.8-3-22 enclosing original ROI filed on 24-3-18 showing income of Rs. 1,18,690 by mentioning that in response to notice issued u/s148; in absence of a notice u/s 143(2), assessment made u/s147 rws.144B would be invalid and is liable to be quashed." 4. Brief facts of the lead case are that the assessee has filed his Return of Income for the A.Y. 2016-17 on 09.03.2018, admitting total income at Rs. 49,810/-. The assessee is engaged in trading business of paddy, rice, other bi-product and transport work. The return was processed u/s. 143(1) on 02.06.2015. There was credible information shared by the Income Tax Officer (Inv.), Raipur that the assessee's bank account were credited through RTGS, which subsequently, has been followed by cash withdrawals and the total credit made in bank account of the assessee during the AY 2016-17 was Rs. 8,31,02,597/- out of which total cash wi....
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..../2022, the final conclusion by the Ld. AO was that the credits in bank account of the assessee remained unexplained, the assessee is engaged in the business of trading in Paddy, Rice, other by products and transport, thus, the credits are in the nature of business receipts of the assessee, thus, towards total credits of Rs. 8,31,02,597/- an estimated addition of 5% has been held as business income of the assessee, which works out to Rs. 41,55,130/-, and the same is added back to the income of assessee. 7. Aggrieved with the aforesaid additions, assessee preferred an appeal before the Ld. CIT(A), however, with no success the appeal of the assessee has been dismissed by the Ld. CIT(A), with the following observations: Findings and Decisions: Revised Ground No.1, 2, 3 & 4 The appellant in his revised ground of appeal, has challenged the reopening of the assessment, stating that the reason was recorded without having tangible material for escaped assessment of Rs. 8,31,02,597/- merely on presumption and surmise only based on information received from ITO(lnv), Raipur. The appellant further claimed that granting of approval on the same day (i.e.30/03/....
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....ed and outcome of enquiry conducted by the AO. It is appellant's duty to prove himself free from allegation for which the case was taken up for scrutiny by reopening of the case, by furnishing substantial details/documents, which the appellant failed to do during the course of assessment proceedings as well as during the course of appellate proceedings. Simply saying that the reason recorded without application of mind on fallacious assumption, could not prove the genuineness of the trade/business of the appellant. The genuineness of the trade made by the appellant could only be proved by furnishing substantial valid documents. As the appellant had huge credit and subsequent cash withdrawals in the bank account during the year under concerned, notices u/s 142(1) of the IT Act were issued, calling for details during the course of assessment proceedings. However, the appellant instead of submitting the same, was non-responsive. And when a final call was made by the AO by issue of a show cause notice, the appellant became responsive with insufficient details. Further, the appellant was given opportunity to furnish remaining details called for vide notices u/s 142(1) of the IT Act ....
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....which were called for, vide notices u/s 142(1) of the I T Act including show cause notice by the AO during the course of the assessment proceedings.However, the appellant failed to submit the same. The AO, decided the case by keeping in mind the nature of business of the appellant. As the appellant was engaged in the business of trading of paddy, rice, other biproduct and transport, having credits of Rs. 8,31,02,597/- in the bank account, 5% of total credits, which arrived at Rs. 41,55,130/-, was considered as reasonable income earned during the year by the appellant in absence of sufficient submission of the appellant and added back to income of the appellant by the AO. The AO, had no option but to pass the order u/s 147 r.w.s 144 r.w.s 1448 of the I T Act on the basis of insufficient submission of the appellant and other material available on record. The appellant has not submitted any substantial details/documents with respect to the subject matters on huge credits and subsequent followed by cash withdrawals, except written submission with regard to reopening of assessment which was raised under revised grounds of appeal, during the course of appellate....
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....2, after the issuance of notice u/s 148 on 30.03.2021. On perusal of letter of assessee dated 08.03.2022, it is apparent that the assessee has mentioned at point no. 2 of the said letter, "the copy of return of income filed in response to notice u/s 148 along with computation and financial statement are enclosed herewith". However, admittedly, there was no return filed by the assessee in response to notice u/s 148. The copy of return enclosed with the letter was the original return u/s 139 dated 09.03.2018 declaring total income of Rs. 49,810/-, but there was no averment by the assessee that such return should be treated as return in response to notice u/s 148. Under such circumstances, as there was no return in response to notice u/s 148 filed by the assessee, it was not obligatory upon the Ld. AO to issue the notice u/s 143(2). In backdrop of such facts and circumstances, we find substance in the assertions of the revenue, accordingly, we reject the additional ground raised by the Ld. AR in the present case. In result, additional ground no. 1 of the assessee stands dismissed. 12. Ground No. 1 & 4: Challenging the validity of reopening assessment of the concluded assessment and....
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....ed out the mistake of the AO in Proposal Form u/sl51(2) i.e., incorrect issue of cash withdrawal ofRs. 4,67,78,900; while in the reasons recorded, it is Rs. 8,31,02,597 on the different issue of 'deposits/ credits into bank'; he has not even cared that the case comes to cls.(c) of Expl.2 to sec 147 which requires certain conditions under (i), (ii), (iii) & (iv) which has to be fulfilled before granting such statutory sanction by such high ranking officer, it is judicial exercise,- rather, he has granted on presumption of cls.(b) which is applicable for where no assessment has been made, which is not applicable to the assessee; approval granted u/s151(2) is without application of mind by the Jt.CIT in a mechanical manner without verifying the facts/ issue involved in the case; in absence of a valid approval granted u/s151(2) by Jt. CIT, which is sine qua non for a valid reopening of the case, reopening u/sl48/147 would be invalid. 18. Kalpana Shantilal Haria (2017) (Born HC) (2017) WPNo.3063 of 2017 19. Kartik Sureshchandra Gandhi (2023) (Born HC) (2023) 154 taxmann.com 193 20. Ram Nebhnani Huf (2023) (Born HC) (2023) 7 NYPCTR 1660 21. Sho....
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....oresaid issue submitted that the reopening was done based on the issue of "unverifiable/ unexplained deposits / credit into bank", whereas the additions are made on the issue of undisclosed business income. It was the submission that there was no addition on the very issue, which was the basis for reopening, the addition was made on an independent issue of business income which is not the part of reasons recorded, therefore, the same is not permissible in the eyes of law. Ld. AR placed his reliance on the judgment in the Rajasthan High Court in the case of Ramsingh (2008) (Raj), Prosperous Buildcon Pvt. Ltd. (2023) (Delhi HC). 13.2 Ld. AR further submitted that there is no live link / nexus between the information of deposit into bank and formation of belief alleging escaped income of Rs. 8,31,02,597/-. It is the submission that the receipt in bank are from debtors against accounted sales, it is only reason to suspect merely to verify the deposit / RTGS credit into bank, therefore, there is no live link between the information and the formation of belief which is precondition, sine qua non for assuming jurisdiction u/s 147. Ld. AR further argued that the Ld. AO has only referred....
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....rokers Pvt. Ltd. (2007) 291 IR 500 (SC), the Supreme Court had explained that expression "reason to believe" would mean justification to know or suppose that income had escaped assessment. While, it is correct that it is not necessary for the Assessing Officer to finally ascertain whether income had escaped assessment, nonetheless, the Assessing Officer must have sufficient cause to believe that it has. 25. In the present case, as may be seen, there is no "close nexus" or "live link" between tangible material and the reason to believe that income has escaped assessment. The information received from the Investigating Unit of the Revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. 26. Clearly, in this case, the Assessing Officer has not acquired any material to form such belief. ....
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.... Raipur. The Ld. AO had requested the assessee time and again to furnish necessary information and explanation qua these transactions, however, the assessee failed to substantiate the same under such circumstances, a plausible view considering the assessee's nature of business was taken by the LD. AO by estimating the income of the assessee, therefore, it cannot be held that the addition was made on an independent issue alien to the very basis for formation of belief or there was no live link between the information and the formation of belief, while recording the reasons for reopening. In such circumstances, we do not find any substance in the contention raised by the Ld. AR, thus, Ground No. 2 & 3 of the appeal of the assessee are rejected. 14. Ground No. 5: Regarding sustaining the addition of Rs. 41,55,130/- on adhoc basis on 5% of deposits / RTGS credit into bank account, which relates to receipt from debtors against accounted / disclosed sale in the books of assessee. 14.1 On merits, Ld. AR submitted that the assessment u/s 147 r.w.s. 144 r.w.s. 144B was completed by estimating the income of the assessee at 5% of deposits / RTGS credits in the bank account of the assess....
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.... 10. In the present case, the AO while passing the assessment order under Section 143(3) read with Section 254 of the Act came to the conclusion that though all the purchases of country liquor were from Ganganagar Sugar Mills Limited, a Government undertaking, and the same were fully vouched but, in the absence of a primary record like sale vouchers, the assessee had shown sales in the manner suitable to it; and, while holding that the books of account maintained by the assessee were not reliable, applied provisions of Section 145(2) of the Act and rejected the same. The AO then held that the profit of the country liquor business of the assessee had to be determined in comparison with other analogous assessee engaged in the same line of business because considering the stiff competition for acquiring monopoly rights, it could be reasonably presumed that the assessees were likely to have profit comparable with each other. The AO then compared the case of the assessee with a contractor of the adjoining area, M/s Malu Khan & Party, Bikaner, who had shown the net profit at 22.70% for the period in question; and assessed the assessee by taking 20.5% net profit instead of 19.13% as decla....
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....ITR 677/[2002]120 Taxman 798, this Court while considering a case of another liquor contractor upheld the order passed by the Tribunal which relied on the assessee's own case in the immediate preceding year and the appeal filed by the Revenue was dismissed. 14. The findings of the Tribunal reproduced herein-above make it clear that the Tribunal has examined the issue involved in its correct prospective and has assigned cogent reasons for not approving the order passed by the AO. The AO was obviously in error in taking the case of M/s Malu Khan & Party as a comparable one for the reasons given by CIT(A) and in the face of assessee's available and consistent past history. 15. In our view, ultimately, the matter had been of putting a estimate on the profit of the assessee while recording the findings on facts. The CIT(A) has given cogent reason for not endorsing the approach of the AO in making assessment with reference to the case of another assessee after finding it to be not a directly comparable case and hence, not a safe guide more particularly, when assessee's past history was available and there was no material difference in the facts pertaining to....
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....R and, rightly so, there was no justification on the part of the A.O to have adopted the aforesaid basis which as the same was not supported by any concrete basis. On the contrary, in our considered view the estimation of the assessee's income for the year under consideration could have been safely done by taking cognizance of its disclosed gross profit rates for the immediately three preceding years [out of which two years had been subjected to scrutiny assessment u/s. 143(3) of the Act], as well as that of the immediately succeeding year which too have been subjected to a scrutiny assessment u/s.143(3) of the Act, as under:- 31-3-10 AY10-11 31-3-11 AY11-12 31-03-12 A.Y.12-13 31-03-13 AY13-14 31-3-14 AY14-15 Sales of cigarette & tobacco 3,12,33,449 32,57,36,624 46,88,63,846 52,95,15,913 59,28,42,427 Sales of other products 6,64,57,045 6,43,70,340 8,27,54,937 9,97,38,393 1,08,8,16,426 -Discount (4,09,223) 7,01,740 12,40,700 13,47,913 19,49,102 Total sales 37,83,81,271 38,94,05,225 55,03,78,083 62,79,06,393 69,97,09,751 Gross profit 58,97,879 60,02,818 83,43,446 96,11,100 ....
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....ks of the assessee and all such entries reflects assessee's explained / accounted turnover / sales or not. Although the bank accounts are available with the Ld. AO during the reopening assessment, but Ld. AO was unable to decide the nature of transactions in absence of any explanation by the assessee, therefore, the impugned transactions are subject matter of verification. Before us, Ld. AR has furnished copies of bank statements maintained with various banks having large entries of transactions and as observed all such transactions are subject to verification with the audited accounts of the assessee, therefore, in all fairness, this issue needs to be restored to the files of Ld. AO for examination, verification and re-adjudication based on material on record and if Ld. AO found it correct that the credit entries in the bank account are duly incorporated in the books of assessee as recorded / accounted transactions and profit generated from such transactions is offered for taxation than there was no reason for estimation, however, in case in a different situation, if the estimation has to be adopted the same should be in the range of average profits of the assessee in preceding 3 ....
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....s of our observations and decision in ITA no. 159/RPR/2024 for the AY 2016-17, wherein our findings shall apply mutatis mutandis to the grounds of appeal in ITA No. 160/RPR/2024. Resultantly, the same is partly allowed for statistical purposes. 17. In combined result, ITA No. 158, 159 & 160/RPR/2024 of the assessee for the AY 2015-16, 2016-17 & 2017-18 respectively, are partly allowed for statistical purposes. Order pronounced in the open court on 16/01/2025. ============= Document 1 b/C 17/05/24 -- Govt. of India Ministry of Finance :Deptt. Of Revenue OFFICE OF THE JT. COMMISSIONER OF INCOME TAX, ITAT B &C Wing, 5th floor, Central Secretariat Building Sector-24, Atal Nagar, Naya Raipur (CG) e-mail:[email protected] F.No. JCIT (ITAT)/PKA/RPR/2023-24/ Date 17.05.2024 To The Hon'ble Members, DB Bench, ITAT, Raipur Sirs, Sub: Submission of report of AO in the below mentioned case -reg. Appellate No. Name of the assessee PAN AY Listed on ITA- 159/RPR/2024 Pradeep Kumar Agrawal ACHPA6856B 2016-17 20.05.2024 Kindly refer to the above. 2. As per the directions, I am submitting herewith the report of AO in the above mentione....
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.... the AO has not issued notice u/s 143(2) after filing letter dated 08.03.2022 enclosing original ROI filed on 09.03.2018 by mentioning that it is in response to the notice issued u/s 148. In this regard, it is submitted that the assessee in his letter dated 08.03.2022 only mentioned that "The copy of Return of Income filed in response to Notice u/s 148 along with computation and financial statements are enclosed herewith." The assessee not mentioned that the original return filed on 09.03.2018 may be treated as return against notice u/s 148, he only mentioned that the copy of return of income filed in response to notice u/s 148 is enclosed but actually no any return has been filed by the assessee in response to notice u/s 148. Document 3 For the sake of convenience the screenshot of letter dated 08.03.2022 of the assessce is pasted as under :- Dated - QS 03/2022 To The Income tax Officer. Additional/ Joint Deputy'Assistant Commissioner of Income Tax. National Faceless Assessment Centre Delhi Reg .- Pradeep Kumar Agrawal. Ram Janki Mandır. Sadar Bazar, Dlamtari (C.G.) PAN-ACHPA6856B. Ref .- Notice under sub section (1) of section 142 of the Income Tax Act, ....
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....see was allowed sufficient opportunities during assessment/appellate proceeding for submission of documents/evidences relating to transactions made by the assessee during the year under consideration. But the assessee has not tried to submit the relevant information/document/evidences before the AO as well as Id. CIT(A). Further, the assessee has turned up before the Hon'ble ITAT and raised additional ground of appeal which should not be considered. Therefore, it is kindly requested to not consider the additional ground of appeal raised by the assessee. The case record which extracted from the system is enclosed in 1 vol. Yours faithfully, Encl .: As above. Income Tax Officer, Dhamtari (R.K. Satpute) Copy to: 1. The Pr. Commissioner of Income Tax-1, Raipur for kind information. 2. The Joint Commissioner of Income Tax, Range-1, Raipur for kind information. Income Tax Officer, Dhamtari Document 5 DOH : 30/09/24 Government of India Ministry of Finance: Department of Revenue CENTRAL BOARD OF DIRECT TAXES OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX (ITAT), Raipur (C.G.) F.No. JCIT (ITAT)/RPR/Clarification-PKA/2024-25/ Date: 27.09.2024 To Hon'bl....
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....Agrawal, PAN-ACHPA6856B 2016-17 Note-sheet Page 1 to 2 Correspondence - Page 1 to 113 Yours faithfully, Adam (Alok Ranjan) Income Tax Officer, Dhamtari Encl .: As above. Copy to the Joint Commissioner of Income Tax, Range-1, Raipur sd- Income Tax Officer, Dhamtari Document 7 Office of the Income Tax Officer (Investigation) Central Revenue Building, Civil Lines, Raipur (C.G.) Date: 10.03.2021 F.No.ITO(Inv.)/RPR/STR/10039600/2020-21/ To The Jurisdictional Assessing Officer Sir Sub: Suspicious Transaction Report in the case of M/s Narayan Indusries, Prop. Shri Pradeep Kumar Agrawal, H. No. 19, Ram Janki Mandir, Sadar Bazar, Dhamtari- PAN: ACHPA6856B- Regarding- Kindly refer to the above. Information provided about the subject that during the period from February 2013 to July 2013, he received total credits aggregating to Rs.3.50 crores which mainly includes RTGS in his bank account maintained at HDFC Bank, having account number 07882560001154. The credits were followed by cash withdrawal. The bank statement of the subject maintained at HDFC Bank, having account number 07882560001154 obtained. The subject maintains other accounts. These bank s....
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....ed on different dates, the cash withdrawal made by the subject from his bank accounts in the above assessment years remain unexplained. Moreover, the cash in hand declared by the subject in his returns of income, from A.Y.2012-13 to A.Y.2016-17 does not commensurate with the cash withdrawal made by him during the A.Y.2013-14 to A. Y.2017-18. Therefore, you are requested to take suitable action u/s 148 of the Income Tax Act. 1961 for the unexplained expenditure made by the subject og tabulated below ;- A.Y. 2013-14 2014-15 2015-16 2016-17 2017-18 Unexplained expenditure 4,01,95.400 4.32.20.840 3.59,78,500 4,67,78,900 1,88,67,200 Yours faithfully (N. Ravi Shankar) Income Tax Officer (Inv.), Raipur Document 10 Pradeep Kumar * ~ rawal ... 16-17 1.4. the information received from ITO(Inv.), Raipur dt. 10-3-21, is as under AY13-14 AY14-15 AY15-16 AY16-17 AY17-18 Gross receipts as per ITR -as per information of ITO (Inv.) 9,79,61,190 10,02,02,884 10,15,80,027 8,37,26,439 9,62,66,624 Total credits/ deposits -as per information of ITO (Inv.) 4,09,20,076 9,01,18,102 9,19,51,673 8,31,02,597 5,95,39,179 Total cash withdrawals -as per information 4,01,95,400 4,32....