The fact of deposit of cash of Rs.14.00 lacs and not filing of return of income by assessee, itself constituted a tangible material to form the belief that income assessable to tax had escaped assessment.

Short Overview The very fact of deposit of cash of Rs.14.00 lacs and not filing of return of income by assessee, itself constituted a tangible material to form the belief that income assessable to tax had escaped assessment.

Assessee challenged validity of reassessment proceedings wherein AO made addition of Rs.15,50,000 on account of alleged unexplained cash under section 68. 

It is held that  AO found out facts of deposit of cash of Rs.14.00 lacs in bank account of the assessee and no return of income was filed for year under consideration. Thus, that very fact of deposit of cash of Rs.14.00 lacs and not filing of return of income by assessee, itself constituted a tangible material to form the belief that income assessable to tax had escaped assessment.

Decision: Against the assessee. 

Referred:  Chhugamal Rajpal v. SP Chaliha & Ors. (1971) 79 ITR 603(SC): 1971 TaxPub (DT) 0314 (SC); Prem Chand Shaw (Jaiswal) v. Asstt. CIT (2016) 383 ITR 597(Cal):2016 TaxPub (DT) 1688 (Cal-HC); Pioneer Town Planners (P) Ltd. v. Dy. CIT (ITA No. 132/Del/2018–ITAT Delhi Bench) : 2018 Tax Pub(DT) 5311  (Del-Trib); Amarlal Bajaj v.Asstt. CIT(2013) 37 Taxmann.com 7 (Mumbai Trib).

 

IN THE ITAT, JAIPUR BENCH

VIJAY PAL RAO, J.M. & VIKRAM SINGH YADAV, A.M.

Pillu Ram Sahal v. ITO

ITA No. 306/JP/2019

7 January, 2020

Assessee by: Rajeev Sogani, CA

Revenue by: Chanchal Meena, Joint Commissioner–Departmental Representative

Vijay Pal Rao, J.M.

This appeal by the assessee is directed against the order of learned Commissioner (Appeals), Ajmer, dated 28-1-2019 for the assessment year 2010-11. The assessee has raised the following grounds.

(1) In the facts and circumstances of the case and in law the learned Commissioner (Appeals) has erred in confirming the actions of the assessing officer in reopening the assessment under section 147 of the Income Tax Act, 1961. The action of the learned Commissioner (Appeals) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.

(2) In the facts and circumstances of the case and in law the learned Commissioner (Appeals) has erred in confirming the actions of the assessing officer in issuing notice under section 148 of the Income Tax Act, 1961 without obtaining sanction uu151 of the Income Tax Act, 1961. The action of the learned Commissioner (Appeals) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.

(3) In the facts and circumstances of the case and in law the learned Commissioner (Appeals) has erred in confirming the actions of the assessing officer in making an addition of Rs. 15,50,000 on account of alleged unexplained cash under section 68 of the Income Tax Act, 1961. The action of the learned Commissioner (Appeals) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the addition of Rs. 15,50,000”

2.1 The Ground Nos. 1 and 2 of the assessee are regarding validity of initiation of proceedings under section 147/148 of the Act.

2.2 The assessee is an individual and not filed the return of income under section 139 of the Act. The assessing officer on the basis of information received noted that the assessee has made the deposit in cash of Rs. 14.00 lacs in the bank account with Bank of Baroda. The assessing officer had initiated the proceedings under section 147/148 of the Act by issuing notice under section 148 on 27-3-2017. The assessing officer completed the assessment under section 143(3) read with section 147 of the Act on 12-10-2017 whereby the addition of Rs. 15.50 lacs was made on account of unexplained deposit in the bank account. The assessee challenged the action of the assessing officer including the validity of reopening of assessment before the learned Commissioner (Appeals) but could not succeed.

2.3 Before the Tribunal, the learned Authorised Representative of the assessee submitted that due approval granted by the learned Principal Commissioner is mechanical and without any application of mind. Therefore, the reopening of assessment is not sustainable in law. In support of his contention, the learned Authorised Representative of the assessee relied on following decisions.

(1) Chhugamal Rajpal v. S.P. Chaliha (1971) 79 ITR 603 (SC) : 1971 TaxPub(DT) 0314 (SC) 

(2) Amarlal Bajaj v. ACIT (2013) 37 Taxmann.com 7 (Mumbai Trib)

(3) Pioneer Town Planners (P) Ltd. v. DCIT (ITA No. 132/Del/2018–ITAT Delhi Bench) : 2018 TaxPub(DT) 5311 (Del-Trib) 

Thus the learned Authorised Representative of the assessee submitted that learned Principal Commissioner just noted the word ‘Yes’ and affixed his signature thereunder by granting the approval mechanically and without application of mind to the facts of the case.

Therefore, the said approval granted by the learned Principal Commissioner is not the valid sanction and consequently the reopening of the assessment is liable to be quashed.

2.4 On the other hand, the learned Departmental Representative submitted that when it is a case of deposit of cash in the bank account of the assessee which is not in dispute then the said facts itself constitute the tangible material to form the belief that income assessable to tax has escaped assessment as the assessee has not filed any return of income. Therefore, in the facts and circumstances of the case when there is no possibility of any second view then considering those reasons recorded by the assessing officer, the approval granted by the learned Principal Commissioner on the basis of recommendation of Joint Commissioner is valid and proper. In support of her contentions, the learned Departmental Representative has relied on the decision of Hon’ble Calcutta High Court in the case of Prem Chand Shah (Jaisawal) v. ACIT, (2016) 383 ITR 597 (Cal) : 2016 TaxPub(DT) 1688 (Cal-HC).

2.5 We have considered the rival submissions as well as the materials available on record. The assessing officer has recorded the reasons for reopening of the assessment as under:–

”As per ITS details of financial year 2009-10, the assessee has deposited cash of Rs. 14,00,000 in Bank of Baroda, VKI Area, Jaipur during the financial year but no return of income has been filed for the assessment year 2010-11. Thus this transaction is not verifiable and the assessee did not disclose fully and truly all material facts necessary for assessment. Therefore, I have reason to believe that income of Rs. 14,00,000 has escaped assessment.

In view of the above reasons, it is requested that necessary approval may kindly be accorded.”

The assessing officer has found out the facts of deposit of cash of Rs. 14.00 lacs in the bank account of the assessee and no return of income has been filed by the assessee for the year under consideration. Thus this very fact of deposit of cash of Rs. 14.00 lacs and not filing of the return of income by the assessee itself constitute a tangible material to form the belief that income assessable to tax has escaped assessment. We further note that Joint Commissioner after considering the reasons also recommended the reasons recorded by the assessing officer for issuing notice under section 148 of the Act. Based on these facts, the learned Principal Commissioner finally granted the approval. Therefore, it was not a case where the prudent person could have taken another view or opinion.

Accordingly, we do not find any error or illegality in the impugned order of the learned Commissioner (Appeals) upholding the validity of reopening of the assessment.

3.1 The Ground No. 3 of the assessee is regarding an addition of Rs. 15.50 lacs made under section 68 of the Act.

3.2 The assessing officer made an addition on account of unexplained cash deposited in the bank account of the assessee. The assessee contended before the assessing officer as well as learned Commissioner (Appeals) that this amount was deposited out of past savings. The assessee further explained that it is his life long savings and finally deposited in the bank account as it was required by his son for business purposes. Therefore, due to compulsion of the wife of the assessee, the assessee had deposited this amount in the bank account which was utilized by his son for his business purposes. The assessing officer found that the assessee has not substantiated the explanation of source of deposit by any documentary evidence. The learned Commissioner (Appeals) has confirmed the addition made by the assessing officer.

3.3 Before us, the learned Authorised Representative of the assessee submitted that when the assessing officer has rejected the contention of the assessee of past savings due to meager income then the amount deposited by the assessee in the bank account cannot be assessed as income of the assessee and the assessing officer himself has given the findings that the assessee was not having sufficient income to save huge amount. Thus the learned Authorised Representative of the assessee contended that the amount which was used by his son who becomes the beneficial owner of the amount could have been assssed in the hands of the son and not in the hands of the assessee. In support of his contentions, the learned Authorised Representative of the assessee relied on the decision of Hon’ble Supreme Court in the case of CIT v. Smt. P.K. Noorjahan (1999) 103 Taxman 382 (SC) : 1999 TaxPub(DT) 0080 (SC). The learned Authorised Representative of the assessee submitted that Hon’ble Supreme Court upheld the order of the Tribunal holding that the assessee could not be credited with having made any income of her own. The learned Authorised Representative of the assessee thus contended that when the assessee was not having sufficient income to make deposit in the bank account then the said amount cannot be added to the income of the assessee.

3.4 On the other hand, the learned Departmental Representative relied on the orders of authorities below and submitted that the assessee has failed to explain the source of deposits in the bank. The assessing officer has noted that except claiming the opening balance of Rs. 15.75 lacs to explain the source of deposits in the bank account, the assessee has not produced any evidence for saving of the said amount.

3.5 We have considered the rival submissions as well as the materials available on record. The facts are not in dispute that the assessee has deposited the cash in the bank account to the tune of Rs. 14.00 lacs on 16-2-2010 with Bank of Baroda. The said amount was used for taking the draft on 18-2-2010. The assessee explained before the assessing officer that the deposits of the cash were made out of past savings of the assessee. The learned Authorised Representative of the assessee produced cash book prepared by the assessee to show that this was an opening balance. However, since the assessee was not assessed to tax and there was no supporting evidence for having the opening credit balance of Rs. 15.75 lacs, therefore, the assessing officer after allowing the benefit of Rs. 25,000 has made the addition of remaining amount of Rs. 15.50 lacs. Though the said addition made by the assessing officer is based on cash book and over and above the deposit of Rs. 14.00 lacs is not justified when cash book itself was rejected by the assessing officer, however, the question remains regarding the source of deposit of Rs. 14.00 lacs. We find that except the cash book prepared by the assessee in support of the source of deposit, no other material was produced by the assessee regarding the past savings of the assessee. Therefore, the explanation of the assessee regarding the bank deposit in the bank was not satisfactory due to the failure on the part of the assessee to explain the source/deposits. The addition made by the assessing officer is based on the facts of the case. As regards the decision relied on by the learned Authorised Representative of the assessee in the case of CIT v. Smt. P.K. Noorjahan (supra), it is pertinent to note that in the said case it was found that the assessee was even not capable of earning income due to her age at that point of time. The assessee also explained the source of investment as income from the properties which were left by her mother’s first husband. Though the said explanation was not found to be satisfactory, however, by considering the surrounding circumstances that the assessee being a Muslim lady of 20 years was not having any source of income, therefore, she was not capable of earning any income. The addition made by the assessing officer was deleted. The said decision was based on peculiar facts. In the case in hand, the assessee never explained before the assessing officer that the said amount belongs to his son but right from beginning the assessee has been claiming that this deposit is sourced by his past savings.

Once the assessee is capable of earning income then failure to explain the source of deposit in the bank would attract the provisions of section 69 of the Act. Hence, in the facts and circumstances of the case, plea of the assessee cannot be accepted that the disclosed source of income of the assessee is not sufficient for making the deposit in the bank. If the said amount of deposit cannot be assessed as income of the assessee then the very object and purpose of provisions of section 69 of the Act is defeated. Section 69 of the Act contemplates that if the assessee is found to have invested money without explaining the source of the same then it will be deemed as unexplained investment. Therefore, the reasons for failure of the assessee to explain the source of deposit in the bank account as not having sufficient disclosed source of income cannot be a ground for immunity from attracting the provisions of section 69 of the Act and consequential deletion of such addition made by the assessing officer. The Ground No. 3 of the assessee is dismissed.

4. In the result, the appeal of the assessee is dismissed