Lack of Jurisdiction and Non-Application of Mind by AO: ITAT declared Reassessment Proceedings as invalid, deleted addition of Rs. 12.39 Cr done U/s 68
Let us have a Short Overview of the case wherein the ITAT declared Reassessment Proceedings as invalid and deleted Addition of Rs. 12,39,90,680/- done under section 68, as under:
1. Facts:
The assessee, a partnership firm engaged in manufacturing and sale of harvesting combines and other agricultural implements, filed its return of income for AY 2012-13 at Rs. 66,61,860/- based on audited books of accounts. Reopening proceedings under Section 148 were initiated by the ITO, Ward Nabha, alleging unexplained cash deposits of Rs. 18,52,71,560/-. The correct figure of cash deposits was Rs. 12,39,90,680/-, which was fully accounted for in the audited books of accounts.
2. Issue:
The assessee challenged the reopening of assessment on grounds of jurisdiction, invalid reasons to believe, and non-application of mind by the Assessing Officer (AO). Additionally, the assessee contested the merits of the addition made under Section 68, claiming the deposits were from regular business sales duly recorded in the books.
3. Held:
• The notice under Section 148 issued by ITO, Ward Nabha was invalid as the assessee’s correct jurisdiction was with ACIT/DCIT, Mandi Gobindgarh, considering the assessee’s returned income exceeding Rs. 50 lakhs in previous assessment years.
• Reassessment proceedings are void when initiated by a non-jurisdictional officer. Further, once the case was transferred to ACIT/DCIT, Mandi Gobindgarh, a fresh notice under Section 148 should have been issued, which was not done. Reliance placed on the decisions in Raman Pillai v. DCIT (ITA No. 770/Chd/2019) and Sh. Manjeet Singh v. DCIT (ITA No. 512/Chd/2022).
• The difference between the alleged cash deposits (Rs. 18.52 crores) and actual deposits (Rs. 12.39 crores) as verified from the books indicated non-application of mind by the AO. The assessment proceedings were quashed based on precedents from the Delhi High Court and various ITAT Benches.
• On merits, the assessee provided evidence of cash sales being recorded in regular books of accounts, which were not rejected by the AO. Sales were also disclosed in VAT returns. As per the judgments in Ludhiana Steel Rolling Mills (295 ITR 111) and Om Overseas (315 ITR 185), no addition can be made under Section 68 if books of accounts are duly audited and accepted by the Department.
4. Conclusion:
The appeal was allowed on both jurisdictional and merit-based grounds. The reassessment proceedings were quashed, and the addition of Rs. 12,39,90,680/- as unexplained cash credit was deleted.
The Copy Of the order is as under:
