Sourav Bakshi Vs ITO (ITAT Amritsar)
Summary: The Income Tax Appellate Tribunal, Amritsar Bench, in Sourav Bakshi Vs ITO, ITA No. 720/Asr/2019, decided on 23 December 2021 for Assessment Year 2011-12, quashed reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, holding that the Assessing Officer had assumed jurisdiction on the basis of incorrect facts regarding the assessee’s financial transactions. The Assessing Officer had recorded reasons alleging financial transactions of ₹1,41,94,000 and non-filing of the income tax return. However, the bank statement subsequently obtained from HDFC Bank under Section 133(6) disclosed cash deposits of ₹74,41,900, which formed the basis of the addition made in the ex parte assessment.
The assessee challenged the validity of the reopening, contending that the recorded reasons were factually incorrect and did not demonstrate a valid reason to believe that taxable income had escaped assessment. On merits, the assessee explained that the deposits arose from an advance of ₹75 lakh received under an agreement to sell land belonging to his mother and uncle. It was submitted that the transaction was subsequently cancelled and the amounts were returned through banking channels. Supporting documents, including the agreement, affidavit and bank records, were furnished during appellate proceedings. The Commissioner of Income Tax (Appeals), however, upheld both the reopening and the addition of ₹74,41,900, questioning the evidentiary value of the unregistered agreement and the explanation of the source of deposits.
Before the Tribunal, the assessee relied upon several decisions holding that reopening based on incorrect factual premises was invalid and that the mere existence of bank deposits did not necessarily establish undisclosed taxable income. The Revenue maintained that the assessee had not filed a return and that substantial deposits exceeding the basic exemption limit justified the Assessing Officer’s belief that income had escaped assessment.
The Tribunal found that the recorded reasons specifically referred to financial transactions of ₹1,41,94,000, whereas the bank records established deposits of only ₹74,41,900. Following decisions including Gaurav Joshi, Monika Rani, Jaspal Singh and Kapoor Rice & General Mills, it held that reasons founded upon incorrect facts could not sustain reassessment jurisdiction. It also referred to judicial decisions explaining that bank deposits, without further examination of their nature and source, could not automatically be equated with escaped income. Accordingly, the Tribunal quashed the reassessment and set aside the CIT(A)’s order on the legal ground. Since the jurisdictional issue was decided in favour of the assessee, the Tribunal expressly declined to adjudicate the merits of the cash deposit addition. The assessee’s appeal was allowed.
List of Cases Discussed:
1. Sh. Gaurav Joshi Vs ITO, ITA No. 274/Asr/2018 (ITAT Amritsar): Relied upon for the proposition that reassessment based on incorrect facts concerning bank deposits is liable to be quashed.
2. Smt. Monika Rani, ITA No. 582/Chd/2019, AY 2010-11 (ITAT Chandigarh): Followed regarding invalidity of reopening where the Assessing Officer recorded factually incorrect reasons.
3. Sh. Jaspal Singh Vs ITO, 88 ITR (Trib) 407 (ITAT Chandigarh): Relied upon for quashing reassessment proceedings founded upon incorrect factual premises.
4. M/s Kapoor Rice & General Mills, ITA No. 948/Chd/2019 (ITAT Chandigarh): Cited in support of the challenge to reassessment based on erroneous reasons.
5. Sagar Enterprises, 257 ITR 335 (Gujarat High Court): Referred to in the decision concerning invalid reopening on incorrect facts.
6. Smt. Charanjit Kaur, 88 ITR (Trib) 414 (ITAT Chandigarh): Relied upon for the principle that bank deposits do not, by themselves, necessarily constitute undisclosed income.
7. Smt. Gurdish Kaur Khullar, ITA No. 121/Chd/2020, AY 2011-12 (ITAT Chandigarh): Followed on the validity of reassessment based merely on bank deposit information.
8. Bir Bahadur Singh Sijwali Vs ITO (ITAT Delhi): Referred to for the principle that reopening cannot rest on the assumption that every bank deposit represents undisclosed income.
9. S. Amrik Singh, 159 ITD 329 (ITAT Amritsar): Referred to in the discussion of reassessment jurisdiction.
10. Smt. Paramjit Kaur, 311 ITR 38: Referred to in support of the legal challenge to reassessment proceedings.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
This appeal of the assessee is directed against the order of Ld. CIT(A)-1, Jalandhar dated 21.10.2019 in respect of A.Y. 2011-12.
2. The Main grievance of the assessee being raised through various grounds of appeal is regarding the notice issued u/s. 148 of the Income Tax Act 1961. The assessee has challenged that the notice u/s. 148 of the Act was issued against the provisions of law and without application of mind by the Assessing Officer and on merits, and then confirmation of addition by the CIT(A) on account of bank deposits in the bank account of the assessee with HDFC Bank to the tune of Rs. 74,41,900/-.
3. The Ld. Counsel of the assessee had made taken an additional ground of appeal vide application, dated 7th of July 2021, which was filed on 9th of July 2021, whereby the service of notice u/s 148 by way of affixture without two independent witnesses have been challenged. But during the course of hearing, the Ld. Counsel of the assessee sought to withdraw his request for additional ground of appeal and, therefore, the additional ground of appeal is being dismissed as withdrawn.
4. The brief facts of the case are that the Assessing Officer as per the AIR information available that the AO noted that the assessee has deposited a cash of Rs. 71,94,000/- in HDFC Bank, during financial year 2010-11 and that the assessee had not filed his return of income for Asstt. Year 2011-12, relevant to financial year 2010-11, in which, there was deposit of cash of Rs. 71,94,900/- in the Bank Account.
5. The Assessing Officer, accordingly, recorded the reasons for reopening of the case, (APB, Pg. 20 to 21). The reasons recorded u/s 148, by the Assessing Officer reads as under:-
“In the present case, the undersigned has information as well as sufficient reasons to believe that income for the A.Y. 2011-12 has escaped assessment owning to non filing of income tax return under the provisions of Income Tax Act, 1961, where the assessee has entered in financial transaction amounting to Rs. 1,41,94,000/-. I have reasons to believe that income of Rs. more than is chargeable to tax has escaped assessment of A.Y. 2011-12.”
6. The said reasons were recorded by mentioning the address of House No. 3880, Sector 32-D, Chandigarh and notice u/s 148 was also issued at the same address. The notice had been received back but the same was affixed vide affixture order, dated 31.03.2018 as per copy of the affixture order at APB. Pg. 22. Lateron, various notices u/s 142(1) were issuedat the Address of VPO Gondpur, District Hoshiarpur, Punjab, but there was no compliance by the assessee and the Assessing Officer called for the copy of the bank statement from the HDFC Bank u/s 133(6), where he noticed the deposit of cash of Rs. 74,41,900/- for which, the assessee failed to explain the source of cash deposit and consequently, the Assessing Officer passed an ex-parte order by assessing the income of the assessee at Rs. 74,41,900/-.
7. The assessee filed an appeal before the Ld.CIT(A), raising various grounds of appeal with regard to the reopening of case u/s 148 and, on merits.The detailed submissions so filed both on legal and on merits by the assessee have been reproduced by the Ld. CIT(A) from page 3, para 3.2 of her order. Certain additional evidences were also filed before the Ld.CIT(A) with regard to the sources of deposit of cash in HDFC Bank, which was stated to be on account of agreement to sell of the land, belonging to the mother of assessee and his uncle, Sh. Sunil Dutt, for which, it was stated that the agreement to sell was entered into with Sh. Dilwara Singh on 11.10.2010 and he had given an advance of Rs. 75 lacs in cash on 11.10.2010 and out of that, Rs. 70 lacs was deposited in Bank Account with HDFC Bank on 12.10.2010 and the balance amount was then deposited on different dates. The various evidences on account of the same i.e. copy of agreement, with Sh. Dilwara Singh and his affidavit, was filed along with source of cash, given by Sh. Dilwara Singh to the assessee. It was also stated that one half share of his uncle from the sale of land was transferred through banking channel and, lateron, the deal was cancelled and the amount was returned back, by both the assessee and his uncle, Sh. Sunil Dutt through banking channels and necessary evidence of the same was filed before the Ld.CIT (A) with a request to admit fresh evidences u/s rule 46A.
8. The remand report was called from the Assessing Officer on the basis of written submissions of assessee, and evidences furnished by assessee. The remand report of the AO was furnished vide letter, dated 21.08.2019, which have been reproduced by the Ld. CIT(A) in para 3.3, at pages 4 to 6 of the order and thereafter, it was given to the assessee so submit his counter comments on 15.10.2019, which have been reproduced in para 3.4, at pages 6 to 9 of the order.
9. The Ld. CIT(A) has given his finding on the issue of notice u/s 148 in para 4.1 of the order and has dismissed the ground of appeal that since there was cash deposit in the bank account of the assessee, higher than the taxable income and assessee was a non-filer of Income tax returns and accordingly confirmed the issuance of notice u/s 148 on page 9 and 10 of the order of CIT(A).
10. The Ld.CIT(A) also confirmed the addition of Rs. 74,41,900/- on merits as made by the Assessing Officer on account of ‘cash deposits’ in the assessee’s bank account and has confirmed such addition by giving finding from pages 11 to 13 of the order, that the assessee himself was not the owner of the land and, also that, the agreement to sell with Sh. Dilwara Singh and Sh. Sunil Dutt, uncle of the assessee was not registered and the agreement was cancelled and the deal did not materialize and, therefore, held that the source of deposit in the bank account was not supported by cogent evidence and, therefore, upheld the addition made by Ld. Assessing Officer.
11. As regards to the ground of issuance of notice u/s 148 without there being any reason to believe, the brief synopsis, along with Paper book have been filed. It has been argued by the Ld. Counsel of the assessee that wrong reasons have been recorded for formation of reason to believe in as much as, reason to believe as per reasons recorded by the Assessing Officer mentions the fact that the assessee having entered into financial transactions to the tune of Rs. 1,41,94,000/- as per copy of the reasons placed at ‘pages 20-21’ of the paper book. It was also argued that that the Ld. Assessing Officer called for the copy of the Bank account of assessee u/s 133(6) from the HDFC Bank, as per para 3, of the order of the Assessing Officer and copy of the said bank account of HDFC Bank have been placed in the paper book at pages 37 to 38, where there are deposits of only Rs. 74,41,000/- and not of Rs. 1,41,94,000/- and, therefore, it was vehemently argued that the wrong reasons have been recorded for formation of belief about the escapement of income and, therefore, the assessment as framed by the Assessing Officer deserves to be quashed.
12. In support, the reliance was placed to the judgment of Hon’ble Jurisdictional Amritsar Bench of ITAT in the case of Sh. Gaurav Joshi Vs ITO in ITA No.274/Asr/2018 (CLPB. Pg. 1 to 6). The counsel of assessee further relied upon the judgment of ‘Chandigarh Bench’ of ITAT in the case of ‘Smt. Monika Rani’ in ITA No. 582/Chd/2019 for A.Y.2010-11, (CLPB. Pg. 7 to 17) and judgment of Chandigarh Bench of ITAT in the case of ‘Sh. Jaspal Singh’ Vs ITO, reported in 88 ITR (Trib) 407, (CLPB. Pg.18 to 24) of the judgment Set- C. Again he relied upon the another judgment of Chandigarh Bench in the case of “M/s Kapoor Rice & General Mills” in ITA No. 948/Chd/2019, (CLPB. Pg. 25 to 32).
13. It was argued by the Ld. Counsel of assessee that merely there was bank deposits, alone will not be sufficient to form a reason to believe, that the income of assessee had escaped assessment and for that the Ld. Counsel of assessee, relied upon the judgment of ‘Chandigarh Bench’ in the case of Smt. Charanjit Kaur, reported in 88 ITR (Trib) 414 and also another judgement of Chandigarh Bench in the case of Smt. Gurdish Kaur Khullar in ITA No. 121/Chd/2020 for A.Y. 2011-12 and, therefore, pleaded that there was no jurisdiction with the Assessing Officer to reopen the assessment u/s 148 because source of deposit need not necessarily be income of the assessee.
14. On legal issue, on account of incorrect content of notice, there was no valid jurisdiction with the AO and it was pleased that the assessment proceedings be quashed and on merits even, no addition was called for.
15. Per contra, the Ld. DR argued that there was valid information for the purposes of issuance of notice u/s 148 with regard to the bank deposits in the name of assessee. She submitted that it was a fact that the assessee had not filed his return of income for the year under consideration and the deposits in the Bank Account of assessee, being much more than the exempted limit and, therefore, there was a valid reason to believe that the income of the assessee had escaped assessment and, therefore, there was a valid jurisdiction with the Assessing Officer for issuance of notice u/s 148.
16. We have heard both the sides and carefully considered the argument of the Ld. Counsel and the DR, and perused the Paper books and brief synopsis as filed by the Counsel. The primary facts with regard to the issuance of notice u/s 148 are not disputed and so we will deal with the issue of assumption of jurisdiction by the Assessing Officer u/s 148 raised by the assessee vide ground No. 1.
17. We have gone through the reasons, which have been recorded by the Assessing Officer, placed at APB, Pg.20 to 21. From the reasons as recorded, it is noted about the escaped income for the assessment year under consideration, that the assessee had entered into ‘financial transactions,’ amounting to Rs. 1,41,94,000/- for Asstt. Year 2011-12 which is borne out from the following paragraphs of the reasons recorded u/s 148:-
“In the present case, the undersigned has information as well as sufficient reasons to believe that income for the A.Y. 2011-12 has escaped assessment owning to non filing of income tax return under the provisions of Income Tax Act, 1961, where the assessee has entered in financial transaction amounting to Rs. 1,41,94,000/-. I have reasons to believe that income of Rs. more than is chargeable to tax has escaped assessment of A.Y. 2011-12.”
18. It is also an undisputed fact that as per the copy of the ‘bank statement’ obtained by the Assessing Officer by way of enquiries u/s 133(6), there were only deposits of Rs. 74,41,900/-, for which, he has made the addition.In our view the very formation of belief by the Assessing Officer is not valid. We have gone through the judgements, relied upon by the Ld. Counsel in the cases of ‘Sh. Gaurav Joshi’, ‘Smt. Monika Rani’, ‘Sh. Jaspal Singh’ and ‘M/s Kapoor Rice & Gen. Mills’ (Supra). In all these cases, it has been held that where wrong facts have been recorded for formation of reason to believe, the assessment proceedings deserve to be quashed. In the case of Sh. Gaurav Joshi (Supra), it has been held as under:-
“AO while issuing notice u/s 148 had mentioned that assessee had deposited cash during FY 2009-10 in bank account which had escaped assessment. On contrary, the assessment order he mentioned cash deposited in assessee’s bank account was less than amount mentioned in reopening notice. Therefore, reasons recorded by AO were not emerging from record available with him. AO recorded reasons which were not found to exist on record, therefore, reassessment framed deserved to be quashed.”
19. Similarly, in the judgment of ‘Smt. Monika Rani (Supra) of Chandigarh Bench of ITAT by relying upon various judgments, the assessment had been quashed with the following observation:-
“In the present case also the AO reopened the assessment on the basis of wrong facts, so respectfully following the ratio laid down in the aforesaid referred cases. I am of the view that the reopening of the assessment in the present case was not valid, accordingly, the same is quashed.”
20. We have also gone through the judgment of ‘Jaspal Singh’ (supra), where earlier judgment in the case of ‘Monika Rani’ and ‘Sagar Enterprises’ of Hon’ble Gujarat High Court reported in 257 ITR 335 have been followed and in para 8.2, of the said judgment, it has been held as under:-
“8.2 Considering the legal position and similar set of facts, the position of law as summed up has been relied upon:
“10.6 In the present case also the Assessing Officer reopened the assessment on the basis of wrong facts, so respectfully following the ratio laid down in the aforesaid referred to cases, I am of the view that the reopening of the assessment in the present case was not valid, accordingly, the same is quashed.”
21. As regards the reliance upon the judgment in the case of “Smt. Charanjit Kaur”(Supra) of Chandigarh Bench of the ITAT, we have gone through the judgment of Smt. Charanjit Kaur (Supra) and in which, it has been held as under:-
“16 So far as, the application of mind by the Assessing Officer is concerned, the reasons recorded by the Assessing Officer for reopening of the case prima facie indicate that he has not applied his mind and proceeded on the assumption that the ban deposit constitutes unexplained income of the assessee. As pointed out by the learned counsel, the Delhi Bench of the Income-tax Appellate Tribunal in the case of Bir Bahadur Singh Sijwali V ITO (supra) has set aside the action of the Assessing Officer in reopening the case of the assessee initiated on fallacious assumption that bank deposits constitute undisclosed income of the assessee, overlooking the fact that source of deposit need not necessarily be income of the assessee.”
22. This judgment of Chandigarh Bench of ITAT has been relied in the case of Smt. Gurdish Kaur Khullar (Supra), besides the other judgments of Amritsar Bench in the case of “S. Amrik Singh” reported in 159 ITD 329(Amritsar) and in the case of Smt.Paramjit Kaur reported in 311 ITR 38. The aforesaid judgments are applicable to the facts of the case of assessee and, therefore, we have no hesitation in holding that there were wrong reasons recorded for the purposes of formation of belief for issuance of notice u/s 148 in the present case. It was merely on the basis of incorrect bank transaction in the form of bank deposits, the Assessing Officer has form reason to belief and thus He has wrongly assumed the jurisdiction and, therefore following the judgments as cited ‘supra’, the assessment as framed by issuance of notice u/s 148 for incorrect belief is deserves to be quashed.
23. Before parting with the decision, it is pertinent to mention that we have not adjudicated the issue on merits, though the Ld. Counsel has also argued on merits, but since the appeal of the assessee is decided on legal issue, therefore, no findings are being given on merits of the case relating to quantum of addition which become academic.
24. In the above view, we quash the order of the ld. CIT(A) on the legal issue, being decided in favour of the assessee.
25. In the result, the appeal of the assessee stands allowed on the legal issue.
Order pronounced U/R 34(4) on 23.12.2021
