Case Law Details
Dineshkumar Dalsangbhai Chaudhary Kankavati Society Vs ITO (ITAT Ahmedabad)
Introduction: In a landmark decision by ITAT Ahmedabad, the Income Tax assessment made under section 147 based merely on the information of cash deposit was deemed not tenable in law. The case, Dineshkumar Dalsangbhai Chaudhary Kankavati Society Vs ITO, revolved around the reopening of the assessment based only on the information that the assessee had deposited cash in the bank.
Analysis: The ITAT Ahmedabad reviewed the validity of reopening the assessment and restricting the addition by the AO under section 68 of the Act. The assessee’s counsel argued that the assessment was reopened solely based on suspicion rather than a formation of belief, citing the ITAT Delhi Bench case of Bir Bahadur Singh Sijwali v. I.T.O. as precedent. The court found that the AO had not conducted any investigation to ascertain the source of the impugned cash deposits in the bank.
The ITAT Ahmedabad agreed with the assessee’s contention and noted that the proceedings could not be initiated merely on a fallacious assumption or suspicion. It upheld that the sources of the deposit need not necessarily be income of the assessee. Drawing parallels with the Bir Bahadur Singh Sijwali v. I.T.O. case, the tribunal quashed the reassessment order, stating that it was not tenable in law to frame an assessment based solely on the information of cash deposit.
Conclusion: The verdict by ITAT Ahmedabad is pivotal in setting a precedent regarding the basis on which an assessment under section 147 can be reopened. The ruling underscores the necessity of having more than just information on cash deposits to substantiate the belief of income escape, thus safeguarding assessees from assessments based on mere suspicion. The case reinforces the importance of conducting proper investigations before initiating reassessment proceedings.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
