Subhash Shah Vs ITO (ITAT Delhi)
AO’s Belief Found Baseless – Reopening Held Void as Return Was Already Filed with Audited Accounts – Suspicion Cannot Replace Evidence
Assessee, proprietor of M/s Fancy Cloth House, challenged reassessment framed u/s 147/148 whereby AO treated cash deposits of Rs.1,12,55,000/- in Dena Bank as unexplained.
AO reopened the case on 22.03.2017 on basis of information that Assessee had made cash deposits in FY 2009-10 but had not filed return of income. During reassessment, Assessee explained that deposits represented sale proceeds of garment trading business & filed audited accounts showing turnover of Rs.3.44 crore. AO rejected books as afterthought, noting that ITR initially filed mentioned no audit & that purchase bills looked fabricated (same format & serial numbers from different parties). Addition of Rs.1.12 crore u/s 68 was made. CIT(A) confirmed reopening & addition, holding that explanation was unsatisfactory.
Before Tribunal, Assessee contended that reopening was invalid since he had in fact filed return in March 2012 with audited accounts, which AO ignored. It was argued that AO’s belief that no return was filed was patently wrong, making reopening void. Further, deposits were fully recorded in books & linked to business turnover.
Tribunal observed that reopening was based on erroneous assumption that no return was filed, whereas Assessee had filed return with audited accounts. Cash deposits tallied with sales turnover & payments to suppliers. Relying on SC rulings in Calcutta Discount Co. Ltd. & Ganga Saran & Sons, it held that “reason to believe” must be founded on tangible material & not suspicion. Since basis itself was incorrect, reopening u/s 147 was invalid. Accordingly, Tribunal quashed reassessment as bad in law. Other issues on merits were left unadjudicated.
