Case Law Details
ITO Vs Dharmesh Hasmukhbhai Mehta (ITAT Ahmedabad)
ITAT Ahmedabad held that a typographical error cannot be a reason to believe that the income of the assessee has escape assessment and hence initiation of proceedings under section 147 of the Income Tax Act is unsustainable.
Facts- The assessee in the CO has challenged the validity of the proceedings initiated u/s. 147 of the Act. The necessary facts are that the assessee in the present case is an individual and engaged in the business of trading of Go and Silver Bullion as proprietor under the name and style of M/s Mahalaxmi Jewellers. In the present case, the proceedings u/s. 147 of the Act, were initiated against the assessee on the reasoning that there was cash deposit in the Bank account maintained with Vijay Bank which was not disclosed in the Income-tax return. AO also observed that there was cash deposit in the bank account of the assessee amounting to Rs. 36,88,15,000/- in the bank account maintained with Vijaya Bank which was in most of the cases immediately transferred through RTGS to another account being undisclosed account. As such, the assessee failed to reconcile the cash deposits in the bank account with cash sales made by it. Based on the above fact, the proceedings were initiated against the assessee under the provision of Section 147 of the Act.
Conclusion- Held that the assessee has justified cash deposit in the bank out of cash sales, but the contention was rejected by the AO on the reasoning that the assessee failed to furnish name, address, PAN, or any identity of the person to whom the sales was made. In this regard, we note that the books of account were duly audited and there was available VAT Audited report u/s. 63 of the VAT Act, no discrepancy has been pointed out by the AO with respect to such documents. As such, the assessee has discharged his onus by submitting the audited financial statement and VAT Audit report for the cash sales made by it. Now, the onus shifted upon the AO to disregard the contention that the cash sales shown by the assessee amounting to Rs. 2,64,27,76,935/- does not represent cash sales. However, AO has not controverted the above contention of the assessee based on the documentary evidence.
Held that there is typographical error in the bank account number mentioned in the Audited Financial Statement vis a vis bank account number recorded by the AO in the reason for reopening. In our considered view merely, a typographical error cannot be a reason to believe that the income of the assessee has escape assessment.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal and the CO have been filed at the instance of the Revenue and the assessee against the order of the Learned Commissioner of Income Tax (Appeals), Ahmedabad, (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 147 r.w.s. 143(3) of the Income Tax Act 1961 (here-in-after referred to as “the Act”). The assessee has filed the Cross Objection in the Revenue’s appeal bearing ITA No. 289/Ahd/2020 for the Assessment Year 2012-13.
First, we take up Cross Objection bearing No. 79/AHD/2020 in Revenue’s appeal in ITA No. 289/AHD/2020 for AY 2012-13.
2. The assessee has raised the following objection in the CO as detailed below:
1. The Ld.CIT(A), has grievously erred in law and or on facts in not considering the ground of appeal relating to the validity of notice u/s.148 and proceeding initiated u/s.147 inspite of the submission made and evidence produced by the appellant with regard to the impugned ground.
2. That in the facts and circumstances of the case as well as in law, the Ld.CIT(A), ought to have appreciated that the notice u/s.148 and proceedings u/s.147 both were illegal and unlawful on accounts of the condition precedent not satisfied.
It is, therefore, prayed that the notice u/s.148 and proceedings u/s.147 should be quashed and the order passed by AO may be set aside.
3. The assessee in the CO has challenged the validity of the proceedings-initiated u/s 147 of the Act. The necessary facts are that the assessee in the present case is an individual and engaged in the business of trading of Gold and Silver Bullion as proprietor under the name and style of M/s Mahalaxmi Jewellers. In the present case, the proceedings u/s 147 of the Act, were initiated against the assessee on the reasoning that there was cash deposit in the Bank account No. 730606021000062 maintained with Vijay Bank which was not disclosed in the Income-tax return. Likewise, the AO also observed that there was cash deposit in the bank account of the assessee amounting to Rs. 36,88,15,000/- in the bank account bearing No. 73060030000306 maintained with Vijaya Bank which was in most of the cases immediately transferred through RTGS to another account bearing No. 730606021000062 being undisclosed account. As such, the assessee failed to reconcile the cash deposits in the bank account with cash sales made by it. Based on the above fact, the proceedings were initiated against the assessee under the provision of section 147 of the Act.
4. At the time of hearing the Ld. AR for the assessee before us submitted that the books of account of the assessee were duly Audited under the provisions of section 44AB of the Act. There was cash sale amounting to Rs. 2,64,27,76,935/-out of which the cash deposits of Rs. 36,88,15,000/- was made in the impugned Vijaya bank account.
4.1 The Ld. AR, further submitted that VAT Audit was also done u/s 63 of the Act, wherein no discrepancy of sales was made. The Ld. AR in support of his claim has drawn our attention on the tax audit report and VAT Audit report which were placed on pages 5 to 31 and 32 to 39 of the paper books. Thus, it was contended by the Ld. AR that the proceedings under section 147 of the Act, were initiated by the AO on wrong assumption of facts and therefore the same is liable to be quashed.
4.2 On the contrary, the Ld. DR appeared on behalf of the revenue submitted that the bank account mentioned by the assessee in the Financial Statement in the name of the Vijaya Bank is different with the bank account as observed by the AO in the reason recorded for initiating the proceedings u/s 147 of the Act. The Ld. DR to demonstrate his contention has drawn our attention on page 27 of the paper book. The Ld. DR vehemently supported the order of the authorities below.
5. We have heard the rival contentions of both the parties and perused the materials available on record. On perusal of the reason recorded for initiating the proceedings u/s 147 of the Act, place on pages 51 to 55 of the paper book, we note that the AO himself observed certain facts with respect to the cash sales made by the assessee. The relevant extract is reproduced as under:
The assessee, vide his submission dated 26.02.2019 stated that name and address of parties are not available in respect of cash sales of Rs.2,61,66,10,786/-. the assessee has also not submitted any proof regarding cash sales of Rs.2,61,66,10,786/-. the assessee has also not submitted any proof regarding cash sales to justify the corresponding cash deposits Rs.36,88,15,000/- in the bank account maintained with Vijaya Bank for A.Y. 2012-13. the assessee has also not submitted/proved the nexus between the cash sales and cash deposited into the bank account, inspite of the fact that there are only 43 instances of sales less than Rs.2 lakhs and more than 3000 sales instances of Rs.2 lakhs & above. Though the assessee has submitted that VAT has been paid on the cash sales, it cannot prove the sales in absence of Name, Address, PAN or any identity of the person receiving such goods.
6. On perusal of the above observation, we note that the assessee has justified cash deposit in the bank out of cash sales, but the contention was rejected by the AO on the reasoning that the assessee failed to furnish name, address, PAN, or any identity of the person to whom the sales was made. In this regard, we note that the books of account were duly audited and there was available VAT Audited report u/s 63 of the VAT Act, no discrepancy has been pointed out by the AO with respect to such documents. As such, the assessee has discharged his onus by submitting the audited financial statement and VAT Audit report for the cash sales made by it. Now, the onus shifted upon the AO to disregard the contention that the cash sales shown by the assessee amounting to Rs. 2,64,27,76,935/- does not represent cash sales. However, AO has not controverted the above contention of the assessee based on the documentary evidence.
7. Likewise, the AO himself has recorded that the amount of cash deposit made by the assessee in one bank account was transferred to another bank account of the assessee which was not disclosed in the books of account. Again, this finding of the AO is contrary to the facts available on record. It is because the books of account were duly audited and no defect of whatsoever was pointed out by the AO before the initiating the proceedings u/s 147 of the Act in the present set of facts. The assessee was maintaining its accounts on double entry system, and it was duty to brought on record that if the cash have been transferred by the assessee in the undisclosed books of accounts, then how the books of account were reconciled. Accordingly, the findings of the AO that the bank account was not disclosed by the assessee is based on wrong assumption of facts.
8. Before parting, it is important to note that there is typographical error in the bank account number mentioned in the Audited Financial Statement vis a vis bank account number recorded by the AO in the reason for reopening. In our considered view merely, a typographical error cannot be a reason to believe that the income of the assessee has escape assessment.
9. In addition to the above, we note that the assessee during the original proceedings in response to the notice u/s 142(1) of the Act dated 26/08/2014 vide letter dated 08/09/2014 has furnished the following details:
Copy of books of accounts maintained:
The following registers have been produced in person:
1. Purchase Register
2. Sales Register
3. Cash Book
4. Bank Book
I. Axis Bank
II. Other Banks
5. Ledger Accounts.
Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Copy of detailed statement showing Party-wise and Month-wise Sales during the A.Y. 2012-13 As per Annexure- “E”
9.1 In view of the above, we are of the view that the AO has initiated the proceedings u/s 147 of the Act, based on the wrong assumptions of facts and therefore the same is hereby quashed. Hence, the ground raised by the assessee in the CO is allowed.
10. In the result, the CO filed by the assessee is allowed.
Coming to the ITA No. 289/AHD/2020 an appeal by the Revenue for A.Y 2012-13.
11. At the outset, we note that we have already given finding on technical ground raised in the cross objection by the assessee that reopening of the assessment by the AO is not sustainable in the eyes of law as the same was made on wrong assumptions of facts. Hence the ground raised by the revenue becomes redundant and infructuous. Therefore, we preclude ourselves from giving any finding on the ground raised on merit of the case by the Revenue. Accordingly, the grounds of the Revenue’s appeals are hereby dismissed as infructuous.
12. In the result, the appeal filed by the Revenue is dismissed as infructuous.
13. In the combined result, the CO filed by the assessee is allowed whereas the appeal filed by the revenue is hereby dismissed as infructuous.
Order pronounced in the Court on 23/08/2023 at Ahmedabad.
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