Case Law Details
Bhaveshbhai Manilal Patel Vs ITO (ITAT Ahmedabad)
In this case by Information noted by the AO of cash deposits of Rs.10.00 lakhs in the bank account of the assessee leading to belief of escapement of income, has been duly demonstrated before me to be incorrect. The actual cash deposits were only to the tune of Rs.29,900/- as is evident from the copy of the bank account of the assessee noted by the AO, placed before us. Even otherwise, I agree with the ld. counsel for the assessee that mere fact of cash deposits in the bank account alone could not lead to formation of the belief of escapement of income by the AO. It is settled law that for valid assumption of jurisdiction to reopen the case u/s 147 of the Act, there has to be belief of the AO of escapement of income , based on information with him. The information of cash deposit in bank can at the most lead to suspicion of income having escaped assessment, the deposits not necessarily being in the nature of income. This suspicion can lead to a belief only when further inquiry is conducted by the AO to determine the nature of cash deposits and based on the results of the inquiry, only a belief of escapement of income can be formed. Moreover, noting the fact that the actual cash deposits in the bank accounts of the assessee amounted to Rs.29,900/-, this amount of cash deposits, in no case, could have resulted in escapement of income at all, being well below taxable limit even if all the cash deposits were found to be in the nature of income not returned to tax by the assessee and the assessee , as per facts noted by the AO had no other income, except that held by the AO in the present reassessment proceedings.
In view of the above, I hold that jurisdiction assumed in the present case by the AO to reopen the case of the assessee under section 147 of the Act was without any formation of belief of escapement of which, based on incorrect facts and thus not in accordance with law. The assessment order, therefore, so framed is held to be invalid, and accordingly set aside.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against order passed by the Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi (in short referred to as ld. CIT(A)) under section 250(6) of the Income Tax Act, 1961 (“the Act” for short), dated 29.9.2022pertaining to Asst. Year 2011-12.
2. The Ld. Counsel for the assessee began by challenging the validity of the assessment framed in the present case. The primary contention being that the assessment framed in the present case u/s 147 of the Act was without valid jurisdiction; that the reasons recorded by the AO could not have lead to belief of escapement of income at all, and in any case the belief of escapement of income was based on incorrect facts, and therefore, the reopening resorted to, was invalid.
My attention was drawn to page no.1 of the assessment order, wherein the AO has noted that “as per information available with the department that the assessee had deposited the cash more than Rs.10,00,000/- in the Kheda Dist. Central Co-operation Bank Ltd. account during the financial year 2010-11 relevant to the Assessment Year 2011-12. Therefore, the sources of the cash deposits are subjected to verification by the Assessing Officer. Therefore, the case was reopened by issuing notice u/s.148 of the I.T. Act, 1961”. He thereafter drew our attention to the copy of aforestated bank account of the assessee for the impugned year placed before me in page no.1 of paper book filed and pointed out that the cash deposits in the bank account were only to the tune of Rs.11,500 plus Rs.6900/- plus Rs.15,000/- thus totaling to Rs.29,900/-; that all other deposits were on account of cheque deposited therein or related to interest credited by the bank. Therefore, the fact noted by the AO of cash deposits of Rs.10.00 lakhs in the bank account of the assessee were incorrect facts. He further pointed out that even otherwise, mere cash deposits in the bank account could not lead to the formation of belief of escapement of income and at best could only lead to suspicion thereof, and considering that the cash deposit in the bank account, in any case, amounted to Rs.29,900/-, even otherwise, there could not be any belief or even suspicion of escapement of income earned on this count, since the cash deposits were well below the taxable limit.
4. The ld.DR was unable to controvert the above contention of the ld.counsel for the assessee.
5. Having heard both the parties and on going through the order of the authorities below, I agree with the ld. counsel for the assessee that the jurisdiction assumed in the present case for reopening of the case of the assessee, was not in accordance with law. Information noted by the AO of cash deposits of Rs.10.00 lakhs in the bank account of the assessee leading to belief of escapement of income, has been duly demonstrated before me to be incorrect. The actual cash deposits were only to the tune of Rs.29,900/- as is evident from the copy of the bank account of the assessee noted by the AO, placed before us. Even otherwise, I agree with the ld. counsel for the assessee that mere fact of cash deposits in the bank account alone could not lead to formation of the belief of escapement of income by the AO. It is settled law that for valid assumption of jurisdiction to reopen the case u/s 147 of the Act, there has to be belief of the AO of escapement of income , based on information with him. The information of cash deposit in bank can at the most lead to suspicion of income having escaped assessment, the deposits not necessarily being in the nature of income. This suspicion can lead to a belief only when further inquiry is conducted by the AO to determine the nature of cash deposits and based on the results of the inquiry, only a belief of escapement of income can be formed. Moreover, noting the fact that the actual cash deposits in the bank accounts of the assessee amounted to Rs.29,900/-, this amount of cash deposits, in no case, could have resulted in escapement of income at all, being well below taxable limit even if all the cash deposits were found to be in the nature of income not returned to tax by the assessee and the assessee , as per facts noted by the AO had no other income, except that held by the AO in the present reassessment proceedings.
6. In view of the above, I hold that jurisdiction assumed in the present case by the AO to reopen the case of the assessee under section 147 of the Act was without any formation of belief of escapement of which, based on incorrect facts and thus not in accordance with law. The assessment order, therefore, so framed is held to be invalid, and accordingly set aside.
7. The appeal of the assessee is allowed on the legal ground. The merits of the case are not being adjudicated, as the same being academic in nature.
8. In view of the above, the appeal of the assessee is allowed in the above terms.
Order pronounced in the Court on 10th February, 2023 at Ahmedabad.
