Case Law Details
Krishnareddy Venkatesan Vs ITO (Madras High Court)
The petitioner received a notice dated 21.03.2022 under Section 148A(b) of the Income Tax Act, 1961, alleging that during the financial year 2014–2015 (assessment year 2015–2016), cash deposits of ₹25,90,000 and a time deposit of ₹27,00,614 were made. In response, the petitioner submitted that the cash deposits of ₹25,90,000 were used to create the fixed deposit of ₹27,00,614. On this basis, it was contended that the threshold of ₹50,00,000 was not crossed and, therefore, the notice was barred by limitation under Section 149(2)(v) of the Act, which prescribes a three-year limit.
The petitioner also furnished the bank statement for the relevant period to substantiate the claim. However, in the impugned order under Section 148A(d), the assessing officer rejected the explanation, stating that the details of the bank statement and related records required verification. On that basis, it was concluded that income in the form of assets exceeding ₹50,00,000 had escaped assessment.
Before the Court, the petitioner argued that despite submission of the bank statement, the assessing officer erroneously recorded that verification was still required and failed to examine whether the cash deposits were actually used to create the fixed deposit. The revenue contended that the burden was on the assessee to establish that the escaped income was below ₹50,00,000 and argued that both the cash deposit and the time deposit qualified as assets that could be aggregated.
The Court observed that the assessing officer had not undertaken the necessary exercise of examining the bank statement to verify whether the cash deposits were indeed used for creating the fixed deposit. Without such verification, it could not be rationally determined whether income in the form of assets of not less than ₹50,00,000 had escaped assessment. On a perusal of the bank statement, the Court noted that the petitioner had an arguable case warranting reconsideration.
Accordingly, the impugned order under Section 148A(d) and the consequential notice under Section 148 were set aside. The matter was remanded to the assessing officer with a direction to provide a reasonable opportunity to the petitioner and to pass a fresh order under Section 148A(d) within two months. The writ petition was allowed with no order as to costs, and connected miscellaneous petitions were closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner received notice dated 21.03.2022 under Section 148A(b) of the Income Tax Act, 1961 (the I-T Act). The notice alleged that the assessee had deposited cash of Rs.25,90,000/- and made a time deposit of Rs.27,00,614/-during financial year 2014 – 2015 corresponding to assessment year 2015 – 2016. The assessee replied to the said notice and stated that cash deposits of Rs.25,90,000/- were made and that the said cash deposits were utilised to create a fixed deposit of Rs.27,00,614/-. Therefore, it was stated in the reply that the threshold of Rs.50,00,000/- was not crossed. Consequently, it was contended that the notice has been issued beyond the three year limit prescribed in Section 149(2)(v) of the I-T Act. The order impugned herein was issued in the said facts and circumstances.
2. Learned counsel for the petitioner invited my attention to the notice under Section 148A(b), the reply thereto and the impugned order. In spite of providing the bank statement for the relevant period, learned counsel submits that it is erroneously recorded therein that the details of the bank statement needs to be verified.
3. Mr. B.Ramana Kumar, learned senior standing counsel, submits in reply that the assessee is under an obligation to establish that the amount escaping assessment is less than Rs.50,00,000/-. He submits further that both the cash deposit and the time deposit qualify as assets and that the assessing officer was justified in adding the two to compute total income escaping assessment.
4. The operative paragraph of the impugned order reads as under:
“3. In response to the said notice u/s 148A(b), assessee replied on 28.03.2022. According to assessee “He deposited in cash Rs.25,90,000/- and the same has been deposited as fixed deposit. Hence, the amount of income escaped is less than 50 lakhs.” Assessee submitted bank statement also for the relevant financial year.
I have considered the reply of assessee and the same is not acceptable because of the following reasons:
Though the assessee stated as the cash deposit again deposited as fixed deposit, the details of bank statement and others need to be verified.
Thus income in the form of asset has escaped assessment is not less than Rs.50 lakhs.”
5. It is evident from the above that the assessing officer failed to examine the bank statement so as to verify whether the cash deposits were used for purposes of creating the fixed deposit. In spite of the assessee providing the bank statement, this exercise was not undertaken. Without undertaking this exercise, it cannot be rationally determined as to whether income in the form of an asset of the value not less than Rs.50,00,000/- had escaped assessment during the relevant assessment year.
6. On perusal of the bank statement, it appears that the petitioner has an arguable case to contend that the cash deposits were used for purposes of creating the fixed deposit. Therefore, the matter warrants reconsideration. Consequently, the impugned order under Section 148A(d) and notice under Section 148 of the I-T Act are set aside and the matter is remanded to the assessing officer. After providing a reasonable opportunity to the petitioner, a fresh order shall be issued under Section 148A(d) of the I-T Act within two months from the date of receipt of a copy of this order.
The writ petition is allowed on the above terms. There will be no order as to costs. Consequently, connected miscellaneous petitions are closed.
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