Case Law Details
Pillu Ram Sahal v. ITO (ITAT Jaipur)
The issue under consideration is whether the re-opening of assessement u/s 147 is justified in law?
ITAT states that, in the instant case, the AO has found out the facts of deposit of cash of Rs. 14.00 lacs in the bank account of the assessee and no return of income has been filed by the assessee for the year under consideration. Thus this very fact of deposit of cash of Rs. 14.00 lacs and not filing of the return of income by the assessee itself constitute a tangible material to form the belief that income assessable to tax has escaped assessment. ITAT further note that JCIT after considering the reasons also recommended the reasons recorded by the AO for issuing notice u/s 148 of the Act. Based on these facts, the ld. Pr.CIT finally granted the approval. Therefore, it was not a case where the prudent person could have taken another view or opinion. Accordingly, ITAT do not find any error or illegality in the impugned order of the ld. CIT(A) upholding the validity of reopening of the assessment.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order of ld. CIT(A), Ajmer dated 28-01-2019 for the Assessment Year 2010-11. The assessee has raised the following grounds.
(i) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the actions of the AO in reopening the assessment u/s 147 of the I.T. Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.
(2) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the actions of the AO in issuing notice u/s 148 of the I.T. Act, 1961 without obtaining sanction uu151 of the I.T. Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.
(3) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the actions of the AO in making an addition of Rs. 15,50,000/- on account of alleged unexplained cash u/s 68 of the I.T. Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the addition of Rs. 15,50,000/-
2.1 The Ground Nos. 1 and 2 of the assessee are regarding validity of initiation of proceedings u/s 147/148 of the Act.
2.2 The assessee is an individual and not filed the return of income u/s 139 of the Act. The AO on the basis of information received noted that the assessee has made the deposit in cash of Rs. 14.00 lacs in the bank account with Bank of Baroda. The AO had initiated the proceedings u/s 147/148 of the Act by issuing notice u/s 148 on 27-03-2017. The AO completed the assessment u/s 143(3) r.w.s. 147 of the Act on 12-10-2017 whereby the addition of Rs. 15.50 lacs was made on account of unexplained deposit in the bank account. The assessee challenged the action of the AO including the validity of reopening of assessment before the ld. CIT(A) but could not succeed.
2.3 Before the Tribunal, the ld.AR of the assessee submitted that due approval granted by the ld. Pr.CIT is mechanical and without any application of mind. Therefore, the reopening of assessment is not sustainable in law. In support of his contention, the ld.AR of the assessee relied on following decisions.
(1) Chhugamal Rajpal vs S.P. Chaliha (1971) 79 ITR 603 (SC)
(2) Amarlal Bajaj vs ACIT (2013) 37 Taxmann.com 7 (Mumbai Trib)
(3) Pioneer Town Planners Pvt. Ltd vs DCIT (ITA No. 132/Del/2018 – ITAT Delhi Bench)
Thus the ld.AR of the assessee submitted that ld. Pr.CIT just noted the word ‘Yes’ and affixed his signature thereunder by granting the approval mechanically and without application of mind to the facts of the case. Therefore, the said approval granted by the ld. Pr.CIT is not the valid sanction and consequently the reopening of the assessment is liable to be quashed
2.4 On the other hand, the ld. DR submitted that when it is a case of deposit of cash in the bank account of the assessee which is not in dispute then the said facts itself constitute the tangible material to form the belief that income assessable to tax has escaped assessment as the assessee has not filed any return of income. Therefore, in the facts and circumstances of the case when there is no possibility of any second view then considering those reasons recorded by the AO, the approval granted by the ld. Pr.CIT on the basis of recommendation of JCIT is valid and proper. In support of her contentions, the ld. DR has relied on the decision of Hon’ble Calcutta High Court in the case of Prem Chand Shah (Jaisawal) vs ACIT, 383 ITR 597.
2.5 We have considered the rival submissions as well as the materials available on record. The AO has recorded the reasons for reopening of the assessment as under:-
‘’As per ITS details of F.Y. 2009-10, the assessee has deposited cash of Rs. 14,00,000/- in Bank of Baroda, VKI Area, Jaipur during the F.Y. but no return of income has been filed for the A.Y. 2010-11. Thus this transaction is not verifiable and the assessee did not disclose fully and truly all material facts necessary for assessment. Therefore, I have reason to believe that income of Rs. 14,00,000/- has escaped assessment. In view of the above reasons, it is requested that necessary approval may kindly be accorded.”
The AO has found out the facts of deposit of cash of Rs. 14.00 lacs in the bank account of the assessee and no return of income has been filed by the assessee for the year under consideration. Thus this very fact of deposit of cash of Rs. 14.00 lacs and not filing of the return of income by the assessee itself constitute a tangible material to form the belief that income assessable to tax has escaped assessment. We further note that JCIT after considering the reasons also recommended the reasons recorded by the AO for issuing notice u/s 148 of the Act. Based on these facts, the ld. Pr.CIT finally granted the approval. Therefore, it was not a case where the prudent person could have taken another view or opinion. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A) upholding the validity of reopening of the assessment.
3.1 The Ground No. 3 of the assessee is regarding an addition of Rs. 15.50 lacs made u/s 68 of the Act
3.2 The AO made an addition on account of unexplained cash deposited in the bank account of the assessee. The assessee contended before the AO as well as ld. CIT(A) that this amount was deposited out of past savings. The assessee further explained that it is his life long savings and finally deposited in the bank account as it was required by his son for business purposes. Therefore, due to compulsion of the wife of the assessee, the assessee had deposited this amount in the bank account which was utilized by his son for his business purposes. The AO found that the assessee has not substantiated the explanation of source of deposit by any documentary evidence. The ld. CIT(A) has confirmed the addition made by the AO.
3.3 Before us, the ld.AR of the assessee submitted that when the AO has rejected the contention of the assessee of past savings due to meager income then the amount deposited by the assessee in the bank account cannot be assessed as income of the assessee and the AO himself has given the findings that the assessee was not having sufficient income to save huge amount. Thus the ld.AR of the assessee contended that the amount which was used by his son who becomes the beneficial owner of the amount could have been assssed in the hands of the son and not in the hands of the assessee. In support of his contentions, the ld.AR of the assessee relied on the decision of Hon’ble Supreme Court in the case of CIT vs Smt. P.K. Noorjahan (1999) 103 Taxman 382 (SC). The ld.AR the assessee submitted that Hon’ble Supreme Court upheld the order of the Tribunal holding that the assessee could not be credited with having made any income of her own. The ld.AR of the assessee thus contended that when the assessee was not having sufficient income to make deposit in the bank account then the said amount cannot be added to the income of the assessee.
3.4 On the other hand, the ld. DR relied on the orders of authorities below and submitted that the assessee has failed to explain the source of deposits in the bank. The AO has noted that except claiming the opening balance of Rs. 15.75 lacs to explain the source of deposits in the bank account, the assessee has not produced any evidence for saving of the said amount.
3.5We have considered the rival submissions as well as the materials available on record. The facts are not in dispute that the assessee has deposited the cash in the bank account to the tune of Rs. 14.00 lacs on 1602-2010 with Bank of Baroda. The said amount was used for taking the draft on 18-02-2010. The assessee explained before the AO that the deposits of the cash were made out of past savings of the assessee. The ld.AR of the assessee produced cash book prepared by the assessee to show that this was an opening balance. However, since the assessee was not assessed to tax and there was no supporting evidence for having the opening credit balance of Rs. 15.75 lacs, therefore, the AO after allowing the benefit of Rs. 25,000/- has made the addition of remaining amount of Rs.15.50 lacs. Though the said addition made by the AO is based on cash book and over and above the deposit of Rs. 14.00 lacs is not justified when cash book itself was rejected by the AO, however, the question remains regarding the source of deposit of Rs. 14.00 lacs. We find that except the cash book prepared by the assessee in support of the source of deposit, no other material was produced by the assessee regarding the past savings of the assessee. Therefore, the explanation of the assessee regarding the bank deposit in the bank was not satisfactory due to the failure on the part of the assessee to explain the source/deposits. The addition made by the AO is based on the facts of the case. As regards the decision relied on by the ld.AR of the assessee in the case of CIT vs Smt. P.K. Noorjahan (supra), it is pertinent to note that in the said case it was found that the assessee was even not capable of earning income due to her age at that point of time. The assessee also explained the source of investment as income from the properties which were left by her mother’s first husband. Though the said explanation was not found to be satisfactory, however, by considering the surrounding circumstances that the assessee being a Muslim lady of 20 years was not having any source of income, therefore, she was not capable of earning any income. The addition made by the AO was deleted. The said decision was based on peculiar facts. In the case in hand, the assessee never explained before the AO that the said amount belongs to his son but right from beginning the assessee has been claiming that this deposit is sourced by his past savings. Once the assessee is capable of earning income then failure to explain the source of deposit in the bank would attract the provisions of Section 69 of the Act. Hence, in the facts and circumstances of the case, plea of the assessee cannot be accepted that the disclosed source of income of the assessee is not sufficient for making the deposit in the bank. if the said amount of deposit cannot be assessed as income of the assessee then the very object and purpose of provisions of Section 69 of the Act is defeated. Section 69 of the Act contemplates that if the assessee is found to have invested money without explaining the source of the same then it will be deemed as unexplained investment. Therefore, the reasons for failure of the assessee to explain the source of deposit in the bank account as not having sufficient disclosed source of income cannot be a ground for immunity from attracting the provisions of Section 69 of the Act and consequential deletion of such addition made by the AO. The Ground No. 3 of the assessee is dismissed.
4.0 In the result, the appeal of the assessee is dismissed Order pronounced in the open court on 07 /01/2020.
