2024 (1) TMI 1260 - AT - Income Tax

Reopening of assessment u/s 147 - reasons to believe - Addition towards cash deposits in saving bank account and unexplained investment in purchase of land - CIT(A) upheld the addition made by the AO towards unexplained investment in property and granted partial relief on account of cash deposit made in the saving bank account HELD THAT - AO had formed a reasonable belief that income of the assessee had escaped assessment primarily on two facts as assessee s case is non-PAN case but the assessee is having PAN and is regularly assessed to income tax. Assessee had used the very same PAN for filing his original return u/s 139. Also the income tax return for AY 2009-10 is not available on record but this is factually incorrect as assessee had already filed his income tax return on 22.09.2010 Based on the aforesaid two factual incorrect assumptions made by the ld AO while recording the reasons the AO had come to conclusion that cash depositnmade in the saving bank account would constitute income escaping assessment in the hands of the assessee warranting reopening u/s 147 of the Act. Once it is clearly established that the very basis of assumption of jurisdiction by the ld AO for reopening the assessment was based on incorrect facts the entire foundation of reason to believe of the ld AO goes. Once the foundation goes the entire reopening deserves to be quashed. This view of ours is further fortified by the decision of the coordinate bench of Mumbai Tribunal in the case of ITO Vs. M/s. Champaklal Mathurbai Mehta 2022 (11) TMI 1209 - ITAT MUMBAI wherein by placing reliance on the decision of Deepak Wadhwa 2021 (3) TMI 332 - DELHI HIGH COURT . and decision of Mumtaz Haji Mohamad Menon 2018 (10) TMI 366 - GUJARAT HIGH COURT had quashed the reopening proceedings. Respectfully following the same we have no hesitation to quash the reassessment by holding that assumption of jurisdiction u/s 147 of the Act in the instant case is based on incorrect facts recorded thereon. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of assumption of jurisdiction under Section 147.
2. Addition of Rs. 11,16,200/- as unexplained cash deposits.
3. Addition of Rs. 42,00,000/- under Section 69 for unexplained investment in property.

Summary:

1. Validity of Assumption of Jurisdiction under Section 147:
The assessee challenged the reassessment on the grounds that the jurisdiction under Section 147 was assumed without complying with mandatory conditions. The Tribunal found that the Assessing Officer (AO) had based the reassessment on incorrect facts, such as the non-availability of the assessee's PAN and the non-filing of the income tax return for AY 2009-10. The Tribunal noted that the assessee had indeed filed the return using PAN AGEPC5576D on 22.09.2010. The Tribunal held that the foundation of the AO's "reason to believe" was flawed, leading to the quashing of the reassessment. This decision was supported by precedents from the Mumbai Tribunal, Delhi High Court, and Gujarat High Court, which emphasized that reassessment based on incorrect facts and non-application of mind by the AO is invalid.

2. Addition of Rs. 11,16,200/- as Unexplained Cash Deposits:
The assessee contested the addition of Rs. 11,16,200/- on the grounds that the cash deposits were unexplained. The Tribunal did not specifically adjudicate this issue since the reassessment itself was quashed, rendering the merits of this addition academic.

3. Addition of Rs. 42,00,000/- under Section 69 for Unexplained Investment in Property:
The assessee also contested the addition of Rs. 42,00,000/- under Section 69, arguing that the amount was given by the mother of the appellant from her bank account and the appellant's own bank account. Similar to the previous issue, the Tribunal did not adjudicate this on merits due to the quashing of the reassessment.

Conclusion:
The Tribunal allowed the appeal of the assessee by quashing the reassessment based on incorrect facts and non-application of mind by the AO. Consequently, the issues regarding the additions on merits were left open and not adjudicated. The appeal was pronounced in the open court on 12/01/2024.