2019 (7) TMI 377 - AT - Income Tax

Unexplained cash deposit in his bank account - Reopening of assessment u/s 147 - HELD THAT - In light of the settled legal proposition of law as laid down by the various Courts including the decision of Hon ble Bombay High Court in case of CIT vs. Jet Airways . 2010 (4) TMI 431 - HIGH COURT OF BOMBAY wherein it was held that in terms of Section 147 of the Act, the Assessing Officer has to assess or reassess the income which has escaped assessment and which was the basis for the formation to belief and it he does so he can also assessed or reassess any other income which has escaped assessment which come to his notice during the course of assessment proceedings. Issuing notice U/s 148 of the Act, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him to independently assess some other income and if he intends to do so, a fresh notice U/s 148 would be necessary, we are of the considered view that the addition made by the Assessing Officer towards unexplained cash deposit in the assessee s bank account cannot be sustained as the very reasons for reopening the assessment has not been made the subject matter of assessment in the hands of the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction under section 147 of the Income Tax Act.
2. Addition of unexplained cash deposit in the bank account.
3. Violation of principles of natural justice by the CIT(A).

Jurisdiction under section 147 of the Income Tax Act:
The appeal was filed against the order of the ld. CIT(A) for the Assessment Year 2010-11. The Assessing Officer (AO) had issued a notice under section 148 of the Act based on the belief that income from commodity derivatives worth a specific amount had escaped assessment. The assessee declared a loss from transactions in commodity derivatives in response to the notice. The AO observed unexplained cash deposits in the bank account of the assessee and added this amount to the returned income. The assessee challenged the jurisdiction of the AO under section 147, arguing that the reasons for reopening the assessment did not lead to any addition related to commodity transactions. The Tribunal referred to legal precedents and held that if the alleged income for which the notice was issued was not brought to tax, the AO cannot extend jurisdiction to tax any other income. Therefore, the addition based on unexplained cash deposits was not sustainable.

Addition of unexplained cash deposit in the bank account:
The AO added the amount of unexplained cash deposit in the bank account to the returned income of the assessee. The assessee contended that the reasons for reopening the assessment were related to commodity transactions, and since no addition was made in that regard, the AO could not independently assess other income. The Tribunal agreed with the assessee, stating that the AO's jurisdiction was limited to assessing the income that led to the belief of escapement. As the income from commodity transactions was not assessed, the addition of unexplained cash deposit could not be sustained.

Violation of principles of natural justice by the CIT(A):
One of the grounds of appeal raised by the assessee was that the CIT(A) did not afford sufficient opportunity of being heard, violating the principle of natural justice. However, this issue was not specifically addressed in the detailed analysis provided by the Tribunal. The Tribunal did not find it necessary to examine the legality of the notice and assumption of jurisdiction under section 147, as well as the merits of the additions made by the AO. Consequently, the contentions related to the violation of principles of natural justice were treated as infructuous and not adjudicated upon.

In conclusion, the Tribunal allowed the appeal filed by the assessee, primarily on the grounds related to the jurisdiction of the AO under section 147 and the addition of unexplained cash deposits in the bank account. The Tribunal emphasized that the AO's jurisdiction is limited to assessing the income that led to the belief of escapement and cannot independently assess other income if the initial reasons for reopening the assessment were not made the subject matter of assessment. The appeal was allowed, and the addition based on unexplained cash deposits was deemed unsustainable.