2025 (7) TMI 237 - AT - Income Tax

Validity of reopening of assessment - assumption of jurisdiction of AO - Assessment u/s 144 - Additions u/s 68 - HELD THAT - It is clear that the assessee has not filed any return of income and any accounts etc. filed on 03.02.2023 were examined and found unsatisfactory. As seen that the assessee has not specifically challenged the action of AO in adding sum u/s. 68 - In fact neither before the Ld. CIT(A) nor before us have any details regarding turnover of business sales and purchases thereon or even details of business expenses have been presented or any argument advanced in that direction. Accordingly we find no fault in the assumption of jurisdiction by AO as evidenced by the finding to this extent in the impugned order. Since the main challenge as per the grounds is regarding this aspect the said grounds fail before us. It also needs to be mentioned that one of the arguments of the Ld. AR pertained to passing of order u/s. 144. It needs to be mentioned that since the return of income was not filed in response to notice u/s. 148 of the Act the AO could only pass an order u/s. 144 of the Act. Appeal of the assessee is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal (AT) in this appeal are:

• Whether the reopening of the assessment under section 147 of the Income Tax Act, 1961 (the Act) was valid and in accordance with the prescribed legal procedure.
• Whether the Assessing Officer (AO) was justified in passing an order under section 144 of the Act in the absence of a filed return of income and adequate evidence supporting the cash deposits.
• Whether the addition of Rs. 1,23,40,000/- under section 68 of the Act representing unexplained cash deposits in the bank account of the assessee was proper.
• Whether the appeal filed before the Tribunal was within time, considering the delay and the reasons for condonation of delay.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of reopening assessment under section 147 of the Act

Relevant legal framework and precedents: Section 147 empowers the AO to reopen an assessment if he has reason to believe that income has escaped assessment. The procedure requires issuance of notice under section 148 and adherence to the principles of natural justice. The Supreme Court's directive in Ashish Agarwal [444 ITR 1 (SC)] mandates strict compliance with procedural safeguards before reopening assessments.

Court's interpretation and reasoning: The Tribunal noted that the AO had passed an order under section 148A(d) and issued a notice under section 148 on 31.03.2022, following due procedure. The CIT(A) had also examined and upheld the validity of the reopening, finding no procedural irregularity. The assessee's challenge focused primarily on this aspect, alleging illegal assumption of jurisdiction.

Key evidence and findings: The record showed proper issuance of notices and compliance with the procedural requirements. The CIT(A) had specifically addressed and rejected the contention of illegal reopening on pages 6-7 of the appellate order. The assessee did not substantively dispute the facts of procedural compliance but relied on the Ashish Agarwal precedent.

Application of law to facts: The Tribunal found no merit in the contention that the reopening was illegal. The procedural steps prescribed under the Act and judicial precedents were followed. The AO had sufficient reason to believe income had escaped assessment, particularly given the absence of a return and inadequate evidence.

Treatment of competing arguments: The assessee's reliance on Ashish Agarwal was considered but found inapplicable as the procedural safeguards were observed. The AO's and CIT(A)'s orders were consistent with legal requirements.

Conclusion: The reopening under section 147 was valid and legal.

Issue 2: Justification for passing order under section 144 of the Act

Relevant legal framework and precedents: Section 144 allows the AO to make a best judgment assessment if the assessee fails to file a return or comply with notices. It is a remedial provision to ensure assessment in absence of cooperation.

Court's interpretation and reasoning: The Tribunal observed that the assessee had not filed any return of income despite notices under section 148. Consequently, the AO was compelled to pass an order under section 144. This was in accordance with the law and not arbitrary.

Key evidence and findings: The AO's order noted that no return or adequate evidence was filed by the assessee. The AO's examination of accounts and cash deposits found them unsatisfactory. The absence of business expense withdrawals further supported the AO's conclusion.

Application of law to facts: The AO's recourse to section 144 was justified given the assessee's non-compliance. The Tribunal upheld the AO's approach as consistent with the statutory mandate.

Treatment of competing arguments: The assessee argued illegality in the use of section 144, but the Tribunal clarified that in absence of a return, section 144 is the appropriate provision.

Conclusion: The order under section 144 was proper and legally sustainable.

Issue 3: Addition of Rs. 1,23,40,000/- under section 68 of the Act

Relevant legal framework and precedents: Section 68 deals with unexplained cash credits. The assessee must satisfactorily explain the nature and source of such credits to avoid additions.

Court's interpretation and reasoning: The Tribunal noted that the assessee did not file any return or provide adequate evidence to explain the cash deposits as business turnover. The AO found suspicious aspects including absence of withdrawals for business expenses and inability to verify sources.

Key evidence and findings: The AO's order recorded that the accounts filed were unsatisfactory and no credible details were furnished regarding sales, purchases, or expenses. The assessee did not challenge the addition substantively before the CIT(A) or the Tribunal.

Application of law to facts: Given the lack of explanation and documentary support, the addition under section 68 was justified. The Tribunal found no fault in the AO's findings or the CIT(A)'s confirmation.

Treatment of competing arguments: The assessee did not advance specific arguments on the merits of the addition, focusing instead on procedural issues. The Tribunal therefore treated the addition as valid.

Conclusion: The addition of Rs. 1,23,40,000/- under section 68 was upheld.

Issue 4: Condonation of delay in filing appeal

Relevant legal framework: Delay in filing an appeal can be condoned if sufficient cause is shown. The Tribunal has discretion to admit appeals despite delay.

Court's interpretation and reasoning: The assessee filed an affidavit explaining the delay of 88 days. The Tribunal found the reasons satisfactory and condoned the delay, admitting the appeal for adjudication.

Conclusion: Delay was condoned and appeal admitted.

3. SIGNIFICANT HOLDINGS

"Considering the reasons given in the said affidavit, the delay is hereby condoned and the appeal is admitted for adjudication."

"We find no fault in the assumption of jurisdiction by the Ld. Assessing Officer, as evidenced by the finding to this extent in the impugned order."

"Since the return of income was not filed in response to notice u/s. 148 of the Act, the Ld. Assessing Officer could only pass an order u/s. 144 of the Act."

"Accordingly, we find no merit in the grounds challenging the reopening of assessment and confirm the addition made under section 68 of the Act."

Core principles established include:

• Strict adherence to procedural requirements under section 147 and related provisions is essential for valid reopening of assessments.
• In absence of return filing, the AO is empowered to pass best judgment assessment under section 144.
• The assessee bears the onus to explain cash credits under section 68 with credible evidence; failure results in addition.
• Delay in filing appeals can be condoned on sufficient cause, enabling substantive adjudication.

Final determinations:

• The reopening of assessment under section 147 was valid and legal.
• The order under section 144 was proper due to non-filing of return and inadequate evidence.
• The addition of Rs. 1,23,40,000/- under section 68 was justified and upheld.
• The delay in filing the appeal was condoned and the appeal was admitted but ultimately dismissed on merits.