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TMI Blog2017 (10) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons recorded for reopening the case as reproduced on the very beginning of the order are again described below: "As per AIR information for FY 2006-07 received in this office the assessee has made cash deposits of Rs. 10,80,000/- in his bank account with Punjab national bank circular road Rewari. A query notice was issued to the assessee on 24th of January 2012, but no response has been received from the assessee. I therefore have reason to believe that assessee has deposited cash in his bank account out of his income from unexplained sources. Accordingly income to the extent of Rs. 10,80,000/- and any other income which subsequently comes to the notice of the undersigned has escaped assessment within the meaning of section 147 of the income tax act. Issue notice under section 148 of the income tax act 1961 for assessment year 2007-2008" 4. After reopening the case under section 148 of the Act, the Assessing Officer, in the impugned order has made three additions as below: a) addition on account of cash deposits Rs. 10,80,000/-; b) addition on account of disallowance of deduction under section 54B of Rs. 17,96,500/-; and c) addition on account of interest Rs. 54,851 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of taxation that all receipts are not income and all income are not taxable income applies squarely to present facts. 7.4 That all the decisions relied by the assessee/appellant in the case law compilation are on identical facts. To support my above conclusion, I reproduce the extract from the same : 8. First decision where also reopening under section 148 of the Act was made by the same assessing officer, that is, income tax officer Ward 2 Rewari is relied by me in support of my above decision, which is on identically worded reasons which is reproduced hereinbelow: ITA No. 3534/Del/2014 [Assessment Year: 2007-08] Munni Devi Date of order : 15-09-2016 11. We have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case laws cited by the assessee's counsel on the issue in dispute. In our view, it is very much necessary to reproduce the reasons recorded by the AO before issue of notice u/s. 148 for reopening of assessment which reads as under:- "As per AIR information for FY 2006-07 received in this office, the assessee has made cash deposits of Rs. 49,42,000/- in bank account with Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at 68 SOT page 197 has considered the controversy in its entirety. The relevant discussion is reproduced below: "3. This assessment was reopened, as noted in the reasons recorded for reopening the assessment- furnished to the assessee vide Assessing Officer's letter dated 25th April 2012, on the following ground: During the financial year 2007-08, the assessee has made transaction of Rs. 10,24,100 (deposits in cash) in his saving bank account but no return of income was filed by the assessee. As such, it has reason to believe that there is an escapement of income at Rs. 10,24,100 on the "3. This assessment was reopened, as noted in the reasons recorded for reopening the assessment- furnished to the assessee vide Assessing Officer's letter dated 25th April 2012, on the following ground: "During the financial year 2007-08, the assessee has made transaction of Rs. 10,24,100 (deposits in cash) in his saving bank account but no return of income was filed by the assessee. As such, it was reason to believe that there is an escapement of income at Rs. 10,24,100 on the link between conclusion and the evidence....". Therefore, the reasons are to be examined only on the basis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. 8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating to Rs. 10,24,100 have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we do not have the liberty to exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped assessment" and we are unable to see anything on the facts of the present case which are materially similar to the facts of the said case. As regards her reliance on the decision of a coordinate bench in the case of Mithila Credit Services Limited Vs ITO (ITA No. 1078/Del/2013; order dated 23.5.2014), it is important to bear in mind the fact that it was a case in which the Assessing Officer had reopened the assessment on the basis of receipt of information from Directorate of Investigation, and, as noted by the Assessing Officer in the reasons recorded for reopening the assessment, "the name of the assessee figures as one of the beneficiaries of these alleged bogus transactions" in the information given by the directorate. If the assessee was a beneficiary of such a scam, the income was indeed to have been taxed in its hands but then in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation to find out the source of the cash deposit by the assessee as the AO has not recorded anything that this deposit of cash is from particular source which is not disclosed by the assessee in the books of account or in the return of income. The deposit of cash in the bank account of the assessee does not establish any live nexus between the information and formation of the believe that there was escapement of the income by the assessee. There may be end number of reasons and sources of deposit of cash in the bank which may not constitute the same as income of the assessee and therefore merely deposit of cash in bank itself would not lead to the conclusion or believe that the said amount is assessable income of the assessee and escapement of assessment. In the case in hand there are number of withdrawals and deposits in the bank account of the assessee in question. It is clear from the details of the bank account that prior to the deposit of this amount of Rs. 6 lac there was withdrawals of about Rs. 14 lac from the said bank account, therefore in the absence of any other information or material to indicate the source of this deposit other than withdrawals from the bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd specific reason have to be recorded by the Assessing Officer before the issuance of notice under section 148 of the Act, as reply has to be given by the assessee to such reason which are recorded in the notice. Nothing can be left for the party to conjecture and then presume that such could be a reason for the Assessing officer to believe that there has been escapement of income from assessment to tax." 10. Thus, it is clear that the Hon'ble High Court has made a clear distinction between the definite/specific reasons and mere mentioning the income of the assessee without having a direct nexus or live link between the material which has come to the notice of the AO and form a believe that there was escapement of the income by the assessee. 14. Thus it is clear that the basic requirement for reopening of assessment that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment was found to be missing when the AO proceed to reopen the assessment which is in nature of a post mortem exercise after the event of reopening of the assessment. Therefore the reopening of the assessment was found to be invalid as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the Assessing Officer to the Assessee is to be avoided; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for re-opening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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