TMI Blog2022 (3) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... O. acted only on the basis of suspicion, so it cannot be said that it was based on belief that the income chargeable to tax had escaped assessment - Thus reassessment proceedings, initiated by the A.O. on the basis of suspicion were not valid - Decided in favour of assessee. - ITA No.121/Chd/2020 (Assessment Year : 2011-12) - - - Dated:- 22-7-2021 - SHRI. N.K.SAINI, VICE PRESIDENT Assessee by: Shri Ashray Sarna, CA Revenue by: Smt. Meenakshi Vohra, Addl. CIT ORDER PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Assessee against the order dt. 26/12/2019 of Ld. CIT(A)-43, New Delhi. 2. Following grounds have been raised in this appeal: 1. That the order passed by the Hon'ble CIT(A) dated 26.12.2019 is against the law and facts of the case. 2. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. Assessing Officer in framing the impugned assessment order u/s 144 r.w.s 147 and without complying with the mandatory conditions u/s 147/148/151 as envisaged under the Income Tax Act, 1961. 3. That having regard to the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The A.O. framed the assessment under section 144 r.w.s 147 of the Act and made the addition of ₹ 35,01,000/-. 5. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submission which reads as under: This is the case of assessee, individual, NRI residing in Surrey, Canada. Case was reopened u/s 147 of the Act, notice 148 of the Act was issued for the reason that there was cash deposit amounting to ₹ 35,01,000/- in the bank account of the assessee. The assessment] in the case of assessee was completed u/s 144 r.w.s. 147 of the Act for the reason that assessee being NRI and notices being issued by the Ld. AC were not served on the assessee. Thereafter Ld. Assessing Officer framed assessment at the total income of ₹ 35,01,000/- as undisclosed income on account of unexplained cash deposit in the bank account of assessee and also initiated penalty u/s 271(l)(c) of the Act. Aggrieved by the order assessee preferred appeal before the worthy CIT(A)-42, New Delhi. GROUND: 2 That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in framing the impugned assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such material is not sustainable. The expression reason to believe predicated that the assessing officer holds the belief induced by the existence of reasons for holding such belief. It contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief Such a belief has not to be based on mere suspicion but it must be based on information as was held y Hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. Vs.IT0 41 1TR191. Reliance is placed on the decision of Amritsar Bench in the case of Amrik Singh v/s ITO, 159 ITD 329 (Amritsar) in which it was held as under: When the assessment proceedings u/s 147 are initiated on the fallacious assumption that the bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the assessee, the proceedings is neither countenanced, nor sustainable in law. Further reliance is placed on the decision of ITO v/s Lakhmani Mewal Das, Supreme Court, 103 ITR 0437 in which it was held s under: Reassessment under s. 147(a)-Reason to believe-Must have a materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant did not file a return for the said assessment year. This fact is also not disputed. The assessing officer therefore had a prima facie reason to believe that in the absence of any income, said deposit in the bank account would constitute as unexplained deposits. It is, therefore, now examined whether the A.O. had prima-facie reasons to believe that income had escaped assessment and whether the conditions laid down under main provision of section 147 are fulfilled in the case of the appellant. As already mentioned hereinbefore, the case of the appellant is covered by the main provisions of sec. 147 and not the proviso to sec. 147. Under the main provision as reproduced earlier, if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section. Thus, under the main section of sec. 147, the essential pre-requisite is that the Assessing Officer should have reasons to believe that income chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite condition in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of-notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material could conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 I T R 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). (para 16) As observed by the Apex Court, at the initiation stage, what is required to be seen is whether there are prima-facie 'reasons to believe' but not the established fact of escapement of income. The Assessing Officer also recorded proper reasons for formation of the bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l submissions the Ld. Sr. DR strongly supported the orders of the authorities below and further submitted that the assessee never filed the return of income for the year under consideration as well as the earlier assessment years. It was further submitted that even in response to the notice issued under section 148 of the Act, no return was filed by the assessee and since there was a deposit in the bank account of the assessee for which no explanation was given, the A.O. rightly reopened the assessment as there was escapement of income by the assessee. Ld. Sr. DR reiterated the observations of the Ld. CIT(A) and submitted that since there was a deposit of cash amounting to ₹ 35,01,000/- in the account of the assessee and no return of income was filed, therefore the A.O. rightly formed the opinion and had reason to believe that income chargeable to tax had escaped assessment and that the Ld. CIT(A) was fully justified in confirming the action of the A.O. 9. I have considered the submissions of both the parties and perused the material available on the record. In the present case, it is not in dispute that the assessee an NRI is residing in Surrey, Canada. In the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) while relying the judgment of the Hon'ble Apex Court in the case of ITO Ors Vs. Lakhmani Mewal Das (1976) reported in 103 ITR 437 (SC) held as under: that the Assessing Officer had not examined the information received from the survey circle before recording his own satisfaction of escaped income and initiated reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of reasons to believe and not on reasons to suspect . The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid. 9.5 In the present case also the A.O. in the reasons recorded clearly stated that on the basis of information that the assessee deposited cash of ₹ 35,01,000/- in the bank account formed the opinion that the said deposit was the income of the assesse which escaped the assessment, while doing so he di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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