TMI Blog2023 (4) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/Asr/2019 - - - Dated:- 20-3-2023 - DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER For the Appellant : None : ( Written submission ) For the Respondent : Sh. Prashant Singh , Sr. DR ORDER Per Anikesh Banerjee , JM Batch of three appeals of the two assessees were filed against the order of the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana, [in brevity the 'CIT(A)'] order passed u/s. 250(6) of the Income Tax Act 1961, [in brevity the Act]. The impugned order was emanated from the order of the Ld. ACIT, Central Circle, Jammu. (in brevity the AO) order passed u/s. 147 r.w.s. 143(3) of the Act. Only in ITA No. 184/Asr/2019, the order passed u/s. 144 of the Act. All three appeals are identical in nature under common factual backdrop and also both the assesses are in relation husband and wife. For the sake of convenience, we pass a common order for all three appeals. ITA No. 182/Asr/2019 is taken as a lead case. 2. Assessee has filed an application for condonation of delay of 02 days wherein, assessee has stated that delay has occurred due to postal delay which was not control of the assessee. The delay for 02 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. 11. That the appellate craves leave to add/amend any ground of appeal at the time of hearing. 4. The assessee had filed return on dated 31/03/2011 u/s. 139 of the Act was also the partner of M/s. Kash Ind Roller Flour Mills and was fully associated with the firm. The entire addition is related to cash deposit amount of Rs. 13,82,500/- in HDFC Saving Bank a/c, cash deposit amount of Rs. 30,12,654/- in ICICI Saving Bank a/c and Rs. 13,44,000/- is also deposit cash in ICICI Saving Bank a/c. The assessee offered explanation that the cash is related to cash of the firm. The assessee also challenged the jurisdiction of the Ld. AO for reopening u/s. 148 of the Act. The assessee claimed that the recorded reason is itself erroneous. The reopening was challenged before both the lower authorities. But the addition was confirmed by the Ld. AO. The assessment order was challenged before the CIT(A) and the assessee remained unsuccessful. Being aggrieved the assessee filed appeal before us. 5. The case was called for hearing; none was present on behalf of the assessee. ITA No. 182/Asr/2019 and 183/Asr/2019 were requested to take on basis of the written submission by the Ld. couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits in saving Bank a/c with HDFC Bank on various dates, wrongly holding that assessee has not explained source of cash deposits. ii. Addition of Rs. 30,12,654/- on a/c of cash deposits in saving Bank a/c with ICICI Bank on various dates, wrongly holding that assessee has not explained source of cash deposits. iii. Addition of Rs. 13,44,000/- on a/c of cash deposits in saving Bank a/c with HDFC Bank on various dates, wrongly holding that assessee has not explained source of cash deposits. 3. The additions are merely based on presumptions. The assessee has filed appeal u/s. 246A of the Income Tax Act 1961 and following submissions are made in support of grounds of appeal. SUBMISSIONS IN SUPPORT OF GROUNDS OF APPEAL. Ground 1 In the facts and circumstances of the case the Ld. AO has erred in opening of the assessment by recording false reasons under section 148(1) of the Income Tax Act . i. It is submitted that the Assessing Officer has recorded reasons to believe that income chargeable to tax has escaped assessment , relying on provisions of para (a) of Explanation 2 to Sec 147 of the Income Tax Act reproduced as under: Explanation 2.--F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of surmises and conjectures, ignoring the facts on record. i. The Ld. AO has recorded reasons on the basis of surmises, conjectures and suspicion and therefore, the same are without jurisdiction. There is no nexus between the prima facie inference arrived in the reasons recorded and the AIR information, which was restricted to cash deposits in bank account. But there was no material, much less tangible, credible, cogent and relevant material to form a reason to believe that cash deposits in assessee' bank a/c or the payments of credit card bills represented income of the assessee. ii. The reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumptions in nature. It is a case of mechanical action on the part of the Ld. AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that the cash deposits and payments of credit card bills represented income. The Ld. AO, while recording reasons, has erred in treating cash deposits in bank a/c as income of the assessee, which is wholly ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man would come to the conclusion that any income chargeable to tax has escaped assessment. ii. The AO has reopened the assessment by recording arbitrary, false and irrational reasons, not based on relevant material facts. The reasons recorded must point out to an income escaping assessment and the reasons cannot be arbitrary or irrational. Ground No. 5 The AO has erred in opening the assessment for the purpose of making a roving and fishing inquiry to verify as to whether any income has in facts escaped assessment. i. The AO has reopened the assessment on the basis of AIR information for the purpose of making a roving and fishing inquiry to verify as to whether any income has in fact escaped assessment on a/c of cash deposits in bank and payment of credit card bills as per the AIR information. The cash deposits in bank and payment of credit card bills do not necessarily constitute income. Thus, it was a mere suspicion of the AO that prompted him to initiate assessment proceedings under section 147 for the purpose of making a roving and fishing inquiry, which is neither countenanced, nor sustainable in law ii. It is submitted that the AO cannot reopen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion, that any income chargeable to tax has escaped assessment. Ground No. 6 The Ld. AO has erred in issuing notice u/s. 148 without appreciating that there was no omission or failure on the part of the assessee to make a return of her income or omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for her assessment for the assessment year under consideration. i. The assessee has filed her return of income for the assessment year under consideration on 31.03.2011 vide acknowledgment No. 8611008992 wherein all material facts necessary for her assessment were disclosed fully and truly, the Ld. AO has falsely stated that the assessee has not filed return for the assessment year under consideration. ii. It is well settled that the reasons recorded for reopening the assessment have to speak for themselves. They have to spell out that (i) there was a failure of the Assessee to disclose fully and truly all the material facts necessary for the assessment and (ii) the reasons must provide a live link to the formation of the belief that income had escaped assessment. Ground No. 7 In the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem while replying to assessee' objection to reasons recorded . ii. In Chhuqamal Rajpal vs. S.P. Chaliha. 79 ITR 603 (SC), the Hon'ble Supreme Court held that the ITO had no material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147 and that therefore, he could not have issued a notice under section 148. The provision of section 147 of the IT Act has been explained in detail by the Hon'ble Punjab and Haryana High court in the case of Dulichand Singhania Vs. ACIT 269 ITR 192 (P H). Similar view was taken by Hon'ble Delhi High Court In Case of Suren International Pvt. Ltd. 357 ITR 24. iii. That a precondition for reopening the assessment is that there must be income chargeable to tax and which should have escaped assessment. As per reasons recorded, the Ld. AO has treated the cash deposit in bank a/c as income of the assessee. But the deposit of cash in bank a/c itself is not income within meaning of income as per provisions of section 2(24) of the Act. Therefore, assessment reopened without application of mind is invalid ab initio as per settled position of law. The Hon'ble Supreme Court In ITO v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of their belief that there has been escapement of the income of the assessee from assessment in the particular year because of her 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. 9. Related to factual ground, the assessee was unable to bring true fact before the revenue authorities. In the written submission the assessee has mentioned that the assessee filed the return voluntarily on 31st March 2011 with acknowledgment No. 8611008992 and declaring total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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