INCOME TAX OFFICER, PATIALA V. RAJ AUTOS, PATIALA

ITA 829/CHANDI/2024

AI Insights

The case involves the Income Tax Department's appeal against the order of the CIT(Appeals) which upheld the re-opening of the assessment for the assessee, Raj Autos, for the assessment year 2016-17. The AO had re-opened the assessment based on information that Raj Autos had deposited a sum of Rs.19,75,47,805/- in its bank account, which was allegedly not commensurate with the income declared. The CIT(A) deleted the quantum addition made by the AO but upheld the re-opening. The Tribunal, however, found the re-opening unjustifiable due to the incorrect factual basis and lack of proper analysis by the AO.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397944 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Assessee Lawyers: ASHWANI KUMAR; DEEPALI AGGARWAL
• Keywords: Unexplained cash credit; Reopening of assessment; Rectification of order; Assessment record; Reason to believe
• Section: 147; 148; 142(1)

Judgement Text

"आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 829/CHD/2024 Ǔनधा[रण वष[ / Assessment Year: 2016-17 The ITO, Patiala. Vs Raj Autos, Opp. Bhagat Volkswagen Showroom, Sirhind Byepass Road, Patiala. èथायी लेखा सं./PAN NO: AANER8138F अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent C.O. No. 36/CHD/2024 in आयकर अपील सं./ ITA No. 829/CHD/2024 Ǔनधा[रण वष[ / Assessment Year: 2016-17 Raj Autos, Opp. Bhagat Volkswagen Showroom, Sirhind Byepass Road, Patiala. Vs The ITO, Ward-5, Patiala. èथायी लेखा सं./PAN NO: AANER8138F अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Assessee by : Shri Ashwani Kumar, CA and Ms. Deepali Aggarwal,CA Revenue by : Smt. Kusum Bansal, CIT,DR Date of Hearing : 23.04.2025 Date of Pronouncement : 02.06.2025 HYBRID HEARING O R D E R PER RAJ PAL YADAV, VP The Revenue is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 21.06.2024 passed for assessment year 2016-17. On receipt of notice in the ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 2 Revenue’s appeal, assessee has filed Cross Objection bearing No. 36/CHD/2024. 2. In the grounds of cross objection, assessee has pleaded that re-opening of assessment by issuance of a notice u/s 148 is not valid and therefore, the re-assessment order ought to have been quashed. The assessee has contended that ld. CIT(A) has erred in upholding the re-opening of assessment. 3. The brief facts of the case are that assessee has filed its return of income on 15.09.2016 declaring total income at Rs.12,17,270/-. The assessee at the relevant time was an authorized dealer of Honda since 2012. According to the AO, he has received an information that assessee has deposited a sum of Rs.19,15,47,805/- in its bank account with Indusind Bank. Therefore, he recorded the reasons for re-opening the assessment. The reasons recorded by the AO read as under : “1. M /S Raj Autos having PAN AANFR8138F has filed its Return of Income declaring Income amounting to Rs. 12,17,270/- on 15.09.2016. Its case was selected under High Risk Transactions Information uploaded on Insight Portal. From the perusal of ITBA, it is established that the assessee has filed its return of income for the A.Y. 2016-17. (No scrutiny assessment was done in this case) 2. From the perusal of E-filing portal information received in this office, it is revealed that the assessee has filed its ITR, and has made cash deposits in its Current Bank Account Number 200998981774 with Indusind Bank Limited amounting to Rs. 19,75,47,805/- The details of the transaction made by the assessee are as under: ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 3 Account No. 200998981774 with Indusind Bank Limited of Rs. 19,75,47,805/- but the same does not commensurate with the ITR Filed for the F.Y. 2015-16 relevant to A.Y. 2016-17. 4. The assessee has escaped assessment of Rs. 19,75,47,805/- for the A.Y. 2016-17 on account of unexplained cash deposits in current account which exceeds the prescribed limit of Rs. 1.00 Lakhs. Looking into all the facts and circumstantial evidence, I have reasons to believe that income of Rs. 19,75,47,805/- chargeable to tax has escaped assessment for the A.Y. 2016-17. 5. In the present case, the undersigned has information as well as sufficient reasons to believe that income for the Assessment Year 2016-17 has escaped assessment. The assessee has entered in financial transaction amounting to Rs. 19,75,47,805/- there is sufficient reason to believe that income more than Rs. 19,75,47,805/- has escaped assessment for the Assessment Year. 6. In the present case, the assessee PAN: AANFR8138F has filed its Return of Income declaring Income amounting to Rs. 12,17,270/- on 15.09.2016. and has engaged in transaction far in excess of declared income which is sufficient reason to believe that (unaccounted income of Rs. 19,75,47,805/- has escaped assessment. In view of the above, the provisions of clause (b) of Explanation 2 to section 147 are applicable of facts of this case which is reproduced below: \"where a Return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return\". 7. Considering the factual matrix, statutory provisions and legal principles, the undersigned has reasons to believe there has been an escapement of income to the tune of more that Rs. 19,75,47,805/- chargeable to tax for the A.Y 2016-17 and hence it is fit case for initiation of proceedings in terms of section 147 of the Income Tax Act, 1961, since income has escaped assessment due to failure by taxpayer to where more than 4 years have elapsed disclose fully and truly all material facts necessary for its assessment for the assessment year 2016-17. 8. Accordingly, necessary approval u/s 151(1) of the Income Tax Act, 1961 is solicited for issuance of notice u/s 148 of the Income Tax Act, 1961 for the Assessment Year 2016-17.\" Name of assessee Name of bank F.Y. Amount of transaction M/s Raj Autos Indusind Bank 2015-16 Limited Rs.19,75,47,805/- (cash deposit) ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 4 In case you wish to file an objection regarding the same, you may do so within time given for response for this notice. NOTE: Please furnish all the details in above mentioned format. Please furnish the necessary documentary evidence to support your claim. Also, you are kindly requested to reply within the time given in notice u/s 142(1) of the Income-tax Act, 1961, failure to which the penal proceeding may be initiated for non- compliance. In case the reply or the documents furnished are in regional language, then please submit the English translation also.” 4. The AO, thereafter, passed assessment order on 29.03.2022. He made an addition of Rs.16,15,47,810/-. 5. In appeal to the CIT(A), this addition on quantum has been deleted but re-opening has been upheld. 6. The Revenue in its appeal is challenging this deletion of Rs.16,15,47,810/- whereas assessee in its Cross Objection challenging the re-opening of assessment. 7. With the assistance of ld. Representative, we have gone through the record carefully. Since it is assessment year 2016-17, therefore, Section 147, as was applicable in this year is to be taken into consideration because substantial changes have been made in the language of Section 147 by Finance Act 2021 w.e.f. 01.04.2021. A perusal of opening line of Section 147 would reveal that it contemplates that “If the AO has reason to believe that any income chargeable to tax has escaped assessment in any assessment year, he may, subject ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 5 to the provisions of Section 148 to 153 assess or re-assess such income ……………”. Notice u/s 148 has been issued on 31.03.2021. A perusal of the reasons recorded by the AO and extracted by us would reveal that according to the AO, a sum of Rs.19,75,47,805/- was deposited in the bank account of the assessee with Indusind Bank. This figure is factually incorrect. According to the assessee, its total turnover during the year was around Rs.16.31 Cr and it has made deposits of Rs.10,14,63,750/-. Thus, it would indicate that ld. AO has not applied his mind on the information uploaded on insight Portal of Department vis-à-vis assessment record of the assessee. He simply treated such an information as a gospel truth and recorded the reasons that income of the assessee has escaped to the extent of Rs.19.75 Cr. We fail to understand from where these figures have been analyzed by the AO. Thus, the foundation of the reasons is based on conceivement of wrong facts. There is no live nexus between the real acts of assessee's return for this assessment year vis- à-vis alleged information possessed by the AO. This re- opening is not justifiable. The ld. CIT(A) has erred in not quashing the assessment on this issue also. ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 6 8. Now we take the grounds agitated by the Revenue in its appeal. We find that the CIT(A) has recorded a very categorical finding and such finding reads as under : 3.1 On being informed from a credible source that the assessee has made cash deposit in its account maintained in the Induslnd Bank Ltd. for a sum of Rs. 19,75,47,805/-, which' was not commensurate with the returned income disclosed by the assessee in its return! submitted on 15.09.2016 for a sum of Rs.12,17,270/- , the Assessing Officer reopened the case by issue of notice u/s.148 on 31.03.2021. The assessee against such notice, submitted a return of income again disclosing the same amount of income in response to the notice u/s.148 on 03.12.2021. Thereafter the Assessing Officer issued notice u/s.143(2) on 01.02.2022 and subsequent to that he further issued notice u/s.142(1) on 08.03.2022 and again on 15.03.2022. The assessee, other than submission of the belated return against the notice u/s.148, submitted its replies on 21.03.2022, 22.03.2022 and 23.03.2022. In such reply, the assessee claimed that the primary issue for the reopening of the case by the Assessing Officer by taking the deposits in the Induslnd Bank Ltd. account maintained by the assessee for Rs. 19,75,47,805/- was a wrong information but actual cash deposit made in such account for the Financial Year 2015-16 was Rs.10,14,63,750/-. The assessee also, claimed that the source of such deposit was a sale proceeds of two wheelers of Honda Brand. It also disclosed that the total turnover during the year was Rs. 16,31,36,937/- which not only included the sale of two wheelers but also included the sale of accessories, spares, oils and lubricants, old vehicles and miscellaneous scrap. They claimed before the Assessing Officer that the cash deposit actually made in the Induslnd Bank account was around 62.19% only. The Assessing Officer, however, found that the late reply made by the assessee with documentary evidences was difficult to scrutinize properly especially for making any third- party enquiry as that was at the fag end of the year by which the Assessing Officer had to complete the assessment. Therefore, he went on to reject the books of account completely and added the entire credit made in the Induslnd Bank Ltd. account for Rs.16,15,47,8107- which included the cash deposit of Rs.10,14,63,750/-. He treated the entire amount credited in the bank account as unexplained cash credit u/s.68 and made addition under that provision. 3.2 Aggrieved with the order, the assessee instituted the present appeal. The appeal was taken up for hearing and the assessee was requested to submit documentary evidences in support of its ground taken along with explanations on the same. The assessee submitted the copy of the bank statement of Induslnd Bank Ltd. for the entire year, the complete audited accounts for the year along with its annexures, the complete set of the cash book for the year along with a separate extract of cash deposits made in the Induslnd Bank account for the year. Assessee also submitted that documents were already submitted before the Assessing ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 7 Officer during the assessment stage and they are quite at a loss for the reasons of rejection of such audited books by the Assessing Officer. On receipt of such documentary evidences, the case was remanded to the Assessing Officer for proper scrutiny of the submitted documents and to submit the remand report after making necessary enquiries in this case. 3.3 The Assessing Officer submitted his Remand Report dated 19.04.2024, wherein I find that no further enquiry was made by the Assessing Officer during the remand stage and simply reiterated the position of the Assessing Officer as taken during the assessment. He further mentioned that although the Assessing Officer had made addition of Rs. 16,15,47,805/- in the assessment order but in advertently in the computation sheet such income was increased to Rs. 19,75,47,805/-. He submitted that a rectification order u/s.154 has already been made to such mistake reducing the demand from Rs.12,32,16,132/- to Rs.10,07,36,304/-. 3.4 I am constrained to mention that both at the assessment stage as well as at the remand stage, the work of the Assessing Officer is nothing but done in a very shoddy manner without going into the merit of the case whatsoever. It is well established that the assessee is an authorized dealer of Honda selling whole range of two wheelers of Honda Brand and its business location is at Patiala. In the trading account the assessee claimed that there was opening stock of vehicles of Rs. 1,13,52,526/-. New vehicles were purchased for Rs. 13,93,84,411/- against which direct sales of new vehicles were reported in the audited accounts for Rs.14,74,93,681/- and vehicles worth Rs.1,11,31,440/- was disclosed as closing stock. The assessee, time and again, claimed that the two wheelers being mostly priced at below Rs.50,000/-, the sales were made through cash and such collected cash was deposited in the bank account certain receipts were also made through other modes other than cash which is very apparent from the statement of bank account of the Induslnd Bank. It further submitted that the Induslnd Bank account was not at the only account maintained by it, it had further bank account with State Bank of India and another account with Punjab National Bank and these accounts were duly disclosed in the Balance sheet of the assessee firm. 3.5 Under the facts and circumstances of the case, l failed to understand why the accounts of the assessee were completely rejected in spite of having them at the stage of the assessment as well as at the stage of the remand. Therefore, I find the action of the Assessing Officer to be completely unjustified in treating the entire deposit made in the Induslnd Bank account as unexplained cash credit u/s.68. The entire deposit including the cash deposit are well explained by the final account of the assessee firm and therefore | direct the Assessing Officer to delete the addition made for Rs.16,15,47,810/- in the assessment order. There is also no justification for rejection of the books of accounts of the assessee as found from the submissions made by the assessee. 4. The appeal of the assessee is, therefore, allowed. ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 8 9. It is pertinent to observe that assessee is an authorized dealer of Honda Scooters. At that point of time, one unit of Honda Scooter could be sold at around Rs.40,000/- to Rs.60,000/-. All these sales were made in cash. The assessee has disclosed the figures that it has opening stock of Rs.1,13,52,526/-. It has purchased scooters from the manufacturers at Rs.13,93,84,411/-. It has sold scooters for a sum of Rs.14.74 Cr and in the closing stock, assessee has shown the balance scooters. This finding has been recorded by the ld. CIT(A). Thus, deposits in the Indusind Bank at Rs.10.14 Cr was out of sale proceeds. Complete bank statement has been placed on the record. Assessee has also placed complete details exhibiting the sale of scooters. Contrary to above facts, AO did not place anything on the record. We fail to note as to why he has not accepted the stand of the assessee. The observation of the AO that assessee has failed to offer any satisfactory explanation is without any application of mind and without any analysis of the details available on the record. Therefore, on due consideration of ITA No.829/CHD/2024 & C.O. 36/CHD/2024 A.Y.2016-17 9 the finding of the ld. CIT(A) on merit, we do not find any merit in this appeal of the Revenue. It is dismissed. 10. In the result, Cross Objection of the assessee is allowed whereas appeal of the Revenue is dismissed. Order pronounced on 02.06.2025. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश कȧ ĤǓतͧलͪप अĒेͪषत/ Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आयुÈत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "