Mukesh Mendiratta , New Delhi V. ITO ward-41(3), New Delhi

ITA 7138/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3736 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 28-08-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Tangible material; Corroborative evidences; Competent authority; Assessment record; Reason to believe; Reassessment proceedings
• Section: 147; 148; 44AD; 142(1); 191

Judgement Text

1 | Page IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.7138/Del/2019 [Assessment Year : 2011-12] Mukesh Mendiratta, 188, Avtar Enclave, New Delhi-110088. PAN-AAPPM0057J vs ITO, Ward-41(3), New Delhi. APPELLANT RESPONDENT Appellant by None Respondent by Shri Om Parkash, Sr.DR Date of Hearing 17.08.2022 Date of Pronouncement 24.08.2022 ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year 2011- 12 is directed against the order of Ld. CIT(A)-14, New Delhi dated 08.07.2019. 2. The assessee has raised following ground of appeal:- 1. “That on the facts and circumstances of the case the learned A.O. & CIT(A) erred in-: a) Initiating the provisions of Sec. 147 of the Income Tax Act, 1961. b) Applying the Provisions of Sec. 147 without referring to any tangible material. c) Issuing notice U/s 148 without obtaining sanction for same as envisaged in Sec. 151 of the Income Tax Act, 1961. d) Equated the cash deposits in Bank as income of the Assessee without showing application of mind. e) Disposing the objections, filed by Assessee, without passing speaking order and in contravention to law. 2 | Page f) Making addition under the Head ‘Business Income' while accepting t explanation of the Assessee for deposit of cash in Bank, thereby invalidating the assessment. g) Adding the notional income of Rs.3,28,888/- u/s Sec. 44AD of the Act eve l though the Assessee has not done any business during year under consideration. h) Making addition on Presumption and conjectures. I. That without prejudice to what stated in Point 1 above, the Satisfaction and Sanction obtained from senior officer was mechanical and incomplete, rendering the order passed U/s 147 void-ab-initio. II. Without Prejudice to what stated above, the notice U/s 148 was issued by non-jurisdictional officer. 2. The Assessee craves leave to add, alter or amend the grounds of appeal at or before the hearing.” 3. At the time of hearing, no one attended the proceedings on behalf of the assessee. It is seen from the records that the notice sent through speed post is returned back unserved with remark “left” by the Postal Authority. The assessee has not provided any new address to the Registry. Therefore, the appeal of the assessee is taken up for hearing in the absence of the assessee and being disposed off on the basis of material available on record. FACTS OF THE CASE 4. Facts giving rise to the present appeal are that the Assessing Officer [“AO”] was in possession of information regarding cash deposited by the assessee in his three Saving Bank Accounts maintained with Indian Bank, Punjab National Bank and HDFC Bank. He also invested in a banking company and earned interest income of Rs.5,88,170/-. The case of the assessee was re-opened u/s 147 of the Income Tax Act, 191 [“the Act”] for 3 | Page assessment. The Ld. Authorized representative of the assessee, Shri R.S.Ahuja, CA/AR attended the proceedings and filed response on the behalf of the assessee. The AO treating the amount taken as business receipt u/s 44AD of the Act and made addition of Rs.3,28,888/- as the income of the assessee. Thus, the AO computed the income of the assessee at Rs.8,17,058/-. 5. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, sustained the addition and dismissed the appeal of the assessee. 6. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal. 7. Ground Nos. I(a), I(b), I(c) and (II) & (III) raised by the assessee are against the legality of the re-opening of the assessment. Similar grounds were taken up before Ld.CIT(A) who after considering the submissions, rejected the grounds of appeal raised by the assessee. 8. On the contrary, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. He submitted that there is no infirmity in the re-opening of the assessment as the AO has rightly re-opened the assessment to verify the source of cash deposited by the assessee. The issue related to the validity of the re-opening of the assessment by finding on fact by Ld.CIT(A) is as under:- 5.1. “To verify the contention of the appellant, the assessment record were called for from the AO and the same was examined. It is seen from the records that the initial notice dated 30.01.2018 was issued by ACIT Circle 41(1), New Delhi. However, there was no response to the said notice/letter. Subsequently, it was observed by the said officer, that as 4 | Page per the latest ITR of the appellant i.e. for AY 2016-17, the jurisdiction was with the ITO Ward-41(3). Therefore, the records available in the office of ACIT Circle 41(1) were transferred to ITO Ward 41(3) on 13.03.2018. The ITO Ward 41(3), thereafter observed that the assessee had not filed any return of income for AY 2011-12 although he had deposited in cash Rs. 53,89,200/- in three saving bank accounts and another Rs. 3,00,000/- in a banking company and had earned 5,88,170/- as interest on FDR with one of the banks. The notice was issued accordingly u/s 148 on 26.03.2018 after following the due procedure. Therefore, the contention of the appellant that notice under section 148 was issued by non- jurisdictional officer is not correct; and it is observed that it was in realty issued by the jurisdictional officer that is ITO Ward 41(3). In view of these facts, the contention of the appellant is rejected and this ground of appeal is dismissed. 5.1.1. Ground No. 1(a), 1(b), 1(c), 1(d), 1(e) and 2 are interconnected on the same ground of issuance of notice u/s 148 after applying the provisions of section 147. As these are inter related therefore they are taken up together for adjudication. 5.2 Brief facts of the case I have carefully perused the assessment order and considered the submissions of the appellant. It is seen the appellant did not file the return of income for AY 2011-12. However the then AO, had the information that cash of Rs. 53,89,200/- was deposited in three savings accounts of the appellant, while Rs. 3,00,000/- was deposited in cash in HDFC Bank Ltd and the appellant had also earned interest income of Rs. 5,88,170/- from FDR with State Bank of Patiala. In order to verify the contentions of the appellant the case records were also called for, from the AO. From examination of the assessment records of the appellant, it is seen that the aforesaid information was available through 26AS/AIR. On the basis of these information's and the fact that assessee was non-filer for AY 2011-12, the AO i.e. ACIT Circle-41(1) (ITR for AY 2015- 16 showed DCIT/ACIT Circle 45(1) as the jurisdictional AO) issued a letter of query on 30.01.2018 to the appellant. However, no reply was received. 5 | Page Subsequently, the AO realised that as per the latest return for AY 2016-17 ITO Ward 41(3) was the jurisdictional AO. Therefore, the records were transferred to ITO Ward 41(3). After receipt of the records, the ITO Ward 41(3) found that the assessee had not filed his return for AY 2011-12 while he had earnings from bank interest, and had made huge cash deposits in several bank accounts standing in his name. Therefore, the AO processed the information and was satisfied that income had escaped assessment. He subsequently took the sanction of the competent authority on 26.03.2018 and then issued the notice u/s 148 on 28.03.2018. From the above chronology of events it is seen that the information was available with the AO who verified and found that the assessee had not filed any return while he had earned interest income from FDRs and had also deposited huge amounts of cash in his bank accounts. Therefore, the contention of the appellant with respect to the initiation of provisions of section 147, without referring to tangible material, and issue of notice u/s 148 without obtaining sanction of CIT, are found to be baseless and without any merit. 5.2.1. It is already stated above, that the records had been transferred from ACIT Circle 41(1) to ITO Ward 41(3). The records consisted of information from 26AS, AIR information and CIB compulsory code transaction details along with return for AY 2015-16. Further, the jurisdictional AO processed all information available with him and recorded his reason to believe and sent the same to PCIT Delhi-14, New Delhi who was the competent authority to sanction the reopening of the case. The sanction was accorded under her signature on 26.03.2018 and notice u/s 148 was issued on 28.03.2018. Therefore, the contention made by the appellant vide ground No. 1(c) is merely an allegation which is found to be untrue and misguiding. Therefore, ground No. 1(c) is dismissed. 5.2.2. In ground No. 2, the appellant has stated that the satisfaction and sanction obtained was mechanical and incomplete. However, it is seen from the records that PCIT-14 has duly recorded her satisfaction as under: 6 | Page "I have gone through the reasons recorded by the AO and I am satisfied that this is a fit case for reopening for case u/s 147 of the Act." 5.2.3. This shows that the competent authority has gone through the reasons recorded by the AO and was duly satisfied with the same and thereafter gave the sanction for reopening of the case. This is not the case where the authority has merely stated "approved". Therefore, I find no reason to interfere with the decision of the AO in reopening the case u/s 148 after following the due procedure as laid down under the Act. Therefore, this ground of appeal is dismissed. 5.2.4. In ground No. 1(d), the appellant has challenged the assessment on the ground that the AO equated the cash deposits in bank as income of the assessee without showing application of mind. 5.2.5. It is seen from the assessment order, that the AO has made an addition of Rs. 3,28,888/- This was made after consideration of the deposits in the bank account totaling Rs. 41,11,100/-. The AO has contended that this deposit was business receipt of the appellant and therefore estimated the income out of this business @ 8%. Therefore, the contention of the appellant that AO has equated the cash deposit as "income" of the assessee is misguiding and false. In fact, the AO has worked out income at 8% of the deposits in the bank, and he has not taken the entire cash deposit as income of the assessee as contended by the appellant. Therefore, ground No. 1(d) is dismissed. 5.2.6. In ground No. l{e), the appellant has contended that the AO disposed the objections without passing a speaking order. 5.3. From the records, it is seen that the appellant was issued notice u/s 148 and subsequently u/s 142(1) on 06.08.2018 and 01.10.2018. The assessee sent his reply on 13.10.2018 through his AR, stating that the assessee could not attend to the several notices as he was busy looking after his father who was unwell. He further stated that the return u/s 148 would be filed by the end of the month (i.e. October 2018). The return for AY 2011-12 was filed by the assessee on 29.10.2018 showing gross total income of Rs. 5,88,170/-. It was only on 26.11.2018 that the assessee 7 | Page filed the objection to the notice issued u/s 148 through his AR. On 28.11.2018, the AO disposed off the objection through a detailed order where point wise reply has been given to the assessee. 5.3.1. In the case of GKN Driveshafts (India) Ltd. v. ITO 125 Taxman 963 Hon'ble Supreme Court has held that "when a notice under section 148 is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notice. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order." 5.3.2. In view of this decision, the AO is required to dispose off the objections raised by the appellant through a speaking order which the AO has done in the instant case. In light of the discussions made in the para above, the contention of the appellant that the objections have been disposed off through a non-speaking order, has no merit and therefore it is dismissed. 5.3.3. The following decisions of Hon'ble Courts clearly mentioned that sufficiency of reasons in initiation of reassessment proceedings is not necessary: - In the case of S. Narayanappa vs. CIT 63 ITR 219 Hon'ble Supreme Court has held that "The sufficiency of the grounds which induced the ITO to act is not a justifiable issue. It is of course open for the assessee to contend that the ITO did not hold the belief that there had been such non- disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief." 5.3.4. Further in the case of Bawa Abhai Singh v. DCIT 117 Taxmann 12 Hon’ble High Court of Delhi has held that 8 | Page "After 1-4-1989 the position is somewhat different. Section 147 with effect from 1-4-1989 provides that where the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the provisions of sections 148 to 153. He may assess or reassess the income which has escaped assessment. It is to be noted that section 147 as it stands with effect from 1-4-1989 not only merges clauses (a) and (b) of the pre-amended section 147 but also brings about a significant change in the preliminary requirement of certain conditions mandatory in character before reassessment proceedings should be initiated in the pre-amended section. Conditions precedent for initiation of action under section 147(a) or 147(b) of the pre-amended section are highlighted above. The amended provisions are contextually different and the cumulative conditions spelt out in clause (a) or (b) of section 147 prior to its amendment, are not present in the amended provision. The only condition for action is that Assessing Officer should have reason to believe that income has escaped assessment, which belief can be reached in any manner and is not qualified by a pre-condition of faith and true disclosure of material fact by an assessee as contemplated in the pre-amended section 147(a) and the Assessing Officer can under the amended provisions legitimately reopen the assessment in respect of an income which has escaped assessment. Viewed in that angle power to reopen assessment is much wider under the amended provision and can be exercised even after assessee has disclosed fully and truly all the material facts. It is to be noted at this juncture that twin conditions must be fulfilled if the case is one which is covered by the proviso to section 147 operative with effect from 1-4-1989. It is to be noted that decision to initiate proceedings is not to be preceded by any judicial or quasi-judicial enquiry. Reasons which may weigh with the Assessing Officer may be the result of his own investigation and may come from any source that he considers reliable. Formation of his belief is not a judicial decision but is an 9 | Page administrative decision. Nevertheless, he is required to act fairly and judiciously." 5.3.5. Further in the case of Raymond Woollen Mills Ltd. Vs. ITO & others 236 ITR 34 Hon'ble Supreme Court has held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. This was reiterated in Kartikey International vs. CIT (All) 329 ITR 539.” 9. I have heard the contentions of Ld. Authorized representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The assessee has not brought any material to rebut the finding of the Ld.CIT(A). In the absence of the rebuttal by the assessee and bringing any supporting evidence, the Ground Nos. I(a), I(b), I(c) and (II) & (III) raised by the assessee are devoid on merit hence, dismissed. 10. Ground Nos. I(d), I(e), I(f), I(g) raised by the assessee are against the sustaining of addition of Rs.3,28,888/-. 11. Ld. Sr. DR in respect of these additions, has stated that the authorities below have given finding on fact that the authorities below have given finding that the assessee has been engaged in the business activity and for many years, the assessee himself has declared business income. Hence, the AO was justified in making the addition. 12. I have heard the contention of Ld. Sr.DR of the Revenue and perused the material available on record and gone through the orders of the authorities below. Ld.CIT(A) has noted the fact that the assessee has been declaring income from business right since 2006-07 upto Assessment Year 2014-15. However, for the Assessment Year 2011-12, the assessee had not filed any 10 | Page return of income and had declared NIL income in response to the notice issued u/s 148 of the Act. Looking to the factual matrix in the present case, the authorities below have brought on record that the assessee has been declaring business income. The assessee has not furnished proof in respect of any other source of cash deposits. Therefore, in my considered view, the Ld. CIT(A) was justified in sustaining the addition made by the AO as the assessee grossly failed to substantiate his claim that the cash deposited in the bank account was not out of business receipts. It is incumbent upon the assessee to prove the source of cash deposits. I therefore, do not see any reason to disturb the finding of authorities below, the same is hereby affirmed. Thus, Ground Nos. I(d), I(e), I(f) and I(g) raised by the assessee are dismissed. 13. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 24 th August, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI