MUKESHBHAI MAGANBHAI PATEL,NAVSARI V. INCOME TAX OFFICE WARD-3, NAVSARI

ITA 788/SRT/2024

AI Insights

The case involves Mukeshbhai Maganbhai Patel, a non-resident Indian, who appealed against the order of the Commissioner of Income-tax (Appeals) which confirmed the addition of Rs.10,69,500 to his income for the assessment year 2012-13. The addition was based on cash deposits in his bank account, which the Income Tax Officer (ITO) considered undisclosed income. The ITO had reopened the assessment under section 147 of the Income-tax Act, 1961, following information that substantial cash deposits were made in the appellant's bank account during the financial year 2011-12. The Tribunal examined the validity of the reopening and the merits of the addition, ultimately upholding the reopening and partially allowing the appeal by reducing the addition based on agricultural income.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26438 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Other Referred Cases: Raymond Woollen Mills Ltd. vs Income-Tax Officer And Ors., ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: ARJUN VITANI
• Keywords: Reason to believe
• Section: 147; 148; 144; 250; 2

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.788/SRT/2024 (Assessment Year: 2012-13) (Hybrid processing Hearing) Mukeshbhai Maganbhai Patel, 23/a Nutan Society, Navsari – 366 442, बनाम/ Vs. Income Tax Officer, Ward–3, Navsari, Room No.206, 2nd Floor, Income Tax Office, Charpool, Awabaug, Navasari-396 445 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: BRVP 6722 R (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) िनधाŊįरती की ओर से /Appellant by Shri Arjun Vitani, AR राजˢ की ओर से /Respondent by Shri Mukesh Jain, Sr. DR अपील पंजीकरण/Appeal instituted on 24/07/2024 सुनवाई की तारीख/Date of Hearing 17/12/2024 उद ्घोषणा की तारीख/Date of Pronouncement 26/12/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the of the Income-tax Act, 1961 (in short, ‘the Act’) by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] dated 12.06.2024 for assessment year (AY) 2012-13, which in turn arises out assessment order passed by Assessing Officer u/s 144 r.w.s. 147 of the Act on 14.12.2019. 2. Grounds of appeal raised by the assessee are as under: “1. The Learned Assessing Officer has erred in law and facts by re-opening the case under section 147. 2 ITA No.788/SRT/2024/AY.2012-13 Mukeshbhai M Patel 2. The Learned CIT(A) has erred in law and fact by partly allowing the bank credits of Rs.58,674/- and confirming the addition of Rs.10,69,500/- on account of credit entry in the bank account. 3. Any other ground of appeal with permission of your honour.” 3. The facts of the case in brief are that the assessee had not filed his return of income for AY 2012-13. Subsequently, case was reopened on the basis of AIR information that assessee has deposited cash of Rs.10,69,500/- in his bank account during F.Y 2011-12 relevant to A.Y. 2012-13. Notice u/s 148 of the Act was issued on 29.03.2019. In response thereto, assessee neither appeared nor submitted any documentary evidences. Thereafter, AO issued a show cause notice dated 02.12.2019 as to why cash deposit of Rs.10,69,500/- and other credit entries (Rs.58,674/-) be not added as undisclosed income to the total income. As assessee did not reply to the above notice, AO completed the assessment u/s 144 r.w.s. 147 of the Act by adding Rs.11,28,174/-. Aggrieved by the addition made in assessment order, assessee preferred appeal before CIT(A). 4. The CIT(A) has confirmed validity of re-opening by stating that on the basis of credible information in possession of AO that in spite of having substantial cash and other deposits in the bank account, the assessee did not file his return of income. In order to bring to tax income which had escaped assessment, AO initiated proceedings u/s 147 of the Act, which is in accordance of provisions of law. Regarding cash deposit and other credits in the bank account, the assessee submitted that he is a non-resident and was holding bank account jointly with his father, who was operating the account. 3 ITA No.788/SRT/2024/AY.2012-13 Mukeshbhai M Patel The cash and credit entries in the bank account was made by his father out of his agricultural income. The CIT(A) has discussed date-wise cash deposit in the bank account at para-6.2.3 of the order. He has stated that Rs.9,00,000/- was deposited in cash on 23.09.2011 and the same was transferred to three persons, namely, Mrs. Darshana A Patel, Mrs Rukhi Bahen D Patel and Mr. Dherubhai M Patel. The CIT(A) further stated that the cash deposits of Rs.9,00,000/- on a single day is not in the nature of normal cash deposit out of sale proceeds of agricultural products, which was transferred to three persons within a couple of days. The CIT(A) has allowed the other credit entry of Rs.58,674/- though appellant had not explained the nature and source of credit entry of Rs.55,000/- in the bank account. The reason for relief was that the amount was small. In the result, assessee was allowed relief of Rs.58,674/- and remaining addition of Rs.10,69,500/- was sustained. 5. Aggrieved by the order of CIT(A), assessee has filed present appeal before the Tribunal. In the grounds of appeal, appellant has challenged validity of reopening u/s 147 of the Act as well as merit of addition of Rs.10,69,500/-. The Learned Authorized Representative (Ld.AR) for the assessee submitted that assessee was a NRI and he has not generated any income in India. Hence, he was not required to file his return. The appellant has not visited in India after 23.01.2007. The cash deposit of Rs.10,69,500/- was made by father of the appellant and not by the appellant. Appellant’s father was an illiterate farmer and he deposited cash out of agricultural 4 ITA No.788/SRT/2024/AY.2012-13 Mukeshbhai M Patel income and past savings. Since appellant was not required to file the return, the reopening is bad in law because there is no escapement of income. 6. The Ld.Sr-DR supported the order of AO and CIT(A). He submitted that reopening was not challenged during assessment proceedings. Before CIT(A), appellant has contested the reopening which has been dismissed by stating that despite having substantial deposits, the appellant had not filed his return of income. The AO had credible information to form the belief that income chargeable to tax had escaped assessment. 7. We have heard rival submission and perused materials on record. It is an undisputed fact that assessee had not filed his return of income for the subject year. It is also an undisputed fact that there was cash deposit of Rs.10,69,500/- in the bank account of the assessee. The assessee had also not responded to the notice issued u/s 148 and did not raise any objection to the notice u/s 148 before the AO. The amount of cash deposit was much higher than the maximum amount which is not chargeable to income-tax. It has been held in a number of cases that there should be prima facie reason at the initial stage of reopening. The sufficiency or correctness of the reason cannot be examined at the threshold. The conclusion or conclusive establishment of escaped income is not required while drawing satisfaction regarding reopening of the assessment. Useful reference may be made to the decision of the Hon’ble Supreme Court in case of Raymond Woollen Mills Ltd. vs Income-Tax Officer And Ors., 236 ITR 34 (SC), wherein it was held as under: 5 ITA No.788/SRT/2024/AY.2012-13 Mukeshbhai M Patel “3. In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see 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. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs.” 7.1. The Hon’ble Supreme Court in case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 held that the expression “reason to believe” would mean cause or justification and cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. Whether material would conclusively prove escapement of income is not the concern at that stage. 7.2 In views of the above authoritative precedents, there should be prima facie reason at the stage of reopening. The sufficiency or correctness of the reason cannot be examined at the threshold. In the present case, the assessee has not filed his return of income. On the other hand, he had deposited cash of Rs.10,69,500/-. Hence, there was prima facie reason to reopen the case. In view of the above facts and the precedents cited supra, the reopening is upheld and ground No.1 is dismissed. 8. Coming to ground No.2, the assessee has contested the addition of Rs.10,69,500/-, being cash deposited in his bank account. The Ld. AR of the 6 ITA No.788/SRT/2024/AY.2012-13 Mukeshbhai M Patel assessee submitted that cash deposit of Rs.10,69,500/- was made by appellant’s father and not by the appellant. The father of appellant is an illiterate farmer and he deposited cash out of his agricultural income and past savings. The assessee is only joint holder of the bank account for purpose of inheritance. He submitted that father of the assessee, Shri Maganbhai Patel died on 03.06.2020. He submitted that appellant’s father was holding land in Bardoli, Surat. He also submitted that Rs.3,00,000/- each were given to his cousin brother, Shri Dhirubhai M Patel and wife, and daughter-in-law of his cousin. 9. On the other hand, Ld.Sr-DR for the Revenue supported the order of the lower authorities. He submitted that assessee has not been able to explain source of cash deposit and AO has rightly added the cash deposit. He further submitted that assessee has failed to substantiate claim of agricultural income earned by his father. Only 3/4 acres of land is in name of his father, which could not generate such huge cash. He also submitted that the account is in the name of appellant and his father and wife are only joint account holders. The appellant has not been able to explain deposit of cash of Rs.9,00,000/- on a single day on 23.09.2011. This amount was transferred to three persons on 26.09.2011. 10. We have heard rival submissions and perused the materials on record. The assessee has tried to explain the cash deposited in the bank account by stating that the said deposit was out of agricultural income and past savings. From the details of land holding, it is seen that the land was in the name of father of the assessee and not his name. We find that assessee was the 7 ITA No.788/SRT/2024/AY.2012-13 Mukeshbhai M Patel account holder and his father and wife were the joint holders. The opening balance was only Rs.1,035/-. The assessee has subsequently deposited Rs.40,000/-, 25,000/-, 25,000/-, 30,000/-, Rs.9,00,000/- and Rs.49,500/- on various dates from 09.05.2011 to 23.02.2012. We also find that the assessee had transferred Rs.3,00,000/- each to Mrs. Darshana A Patel, Mrs. Rukhi Bahen D Patel and Shri Dhirubhai M Patel after deposit of cash of Rs.9,00,000/- a couple of days earlier. As stated by Ld. Sr-DR for the Revenue, assessee’s father was having only 3/4 acres of land. The assessee is required to incur various expenses for generating agricultural income. The copy of agricultural sale bills at page 30 and 31 are in the name of father of the assessee. In the said bill, there are both credit and debit entries and the balance was Rs.2,09,539/-. There are no details of payments made to the father of the assessee. Hence, the assessee has not conclusively proved receipt of cash from sale of agricultural produces. The assessee has not been able to prove that he had cash balance of Rs.9,00,000/- as on 23.09.2011 because he had deposited Rs.30,000/- in the immediately preceding date i.e., 22.09.2011. It means he had received Rs.9,00,000/- as agricultural income in a single day, which is not feasible. Such claim has not been established by the assessee by giving any documentary evidence. Hence, the claim of the assessee cannot be accepted. However, considering the fact that father of assessee was holding 3/4 acres of land, it would be fair and reasonable if the assessee is allowed benefit of cash deposit of Rs.2,50,000/- on account of agricultural income and past savings of his father. The AO is accordingly 8 ITA No.788/SRT/2024/AY.2012-13 Mukeshbhai M Patel directed to delete Rs.2,50,000/-. The remaining addition of Rs.8,19,500/- is upheld. This ground of assessee is partly allowed in above terms. 11. In the result, the appeal of the assessee is partly allowed. Order is pronounced in the open court on 26/12/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) Æयाियक सदÖय/ Judicial Member लेखा सदÖय/ Accountant Member सूरत/Surat Ǒदनांक/ Date: 26/12/2024 DKP Outsourcing Sr.P.S आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to :  अपीलाथê/ The Appellant  ÿÂयथê/ The Respondent  आयकर आयुĉ/ CIT  आयकर आयुĉ (अपील)/ The CIT(A)  िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडª फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार आयकर अपीलȣय अͬधकरण, सूरत "