VASUDHA PREMKUMAR SHARMA,MUMBAI V. INCOME TAX OFFICER , NEW DELHI

ITA 3290/DEL/2023

AI Insights

The case involves an appeal by Vasudha Premkumar Sharma against the order of the Commissioner of Income Tax (Appeals), which arose from an assessment order under sections 144 and 147 of the Income Tax Act, 1961, for the assessment year 2011-12. The primary contention was the legitimacy of the jurisdiction assumed under section 147 and the subsequent additions made to the assessee's income concerning term deposits and cash deposits totaling INR 2,40,58,618. The assessee challenged the reopening of the assessment, arguing that it was based on incorrect facts, including the erroneous claim that no return was filed for the relevant assessment year and incorrect figures regarding cash deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23857 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Other Referred Cases: Arvind Sahdeo Gupta vs ITO-1 Writ Petition No.4793 of 2021, Kunwar Ayub Ali vs ITO in ITA No.3137/Del/2018 (Del.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH DAN RATNOO
• Assessee Lawyers: SUBHASH CHHAJED; DEEPIKA CHHAJED
• Keywords: Set aside; Reopening of assessment; Reason to believe
• Section: 147; 148; 144; 250

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “F” BENCH: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.3290/Del/2023 [Assessment Year : 2011-12] Vasudha Premkumar Sharma 191/2B, Windermere Off New Link Road, Oshiwara Mumbai-400053 PAN-AMFPS0916E vs ITO Ward-59(2) New Delhi APPELLANT RESPONDENT Appellant by Shri Subhash Chhajed, CA & Ms. Deepika Chhajed, CA Respondent by Shri Kailash Dan Ratnoo, CIT DR Date of Hearing 12.12.2024 Date of Pronouncement 03.01.2025 ORDER PER PRADIP KUMAR KEDIA, AM : The instant appeal has been filed at the instance of the assessee seeking to assail the First Appellate order dated 23.09.2023 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 07.12.2018 passed u/s 144 r.w.s 147 of the Act pertaining to assessment year 2011-12. 2. As per the grounds of appeal, the assessee has challenged the legitimacy of jurisdiction assumed under s. 147 of the Act as well as addition made by the AO towards term deposits/cash deposits in bank amounting to INR 2,40,58,618/-. 3. When the matter was called for hearing, the Ld. Counsel for the assessee adverted to the assessment order and submitted at the outset that jurisdiction was assumed by the AO under s. 147 of the Act on the premises that; (a) information was received by the AO through AIR/CIB that assessee had deposited cash of INR 2,40,58,618/- during the FY 2010-11 relevant to AY ITA No.3290/Del/2023 Page | 2 2011-12 and the assessee has not filed any return of income for the aforesaid AY 2011-12. (b) the source of term deposits of INR 2,40,58,618/- remains unverified and in order to verify and examine the source of investment, there exists reason to believe that the income of the assessee has escaped assessment for AY 2011- 12. 4. In this backdrop, the Ld. Counsel for the assessee submitted that the whole basis of invoking section 147 of the Act suffers from incorrigible legal infirmities. The Ld. Counsel for the assessee adverted to the copy of the return of income filed dated 27.07.2011, Machine No.3211000715 filed with Ward- 32(1), New Delhi in order to transgress the very basis of formation of belief towards escapement. The Ld. Counsel for the assessee also pointed out that the assessee has been regularly filing return of income in the earlier years also for which the relevant ITR acknowledgements are placed on record. As per the return of income filed, the assessee has reported taxable income of INR 13,810/-. The Ld. Counsel for the assessee thus asserted that the very foundation for re-opening the assessment on the ground that no return has been filed is factually incorrect and contrary to the record. Hence, the reasons recorded based on grossly incorrect facts do not permit the action under s. 147 of the Act. 4.1. On merits, the Ld. Counsel for the assessee pointed out that as per the balance sheet filed with return of income for AY 2011-12, the assessee has properly disclosed investments in fixed deposits at INR 1,36,77,450/-. Similar fixed deposits of INR 1 crore was declared in the balance sheet for the immediately preceding AY 2010-11. The Ld. Counsel for the assessee thereafter, adverted to the bank statement and referred to the entries shown in the bank accounts maintained with Indus Ind Bank and Standard Chartered Bank. It was pointed out that in the Indus Ind Bank, total bank deposits stand at INR 1,24,500/- whereas INR 1 Lakh has been deposited in cash in Standard Chartered Bank during the year. The aggregate cash deposits thus stands at meager amount of INR 2,24,500/-. The AO on the other hand, yet again proceeded on wholly incorrect figure of INR 2,40,58,618/- as against the total cash deposits of INR 2,24,500/-. Thus, the AO has proceeded against the ITA No.3290/Del/2023 Page | 3 assessee under s. 147 of the Act dehors the ground realities and the so-called belief towards alleged escapement is nothing but a mere pretense. 4.2. The Ld. Counsel for the assessee thereafter adverted to the judgement refereed by the Hon’ble Bombay High Court in the case of Arvind Sahdeo Gupta vs ITO-1 Writ Petition No.4793 of 2021 judgement dated 08.08.2023 for the proposition that re-opening of assessment based on incorrect facts are unsustainable in law. Similar view has been expressed by the Co-ordinate Bench of the Tribunal in the case of Kunwar Ayub Ali vs ITO in ITA No.3137/Del/2018 (Del.) order dated 17.04.2023 which has been rendered in the similar facts. In that case also, the reasons towards escapement of chargeable income were recorded on the belief that the assessee has not filed the return of income which was found to be grossly contrary to the facts on record. The notice issued under s. 148 of the Act was thus quashed being issued on the basis of inherently wrong facts. The Ld. Counsel for the assessee thus canvassed that the jurisdiction usurped under s. 147 is a unsustainable at the threshold. Besides, the additions made do not square with facts either. 5. Ld.CIT DR for the Revenue relied upon the action of the lower authorities. 6. We have heard carefully the rival submissions. As pointed out on behalf of the assessee, the belief towards escapement of chargeable income has been entertained by the AO on the basis that the assessee has not filed the return of income for AY 2011-12 in question which is grossly contrary to the facts on record. It is demonstrated on behalf of the assessee that the assessee has duly filed return of income on 27.07.2011. Hence, the most basic reason of holding belief itself is wholly incorrect and not existed at the time of recordings of the reasons. Secondly, the premise of large cash deposits/term deposits giving birth to belief towards escapement is yet again demonstrated to be colossal misunderstanding facts and contrary to the material i.e. bank statement placed on record. 7. ‘Reason to believe’ is the starting point for re-opening a case. A freak foundation or reason that assessee did not file ROI is blatantly contrary to the facts. Belief stemmed from wholly unfounded reasons thus betrays the pre- ITA No.3290/Del/2023 Page | 4 requisites of s. 147 of the Act. We find that the issue is squarely covered in favour of the assessee by the judgements rendered in the case of Arvind Sahdeo Gupta vs ITO-1 and Kunwar Ayub Ali vs ITO (supra) by the Co-ordinate Bench wherein several judgements of the Hon’ble High Courts of different jurisdictions have been referred and it was held that where the reasons cited that the assessee did not file the return of income was found to be factually incorrect, the notice issued under s. 148 of the Act for re-opening of assessment requires to be quashed for assumption of jurisdiction on extraneous grounds. 8. In the light of the judgements rendered in the case of Arvind Sahdeo Gupta vs ITO-1 (supra) and Kunwar Ayub Ali vs ITO (supra) expounding the position of law, we find palpable merit in the plea of the assessee towards inherent lack of jurisdiction under s. 147 of the Act. 9. The re-opening proceedings itself being not permissible on the basis of inherently wrong facts, we do not consider it necessary to delve into the merits of the additions. We thus set aside the action of the CIT(A) and quash the re- assessment proceedings giving rise to the present appeal. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 03rd January, 2025. Sd/- Sd/- (VIMAL KUMAR) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER ASSISTANT REGISTRAR ITAT, NEW DELHI "