Deposits per se in the bank account no basis of holding that income has escaped assessment.

Deposits per se in the bank account no basis of holding that income has escaped assessment. Nothing can be added  to or deleted from reasons recorded for reopening-ITAT

ABCAUS Case Law Citation:
ABCAUS 2171 (2018) (01) ITAT

Important Case Laws Cited/relied upon by the parties:
NTPC Ltd. vs. CIT, 229 ITR 383 (SC)
Assam Co. India Ltd., 256 ITR 423 (Gauhati High Court)
Bir Bahadur Singh Sijwali vs. ITO (ITAT, Delhi)
Ashwani Kuamr vs. ITO (ITAT, Amritsar)
Gyan Prakash Motwani vs. DCIT (ITAT, Lucknow)
Parimisetti Seetharmamma vs. CIT (SC)
Prashant S. Joshi vs. ITO (2010), 230 CTR 232
Hindustan Liver Ltd. vs. ITO (2004) 268 ITR 332

income has escaped assessment

Brief Facts of the Case:
The appellant assessee was an individual and had been filing the return of income for the past several years. For the relevant assessment year he did not file his return of income as the income for the financial year was below the maximum amount of income chargeable to tax.

The case of the assessee was selected for scrutiny by issue of notice under section 147/148 of the Income Tax Act, 1961 (the Act). The reasons recorded by the Assessing Officer (AO) stated that certain amounts had been deposited in the bank account of the assessee and, therefore, he believed that the income had escaped assessment. The AO, rejected the objection of the assessee in this regard.

CIT(A) confirmed the reassessment proceedings initiated by the Assessing Office.

Contention/Grounds raised on behalf of the Appellant Assessee:
It was contended that there was no nexus between the material with AO and the reasons to belief . Mere deposits in bank account, without any material would not constitute reasons to believe. Therefore, the entire reassessment proceedings were without jurisdiction and bad in law and be quashed.

The assessee relied on several judgments to argue that there was no independent finding recorded by the Assessing Officer nor any specific reason brought out from any material on record to show that there was any income which had escaped assessment and without pointing out any defect, which is on the basis that certain amounts were deposited, the proceedings initiated under section 147/148 of the Act was unwarranted, illegal and beyond the spirit of law.

Observations made by the Tribunal:
The ITAT observed that as held by the High Court, the Assessing Officer must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice under section 148 of the Act. In other words, when no reasons are recorded for reopening the assessment prior to issuance of notice, the reassessment proceedings must fail for that reason alone. It is well settled in law that the reasons as recorded for reopening the assessment are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be deleted from the reasons so recorded.

It was further observed that in another case, the High Court had observed that the reasons are required to be read as they are recorded by the Assessing Officer. No substitution or deletion or addition can be made to those reasons and no inference can be allowed to be drawn on the basis of the reasons not recorded. It is for the Assessing Officer to disclose and open his mind through the reasons recorded by him. The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons.

The ITAT observed that in the instant case, the reasons recorded merely stated that cash deposits were made in the bank account of the assessee, but mere fact that these deposits had been made in bank account did not indicate that these deposits constitute an income which had escaped assessment. The reasons recorded for reopening assessment did not make out a case.

The ITAT opined that deposits per se in the bank account of the assessee could not be the basis of holding the view that income has escaped assessment and the reason to believe that income has escaped assessment was not established by the Assessing Officer.

The ITAT observed that CIT(A) had not at all adjudicated upon the significance of the reasons recorded by the Assessing Officer before initiation of proceedings under section 147/148 of the Act in his order and summarily dismissed the appeal filed by the assessee.

The ITAT opined that mere deposits in the bank account could not be the basis for holding that the income chargeable to tax has escaped assessment overlooking that the source of deposits need not necessarily be income of the assessee and that such reasons recorded were not sufficient to believe escapement of income.

Decision/ Conclusion/Held:
The Tribunal quashed the reassessment proceedings initiated by the Assessing Officer and confirmed by the CIT(A).

income has escaped assessment.

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