No infirmity in reopening on the reasoning that no return was filed by the assessee when assessee was using two different PANs, one for bank operation and other for filing ITR – ITAT
In a recent judgment ITAT Allahabad has held that there was no infirmity in the action of the Assessing Officer in reopening on the reasoning that despite large cash deposit in bank account and no return was filed as the assessee was maintaining two PAN numbers. One PAN number has been used for opening the bank account and the second PAN number for filing income tax return
ABCAUS Case Law Citation:
4557 (2025) (05) abcaus.in ITAT
In The instant case, an appeal was filed by the assessee against the order of the CIT(A), NFAC confirming the action of the Assessing Officer (AO) in reopening the case and making best judgment assessement under section 144 of the Income Tax Act, 1961 (the Act).
The assessee was a partnership firm engaged in wholesale trading of sugar, it purchases sugar bags in the bulk quantity from sugar mills and sells to it to retailers. It filed its ITR after getting the books of accounts audited under section 44AB of the Act.
However, the AO noted that a large sum was deposited in Bank account held by the assessee firm. As the AO found that the assessee had not filed a return of income, he issued a notice under section 148 followed by notices under section 142(1).
However, the assessee did not respond to those notices and therefore, the AO completed the assessment as a best judgment assessment invoking the provisions of section 144.
Aggrieved with the order, the assessee went in appeal before the CIT(A). It was argued that the firm, had requested for the issue of duplicate Permanent Account Number (PAN) card. However, instead of duplicate PAN, an additional PAN was issued to the assessee firm during the relevant financial year and the said additional bore a totally different number than the original PAN.
It was submitted that the assessee opened the bank account against the said new PAN and all banking transactions were recorded against the said new PAN. But the assessee continued to file its returns and audit reports to the department with its original PAN.
It was submitted that the assessee’s partners were not literate or computer literate and the partner of the assessee firm was unwell during Covid and therefore, he was unable to get online notices checked. Therefore, there could not be any compliance before the AO but at the same time the AO was unjustified in making assessment without regard to the history of the assessee’s case.
Also, the assessee disputed the amount of cash deposits in the bank account and contended that actual amount of deposited was much less which was evident from the bank statement.
It was contended that because the AO had not considered the bank statement properly therefore the assessment made by the AO was illegal. That AO was duty bound to give the assessee due opportunity to explain the nature and source of deposits which the AO had not done and since the entire addition was made behind the back of the assessee and without any reference to the figures, the assessment was bad in law.
It was submitted that the assessee was running a regular business and could not be taxed on the entire amount deposited in the said bank account but only on the profit element thereof. He further submitted that that the assessee had not received any physical notice and therefore, could not make a submission.
The matter was remanded to the AO by the CIT(A) who reiterated his findings of the assessment order and the factum non-compliance by the assessee. The CIT(A) observed that there was cash deposit in the bank account and the information regarding this was received from the NMS system. The notice was issued but no return was filed and no compliance was made by the assessee. Therefore, since there was credible information with the AO and he had followed the due procedure to issue notice and frame an assessment under section 144 r.w.s. 147 of the Act, the appellant’s contention in challenging the assessment under section 144 r.w.s 147 was lacking in merit and hence was rejected.
With regard to the addition of cash deposit, the CIT(A) observed that the assessee had himself agreed to the amount of cash deposits although a lesser amount and shown very limited profit on them. But he had not offered any explanation as to how the entire amount had been deposited in the bank account and even the profit disclosed by him on his admitted deposit was much below the accepted rate of taxation.
Therefore, the CIT(A) dismissed the appeal of the assessee and confirmed the addition made by the assessee.
The Tribunal opined that there was no infirmity in the action of the AO in reopening the case or in finalizing assessment under section 144. An AO has to act on the basis of the materials before him. The materials that were before him indicated that there was large amount of cash deposit in a bank account by an assessee which had not filed an income tax return. That gave the AO a prima facie reason to belief that income had escaped assessment. Therefore, he was justified in issuing notice under section 148. Since, the assessee did not make any compliance to the notices, the AO who was bound to complete the assessment in a best judgment manner and in the absence of any proof submitted by the assessee regarding expenses etc., was also bound to treat entire amount as the income of the assesse.
Hence, the Tribunal dismissed the challenge to the orders on technical grounds i.e. for issuance of notice under section 148 and for completion of best judgment assessment under section 144.
The Tribunal further observed that the assessee had been maintaining two PAN numbers. One PAN number has been used for opening the bank account and the second PAN number has been used for filing the income tax return. The assessee submitted that the deposits in the bank account made under the new PAN had been duly explained in the audit report and return filed under old PAN. Therefore, there was no basis for making the kind of addition that the AO had made.
The Tribunal opined that in view of that the fault was clearly that of the assessee, for doing an act impermissible in law, the onus was entirely upon the assessee to show before the AO that the deposits made in the Bank account opened under new PAN were duly explained by the returns and audit report filed under old PAN.
In view of the above, the Tribunal restored the matter back to the file of the AO to give the assessee an opportunity to file the necessary evidences to support his case.
Accordingly, the matter was restored to the file of the AO for de novo assessment.
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