Reopening by issue of notice u/s 148 on the basis of AIR information after sending query letter to assessee was not without application of mind nor reasons recorded were reason to mere suspect – ITAT
ABCAUS Case Law Citation:
ABCAUS 2609 (2018) (11) ITAT
The assessee had filed an appeal against the order of CIT(A) alleging that the order passed u/s 147 of the Income Tax Act, 1961 (the Act) was not maintainable for the reason that the notice issued u/s 148 of the Act was issued merely on the basis of AIR information that assessee had deposited cash in saving bank account.
It was also alleged that before issuance of notice u/s 148 no satisfaction was recorded by the Assessing Officer (AO). Notice u/s 148 was issued on the basis of suspicion & in mechanical manner.
The assessee was engaged in the retail business and filed return u/s. 44AF. The assessee was also deriving vocational income.
The Assessing Officer received AIR information that the assessee had deposited cash in her S/B account with bank during the year under consideration. The Assessing Officer issued query letter to the assessee for verification of the source of cash deposited but no compliance was made by the assessee. A reminder was also sent for compliance of the earlier letter, but the assessee did not turn up to comply.
Later on, the AO reopened the case after recording reasons and after obtaining approval of the competent authority for issuance of notice u/s 148.
During the course of the re-assessment proceedings, the AO observed that the assessee failed to file complete details of transactions along with the copy of bank statements etc. so to as to prove the identity, creditworthiness of the creditors who allegedly deposited the cash in the bank account of the assessee and genuineness of transactions.
The AO therefore, made an addition u/s. 68 of the Act out of cash deposits made in the savings bank account of the assessee.
CIT(A) affirmed the action of the Assessing Officer vide impugned order.
Aggrieved, the assessee went in appeal before the Tribunal.
The assessee challenged the validity of reopening proceedings on the premise of issuance of notice u/s. 148 was only on the basis of AIR information, which did not furnish any material for escapement of income; non-recording of satisfaction before issuance of notice u/s. 148 and non-compliance of section 151(2) and disposal of objections to notice u/s. 148 by a non-speaking order.
The Tribunal observed that in the instant case, the Assessing Officer had not recorded its reason on sole receipt of AIR information without application of mind, but before initiating the proceedings u/s. 147/148, he had issued query letters to the assessee to verify the cash deposits in the bank account.
The Tribunal further observed that the assessee at no point of time stated that the query letter were not in the notice of the assessee nor had he assigned any reason for not responding to the said verification letters.
The Tribunal opined that after these exercise undertaken by the Assessing Officer, it could not be said that the reasons recorded were reason to suspect and not reason to believe escapement of income.
The Tribunal also upheld the satisfaction of the Assessing Officer as after taking steps to verify the cash deposit, in which the assessee did not cooperate, and after recording the reason to believe, the Assessing Officer had categorically mentioned in the reasons recorded that
“I, therefore, consider that it is a fit case for issue of notice u/s. 148”