The reassessment will be unsustainable if there is no tangible connection between the income assessment and the construction of beliefs
Fact and issue of the case
This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 20.06.2019 for the AY 2010-11. The assessee raised several grounds on merits in sustaining the addition of Rs.10 lakhs made on account of cash deposit and further an application for admission of additional ground was made in which the assessee challenged the reopening of the assessment by the Assessing Officer and the additional grounds read as under: –
”Ld. CIT(A) is erred in law by confirming the reopening proceeding u/s 147, which the AO has initiated without conducting proper enquiry and collecting material information, which is bad in law and liable to be deleted.
AO CIT(A) is erred in law by reopening the proceedings u/s 147, passed upon borrowed satisfaction from AIR Information, which is bad in law and liable to be deleted.
That based on the facts and circumstances of the case and in law, the approval granted u/s 151 of the Income Tax Act, 1961 was not in accordance with law as it was accorded in a mechanical manner, hence reassessment proceedings initiated u/s 147 is bad in law and liable to be quashed.
On the facts and in the circumstances of the case and in law, the Ld.AO and Ld.CIT(A) erred in rejecting the explanation and evidences brought on record by the assessee to prove the identity, creditworthiness and genuineness of the transaction disallowed u/s 68 of the Act. 12. AO CIT(A) is erred in law to reassess issue other than the issue in respect of which proceedings u/s 147 are initiated, which is bad in law and liable to be deleted. 13. Ld.AO is erred in law by not specifying section under which the addition has been made, which is bad in law and liable to be deleted.”
The Ld. Counsel for the assessee submits that the additional grounds raised are purely legal grounds which are going to the very jurisdiction of reopening of the assessment by the Assessing Officer and, therefore, they may be admitted and adjudicated. Reliance was placed on the ruling of the Apex Court in the case of National Thermal Power Company Ltd. Vs. CIT (229 ITR 383).
On hearing both the sides and going through the additional grounds of appeal the same are admitted as these grounds are purely legal grounds following the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT (supra).
Briefly stated the facts are that the assessee filed his return of income declaring income of Rs.1,68,680/- under income from business and as agricultural income of Rs.46,000/-. The assessment was reopened by issue of notice u/s 148 as there were cash deposits of Rs.17,30,110/- in the bank account of the assessee. The reassessment was completed u/s 143(3) read with section 147 of the Act making an addition of Rs.10 lakhs representing the gifts received by the assessee from his father in law and mother in law which addition was sustained by the Ld.CIT(Appeals).
Observation of the court
Ratios of the above decision applies to the facts of the assessee’s case as the reasons recorded for reopening of the assessee’s case are insufficient, vague, un-corroborative to form a belief that the income had escaped assessment as there was no link between the tangible materials and the formation of belief of the Assessing Officer that the income had escaped assessment. Thus, the reassessment made u/s 143(3) read with section 147 of the Act based on such reasons is bad in law and accordingly, the reassessment is quashed.
Even on merits it is observed that the Assessing Officer even though reopened the assessment on the ground that the assessee had cash deposits of Rs.17,30,11O/- into his account, ultimately addition was made only to the extent of Rs.1O lakhs disbelieving the gifts received by the assessee from his father in law and mother in law which was utilized for depositing the same into his bank account. It is observed that in the course of reassessment proceedings the Assessing Officer recorded statement of both father in law and mother in law who have also confirmed the gifts given to the assessee who is the husband of their only daughter. However, this was disbelieved by the Assessing Officer as there were some discrepancies in the gift deeds for which the assessee filed affidavits from the donors before the Ld.CIT(A) which were totally ignored by him. The Assessing Officer never denied that the father in law and mother in law of the assessee were not in possession of agricultural land of 6.5 acres. Therefore, since the donors of the gifts are closely related to the assessee being father in law and mother in law and the sources were also explained the gifts cannot be disbelieved.
In view of what is discussed above, we allow the appeal of the assessee.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 16/10/2023
Read the full order from hereParminder-Singh-Vs-ITO-ITAT-Delhi2