Income Tax Appellate Tribunal - Lucknow
Om Prakash Shukla, Faizabad vs Income Tax Officer-Ii, Faizabad on 30 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "SMC", LUCKNOW
BEFORE SHRI A.D JAIN, VICE PRESIDENT
ITA No. 763/LKW/2016
A.Y. 2009-10
Om Prakash Shukla, Vs. Income Tax Officer-II,
R/o Shukla Ka Purwa, Faizabad
Haiderganj, Faizabad
PAN EGCPS 3445 H
(Appellant) (Respondent)
Appellant by Shri Rakesh Garg, Advocate
Respondent by Shri C.K. Singh, DR
Date of hearing 27/11/2018
Date of pronouncement 30/11/2018
ORDER
This is assessee's appeal for Assessment Year 2009-10, taking the following grounds:
"1. The Ld. CIT[A] has erred in law and facts in conforming addition of cash deposit in assessee's SB A/c's amounting to Rs. 40,23,661/- as income of the assessee ignoring the fact that bank accounts were operated fraudulently by fabrication of signature of the assessee and subject matter of Chargesheet/Case Diary filed in Crime No. 220/14 u/s 467,468,471,1206,420 Indian Penal Code(IPC) P.S. Kotwali Nagar, Faizabad.
2. Because the Ld. CIT(A) has failed to appreciate that post - deposit of cash , money was primarily used to purchase cement being business of accused and buy insurance policies in the name of the accused in crime No. 220/14 P.S. Kotwali Nagar, Faizabad.
3. Because the Ld. CIT(A]/AO has failed to appreciate that real beneficiaries of forged transactions were accused who should have been subjected to tax and penal action under the Income Tax Act,1961.
4. Because the Ld. CIT(A)/AO has failed to appreciate that the appellant is a small farmer and labourer and was earning nominal salary income of Rs. 2500/- per month, under the employment of accused."2 ITA No. 763/Lkw/2016
2. The following additional ground has also been raised:
"1. Because there being no material to form reason to believe that income has escaped assessment, the notice issued u/s 148 and the reassessment proceedings/reassessment thereafter are all without jurisdiction, void abinitio, bad in law and be quashed."
3. The additional ground raised involves a legal issue, not requiring any fresh evidence to be gone into. Accordingly, this additional ground is admitted.
4. The AO recorded the following reasons to form belief of escapement of income of the assessee:
"As per information available in the office it is noticed that during the year relevant to the assessment year 2009-10 the assessee had made cash deposits to the tune of Rs.28,18,210/- in his saving bank account No 377010100030223 maintained with Axis Bank Ltd.- Faizabad which are not verifiable at this stage.
2. The source of deposit to the tune of Rs. 28,18,210/-, extent of business, nature and source(s) of deposits are to be considered in the case of assessee. No return for the year under consideration has been filed by the above named person. I have reason to believe that income to the tune of Rs.28,18,210/- has escaped assessment for the relevant assessment year Hence, proceedings u/s 147 of the IT Act, 1961 are being initiated Issue notice under section 148 of the Income tax Aci.1961."
5. Apropos the additional ground, the ld. counsel for the assessee has contended that the AO had no material to form reason of belief of escapement of income and so, the notice issued u/s 148 of the I.T. Act and the proceedings pursuant thereto are bad in law; that it is a case of 3 ITA No. 763/Lkw/2016 a roving and fishing enquiry, which is not permissible in law; that merely on the basis of AIR information, it cannot be concluded that there is escapement of income.
6. On the other hand, the ld. DR has contended that it was the AIR information, which formed the basis of the AO's belief of escapement of income of the assessee, amounting to Rs.28,18,210/-, representing cash deposits in the savings bank account of the assessee; that the source of such deposits, the nature thereof and the extent of business were not explained, the assessee having not filed any return of income; that therefore, the AO's formation of belief of escapement of income is justified; and that the AO was, as such, correct in issuing the notice u/s 148 of the Act to the assessee.
7. Heard. The facts are not disputed. A bare perusal of the reasons recorded for issuance of notice u/s 148 of the Act, shows that the only material available before the AO was the AIR information of the assessee having deposited an amount of Rs.28.11 lakhs in his savings bank account. The assessee was issued a notice u/s 148 of the Act in pursuance to the aforesaid reasons. In 'Bir Bahadur Singh Sijwali vs. ITO, Ward-1, Haldwani' 53 Taxman.com 366 (Del.-Trib), like in the present case, the reasons recorded indicated that cash deposits had been made in the bank account of the assessee. The Tribunal held that 4 ITA No. 763/Lkw/2016 the mere factum of deposits having been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. It was observed that the reasons recorded did not make out a case that the assessee was engaged in some business and the income from such a business had not been returned by the assessee. In the case at hand also, the reasons recorded do not contain any such recital. The Tribunal held that the factum per se, of deposits in the bank account of the assessee could not be made the basis for holding the view that income had escaped assessment, over- looking that the sources of the deposits need not necessarily be the income of the assessee; and that as such, the reasons recorded were not sufficient to believe escapement of income; that rather, they were reasons to suspect escapement of income, which was not enough for issuance of a notice u/s 148 of the Act.
8. 'Sijwali' (Supra) has been followed in 'Sh. Ashwani Kumar vs. ITO', order dated 23.02.2016, passed by the ITAT, Amritsar (SMC), in ITA No. 129(Asr)/2015, for A.Y. 2005-06 and in 'Krishna Kumar Tripathi vs. ITO', order dated 31.7.2017, passed by the ITAT, Agra (SMC), in ITA No. 87/Agra/2016, for A.Y. 2011-12.
9. 'Sijwali' (Supra) was also followed in 'Sh. Amrik Singh vs. ITO', order dated 11.05.2016, passed by the ITAT, Amritsar (SMC) in ITA No.630(Asr)/2015, for A.Y. 2006-07, to hold, inter alia, as follows: 5 ITA No. 763/Lkw/2016
"45. In 'Bir Bahadur Singh Sijwali' (supra), it has been held that where the AO issued a notice u/s 148 on the ground that there was an escapement of income and the belief regarding such escapement of income was formed on the fallacious assumption of the AO that bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the assessee, the reassessment proceedings cannot be sustained. In the present case, similarly, the basis of initiation of the assessment proceedings u/s 147 was the information with the Department, of the deposits made by the assessee in his bank account.
46. 'Bir Bahadur Singh Sijwali' (supra), makes reference to 'Hindusan Lever Ltd. vs. R.B. Wadkar', 268 ITR 332 (Bom.), to hold that the reasons recorded for reopening the assessment are to be examined on a standalone basis and nothing can be added to the reasons. It was also observed that the reasons must point out to an income escaping assessment and not merely need of an enquiry which may result in detection of an income escaping assessment. It was observed that it is necessary that there must be something which indicates, even if it does not establish, the escapement of income from assessment; that it is only on that basis that the AO can form a prima-facie belief that an income has escaped assessment; that merely because some further investigations have not been carried out, which, if made, could have led to detection of an income escaping assessment, this can not be reason enough to hold the view that the income has escaped assessment; and that there has to be some kind of cause and effect of relationship between the reasons recorded and the income escaping assessment. The observations of the Hon'ble Supreme Court in the case of 'ITO vs. Lakhmani Mewal Das', 103 ITR 437 (SC), were reproduced, as under:
"the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the particular year because of his 6 ITA No. 763/Lkw/2016 failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment."
47. It was further observed as follows:
"8. Let us, in the light of this legal position, revert to the facts of the case before us. All that the reasons recorded for reopening indicate is that cash deposits aggregating to Rs.10,24,100/- have been made in the bank account of the assessee, but the mere fact that these deposits have been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. The reasons recorded for reopening the assessment do not make out a case that the assessee was engaged in some business and the income from such a business has not been returned by the assessee. As we do not have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with the question as to whether the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of Rs.10,24,100/- has escaped assessment of income because the assessee has Rs.10,24,100/- in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, 7 ITA No. 763/Lkw/2016 rather than suspect, that an income has escapement assessment."
48.The Tribunal concluded thus:
"but then in the case before us the only reason for reassessment proceedings was the fact of deposit of bank account which by itself does not lead to income being taxed in the hands of the assessee. Learned Departmental Representative has referred to several other judicial precedents in support of the proposition that at the stage of initiation of reassessment proceedings, all that is to be seen is existence, rather than adequacy, of the material to come to the conclusion that income has escaped assessment. There cannot be any, and there is no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment, in our humble understanding, cannot be drawn."
49. Now, in keeping with 'Bir Bahadur Singh Sijwali' (supra), this information cannot form a valid basis for initiating assessment proceedings under section 147 of the I.T. Act. As observed in 'Bir Bahadur Singh Sijwali' (supra), the mere fact that the deposits had been made in the bank account does not indicate that these deposits constitute income which has escaped assessment.
50.Thus, it was a mere suspicion of the AO, that prompted him to initiate assessment proceedings under section 147, which is neither countenanced, nor sustainable in law. Too, the AO proceeded on the fallacious assumption that the bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the assessee. That being so, in keeping with 'Bir Bahadur Singh Sijwali' (supra), the reasons recorded to initiate assessment proceedings under section 147 of the Act and all proceedings pursuant thereto, culminating in the impugned order, are cancelled. Ground No.2 is, accordingly, accepted."
8ITA No. 763/Lkw/2016
10. 'Sijwali' (Supra) and 'Amrik Singh' (Supra) were followed in 'Munni Devi vs. ITO', order dated15.09.2016, passed by the ITAT, Delhi (SMC), in ITA No.3534/Del/2014, for A.Y. 2007-08 and 'Harmeet Singh vs. ITO', order dated 10.02.2017 passed by the ITAT, Delhi (SMC), in ITA No. 1939/Del/2016 for A.Y. 2008-09.
11. No decision contrary to the above decisions has been cited befoe me.
12. In view of the above, finding merit in the grievance raised by the assessee by way of the additional ground of appeal, the reasons recorded by the AO for issuance of notice u/s 148 of the Act are held to be invalid, being reasons not sufficient to form belief of escapement of income, based on vague information. All proceedings pursuant thereto, including notice issued under Section 148 of the I.T. Act, the assessment order dated 18.03.2014 and the impugned order dated 28.09.2016, are thus annulled and cancelled. No other issue survives for adjudication, nor was anything else argued.
13. In the result, the appeal is allowed.
(Order pronounced in the open court on 30/11/2018) Sd/-
(A.D. Jain) Vice President Aks -
Dtd. 30/11/2018 9 ITA No. 763/Lkw/2016 Copy of order forwarded to:
(1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File
By order
Assistant Registrar