Income Tax Appellate Tribunal - Lucknow
Ravindra Deo Tyagi, Kanpur vs Income Tax Officer-4(2), Kanpur on 30 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "SMC", LUCKNOW
BEFORE SHRI A.D JAIN, VICE PRESIDENT
ITA No. 123 to 125/LKW/2017
A.Ys. 2010-11 to 2012-13
Ravindra Deo Tyagi, Vs. Income Tax Officer-4(2),
4/5, New Victoria Mill, Kanpur 208001
14/1, Civil Lines,
Kanpur 208001
PAN ACHPT 7151 N
(Appellant) (Respondent)
Appellant by Shri Rakesh Garg, Advocate
Respondent by Shri C.K. Singh, DR
Date of hearing 28/11/2018
Date of pronouncement 30/11/2018
ORDER
These are assessee's appeals for Assessment Years 2010-11 to 2012-13, involving common issues. As such, they are being disposed of by this composite order. Details, for convenience, are being taken from ITA No.123/Lkw/2017. The following grounds have been raised:
"1. Because the re-assessment framed under section 1474143(3) is without jurisdiction, bad in law, the re- assessment framed be quashed.
2. Because there being no material to form reason to believe, the notice issued under section 148 is without jurisdiction, bad in law, the re-assessment framed be quashed.
3. Because the authorities below have erred on facts and in law in estimating and adding a sum of Rs.99,051/- as presumptive income under section 44AD of the I.T. Act, 1961, which addition is contrary to facts, bad in law and be deleted.2
ITA No. 123 to 125/Lkw/2017
4. Because the peak credit in the savings bank with ICICI Bank being Rs.63,922/-only, there was no reason for the AO to estimate the profit at Rs.99,051/- and make an addition of the same, against Rs.63,922/- if at all, the addition made be deleted.
5. Because the authorities below have erred on facts and in law in making and upholding the addition of Rs.6,13,000/- being deposits in Induslnd Bank, which deposits being all explained, the authorities below were not justified in making and upholding the addition under section 69 of the I.T. Act, 1961
6. Because in any case and in all circumstances of the case, the additions made by the AO and upheld by the CIT(A) are all contrary to facts, bad in law be deleted.
7. Because the addition of Rs.15,000/- being income from agriculture being ancestral in nature, does not being to the assesses 'Indl.', the addition made for rate purposes is contrary to the provisions of law, be deleted."
2. The AO recorded the following reasons to form belief of escapement of income of the assessee: (APB-1) "On perusal of AIR information generated from AST module, it is gathered that the assessee has made cash deposits of Rs.10,00,000/- or more in a savings bank account of ICICI bank totaling to Rs.11,18,886/- during the F.Y. 2009-10 relevant to A.Y. 2010-11. Assessee is an employee of New Victoria Mills, 14/1, Civil Lines, Kanpur and working on the post of ASPO. On perusal of Form No. 16 issued by the M/s. New Victoria Mills dated 29.04.2010 it revealed that during the year under consideration, employer has deducted Rs.11,805/- as TDS on a gross payment of Rs.3,74,613/- as salary. The assessee has filed its return of income for A.Y. 2010-11 declaring income of Rs.5,39,995/-under the head income from salary pension. The assessee is not showing any income from business and profession or capital gain. Therefore, it is not understood as to why the assessee 3 ITA No. 123 to 125/Lkw/2017 earning salary only is depositing cash amounting to Rs.11,18,886/- in his bank accounts.
In view of the above facts, I have reason to believe that income of Rs.11,18,886/- chargeable to tax has escaped assessment as per the provisions of Sec.147 of the IT. Act, 1961 read with explanation 2(b). Therefore this is a fit case for issue of notice u/s.148 of the IT. Act, 1961."
5. 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 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.11,18,886/-, 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; 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 4 ITA No. 123 to 125/Lkw/2017 material available before the AO was the AIR information of the assessee having deposited an amount of Rs.11,18,886/- 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 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 5 ITA No. 123 to 125/Lkw/2017 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, interalia as follows:
"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 6 ITA No. 123 to 125/Lkw/2017 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 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 7 ITA No. 123 to 125/Lkw/2017 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, 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."8
ITA No. 123 to 125/Lkw/2017
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."
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 before me.
12. In view of the above, finding merit in the grievance raised by the assessee, 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 9 ITA No. 123 to 125/Lkw/2017 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 and the impugned order are thus annulled and cancelled. No other issue survives for adjudication, nor was anything else argued.
13. Facts being, mutatis mutandis, similar in the other appeals, i.e., ITA Nos.124 and 125/Lkw/2017, these appeals are also allowed with the same observations as given for ITA No.123/Lkw/2017.
14. In the result, all the appeals are allowed. (Order pronounced in the open court on 30/11/2018) Sd/-
(A.D. Jain) Vice President Aks -
Dtd. 30 /11/2018 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