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Dinesh kumar Dalsangbhai Chaudhary vs. Income Tax Officer - (Income Tax Appellate Tribunal) (14 Jun 2023)

Assessment framed merely on the basis of an information of cash deposit is not tenable in absence of any material establishing that income has escaped the assessment

MANU/IB/0286/2023

Direct Taxation

In facts of present case, it had come to the notice of the Assessing Officer (AO) that, the assessee had deposited cash of Rs.11.21 lakhs in the Bank of Baroda. The assesses case was reopened for assessment and necessary notices issued. The AO accordingly framed assessment under Section 144 of the Income Tax Act, 1961 (IT Act) and made an addition of Rs.18,91,000 to the income of the assessee on account of unexplained cash deposits. The assessee challenged the assessment order before the learned CIT(A). Learned CIT(A) upheld the action of the AO in reopening of the assessment, but restricted the addition to the extent of Rs. 2,38,000.

AO had acted merely on the basis of suspicion based on AIR statement indicating the assessee has deposited cash in the bank to the tune of Rs.11.21 lakhs, but not based on belief that the income chargeable to tax had escaped income. It has been held by the various decisions of the ITAT that, when the assessment proceedings under Section 147 of IT Act are initiated on the fallacious assumption or suspicion 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, the proceedings is neither countenanced, nor sustainable in law.

In the instant case, there is nothing on record to show that on receipt of the information, the AO had carried out any inquiry or investigation so as to demonstrate the source of the impugned cash deposits in the bank, which according to the AO was income escaped from the assessment so as to attract initiation of proceedings under Section 147 of the Act. The issue on hand is similar to the issue raised in the case of Bir Bahadur Singh Sijwali v. I.T.O. where the Tribunal has quashed the reassessment order holding that in the absence of material to indicate that income has escaped the assessment, the assessment framed merely on the basis of an information of cash deposit, was not tenable in law.

The assumption of jurisdiction by the AO to reopen the case of the assessee merely on the basis in formation of cash deposit in bank was not in accordance with law, and therefore, the impugned assessment order passed by the learned CIT(A) is set aside and the assessment order passed under Section 147 of the Act quashed. Appeal allowed.

Tags : ASSESSMENT   ADDITION   LEGALITY  

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