Reopening of Assessment can be done if assessee has received huge cash deposits & not filed ITR: ITAT

The brief facts of the case were that as per AIR information, the Ld. The assessing Officer came to know that the assessee had received cash deposits of Rs. 25,21,100/-in saving bank account maintained with Corporation Bank. To verify cash deposits, a letter dated 10-02-2017 was served on the assessee, which remained uncompiled with. Accordingly, the Ld. Assessing Officer issued 148 notices to initiate reassessment proceedings. The Ld. Assessing Officer sent several notices on the assessee (as listed in the assessment order), which all remained uncompiled. Accordingly, the Ld. Assessing Officer added an amount of Rs. 22, 21, 100/- as unexplained cash credits u/s 68 of the Act.

Re-opening of case u/s 147 is bad in law

Before ITAT (Income Tax Appellant Tribunal), the Ld. Counsel for the assessee at the outset submitted that reopening of assessment is bad in law since the assessee’s case has been reopened solely on the basis of deposit of certain cash in the books of account, which cannot lead to the inference that income chargeable to tax has escaped assessment.

What ITAT Held?

On going through the ‘reasons for re-opening’, it is seen that on receipt of information from AIR that assessee had received cash deposits of Rs. 25,21,100/-in saving bank account maintained with Corporation Bank, the Ld. Assessing Officer first called upon the assessee to justify the transaction and only when the assessee failed to comply, the Ld. Assessing Officer re-opened the case u/s 148 of the Act. The assessee had not filed return of income for the captioned year. Not only this, the subsequent conduct of the assessee during the assessment also points to total non-cooperation on his part and in absence of any explanation forthcoming from the assessee, the Ld. Assessing Officer was forced to pass ex-parte assessment order treating the above sum as undisclosed income of the assessee. In our view, since the assessee had not filed return of income for the captioned year and there was a huge cash deposit of Rs. 25,21,100/- in his saving bank account, and further, when the assessee was called upon to provide an explanation in respect of this deposit, he did not comply, this itself leads to an reasonable doubt regarding the source of such deposits especially when return of income has not been filed. In the case of Pr. CIT v. Gopal Heritage (P.) Ltd [2021] 127 taxmann.com 679 (Gujarat), the Gujarat High Court held that where Assessing Officer issued reopening notice against assessee on ground that an information was received from NMS (Non filler monitoring system) that assessee had received cash deposits of certain amount in a bank account but had not disclosed same in its return, since assessee had failed to submit supporting evidences and source of income with regard to said cash deposits, impugned reopening notice issued against assessee was justified. Again in the case of Smt. Uma Mandal v ITO [2021] 128 taxmann.com 369 (Jaipur – Trib.), ITAT held that where Assessing Officer issued a reopening notice against assessee on ground that an information was received that assessee had deposited certain amount in cash in her bank account but did not file return of income, since Assessing Officer reopened assessment after recording due reasons and after following due process and such information available before Assessing Officer was relevant and afforded a nexus to formation of prima facie belief that income chargeable to tax had escaped assessment in hands of assessee, impugned reopening notice was justified. Therefore, in our considered view, looking into the totality of facts in the case, the Ld. Assessing Officer is justified in re-opening the assessment in the instant set of facts. The process of re-opening was initiated after affording due opportunity to the assessee to give explanation regarding source of deposit. It is only when the assessee failed to comply / co-operate that case was re-opened u/s 148 of the Act, after following due process of law.