Tax demand of Rs 7 Cr made on person drawing monthly salary of Rs 4500: ITAT Quashes Assessment

The assessee has challenged the order of Ld. CIT(A) before the Income Tax Appellant Tribunal (ITAT) on merit in the various grounds assailing the confirmation of addition of Rs. 7,03,75,500/- as made by the AO on account of unexplained investment u/s 69 of the Income Tax Act, 1961 (hereinafter referred to as the Act).

The facts in brief are that the assessee filed his return of income on 16.08.2011 declaring total income of Rs. 1,60,970/-. The case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act which was complied with by the assessee by submitting that the return of income originally filed and may kindly be treated as return filed in response to notice u/s 148 of the Act. The AO reopened the assessment to verify the deposits of cash in bank account of the assessee aggregating to Rs. 7,03,75,500/- against which several cheques were issued to various parties. 

The assessee submitted before the AO that he is just an employee working with B.D. Agarwal Company and drawing monthly salary of Rs.4,500/-. The assessee submitted before the AO that the employer is the only person who has deposited money in his bank account and also issued cheques from the said bank without his knowledge and thus in no way he should be held responsible for huge cash transactions which are beyond his capacity and imagination.

The AO made the addition of Rs.7,03,75,500/- to the income of the assessee and CIT(A) confirmed the same without dealing with the various contentions as raised by the assessee such as the operation of the bank account by the employer as the assessee is a very small employee earning a meager income of Rs.4,500/- per month. 

ITAT Order

9. Having heard the rival submissions and perusing the material on record, we find that the AO has recorded the reasons u/s 148 of the Act in a very casual manner. We find that the AO has only reproduced in the reasons recorded the information received and hurriedly came to the conclusion that there exists escapement of income and evasion of tax without any application of mind and further stated that hence this matter is taken up u/s 147 of the Act. In our considered opinion the reopening of assessment cannot me made in a casual and whimsical manner. The AO has to apply his mind to the information if received by the AO. Moreover, the balance of equity is also in favour of the assessee who is a marginal labour/ employee of meager means drawing salary of Rs. 4,500/- per month. How the person iof such scarce resources can deposit more than seven crores in cash in his bank account. The AO has completely failed to examine and verify as to who is the real person behind all this and thus has made the addition in a very casual manner. The Ld. Counsel of the assessee also brought to our notice that a complaint lodged before the Posta Police Station in Kolkata on 20.09.2014 informing the police that the assessee is a marginal labour and his bank account was misused by his employer and his friend Shri Narendra Aggarwal narrating the entire facts. Under these circumstances and facts we are of the view that ends of justice could be made if the issue is examined in detail by the AO by affording a reasonable opportunity to the assessee and assess the income in accordance with law. Accordingly we set aside the order of the Ld. CIT(A) and restore the issue back to the file of the AO with the direction to examine the matter again and get to the truth and decide the issue afresh.

To Read Judgment Download PDF Given Below: