The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that proceedings under Section 147 of the Income Tax Act being initiated by AO was on wrong assumption of facts, thus not sustainable.
The assessee in the CO has challenged the validity of the proceedings initiated under Section 147 of the Income Tax Act. The necessary facts are that the assessee in the present case is an individual and engaged in the business of trading of Go and Silver Bullion as proprietor under the name and style of M/s Mahalaxmi Jewellers.
In the present case, the proceedings under Section 147 of the Income Tax Act, were initiated against the assessee on the reasoning that there was cash deposit in the Bank account No.730606021000062 maintained with Vijay Bank which was not disclosed in the Income-tax return. Likewise, the AO also observed that there was cash deposit in the bank account of the assessee amounting to Rs. 36,88,15,000/- in the bank account bearing No. 73060030000306 maintained with Vijaya Bank whichwasinmost of the cases immediately transferred through RTGS to another account bearing No. 730606021000062 being undisclosed account. As such, the assessee failed to reconcile the cash deposits in the bank account with cash sales made by it. Based on the above fact, the proceedings were initiated against the assessee under the provision of Section 147 of the Income Tax Act.
After hearing both the parties, the tribunal heod that the assessee has justified cash deposit in the bank out of cash sales, but the contention was rejected by the AO on the reasoning that the assessee failed to furnish name, address, PAN, or any identity of the person to whom the sales was made. In this regard, we note that the books of account were duly audited and there was available VAT Audited report under Section 63 of the VAT Act, no discrepancy has been pointed out by the AO with respect to such documents.
As such, the assessee has discharged his onus by submitting the audited financial statement and VAT Audit report for the cash sales made by it. Now, the onus shifted upon the AO to disregard the contention that the cash sales shown by the assessee amounting to Rs. 2,64,27,76,935/- does not represent cash sales. However, AO has not controverted the above contention of the assessee based on the documentary evidence.
Likewise, the AO himself has recorded that the amount of cash deposit made by the assessee in one bank account was transferred to another bank account of the assessee which was not disclosed in the books of account. Again, this finding of the AO is contrary to the facts available on record. It is because the books of account were duly audited and no defect of whatsoever was pointed out by the AO before the initiating the proceedings under Section 147 of the Income Tax Act in the present set of facts.
The assessee was maintaining its accounts on double entry system, and it was duty to brought on record that if the cash have been transferred by the assessee in the undisclosed books of accounts, then how the books of account were reconciled. Accordingly, the findings of the AO that the bank account wasnot disclosed by the assessee is based on wrong assumption of facts.
There was typographical error in the bank account number mentioned in the Audited Financial Statement visa vis bank account number recorded by the AO in the reason for reopening. merely, a typographical error cannot be a reason to believe that the income of the assessee has escape assessment.
The two member bench consisting of Madhumita Roy (Judicial member) and Waseem Ahmed (Accountant member) held that the AO has initiated the proceedings under Section 147 of the Income Tax Act, based on the wrong assumptions of facts and therefore the same is hereby quashed. Hence, the ground raised by the assessee in the CO was allowed.
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