The Income Tax Appellate Tribunal (ITAT), Delhi bench deleted the addition made towards the gift of cash amount deposited in the ICICI Bank, received from the father-in-law and mother-in-law of the wife. The assessee, Parminder Singh, was engaged in the business of sale and purchase of old mobile phones and the distribution of milk supply in his locality. Such a business mostly deals in cash. While filing the return of income, he declared that he had earned income from the business and agriculture. Subsequently, the assessee’s case was reopened under Section 148 of the Income Tax Act due to cash deposits of Rs. 17,30,110 in the bank account of the assessee.
The reassessment was then completed under Section 143(3) read with Section 147 of the Income Tax Act, making an addition of Rs. 10 lakhs representing the gifts received by the assessee from his father-in-law and mother-in-law. Aggrieved by the order, the assessee filed an appeal before the CIT(A), who dismissed the appeal. Thus, the assessee filed a second appeal before the tribunal.
During the proceedings, Manpreet Singh Kapoor, Counsel for the assessee, argued that the AO had initiated the proceeding under Section 147 based upon AIR Information generated from the IT Department application. Furthermore, counsel argued that the AO had not conducted any inquiry with respect to the source of such cash deposited and merely raised a suspicion about income escaping assessment of the assessee. Additionally, the AO received information from ICICI Bank Ltd. after 2 months from the date of the issue of notice under Section 148 of the Income Tax Act.
Om Prakash, Counsel for Revenue, argued that the assessment was reopened based on AIR information, which stated that the assessee had huge cash deposits in his bank account. Therefore, the Assessing Officer had reason to believe that the income had escaped assessment, and the reopening was rightly made by the Assessing Officer.
The Tribunal, while considering the appeal, observed that the Assessing Officer, at the time of recording reasons for reopening, was not in possession of any tangible materials suggesting that the income had escaped assessment, except the AIR Information. It was also found that the Assessing Officer did not have any relevant documents to correlate with the cash deposits made by the assessee to form a belief that the income had escaped assessment.
After reviewing the facts and records, the single member bench of Challa Nagendra Prasad (Judicial Member) quashed the reassessment proceedings and held that the donors of the gifts, being the father-in-law and mother-in-law, were closely related to the assessee, and the sources were explained. The gifts cannot be disbelieved.
Therefore, the bench deleted the addition made by the assessing officer and allowed the appeal of the assessee.
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