ITAT quashes Reassessment Order on Cash Deposits due to AO's Vague Reasoning and Non-Application of Mind [Read Order]

The Delhi Bench of Income Tax Appellate Authority ( ITAT ) quashed the reassessment order on cash deposits due to the assessing officer's vague reasoning and non-application of mind for reopening the matter.

Raghubir Singh Punia, the assessee had deposited a sum of Rs. 29,49,000 in his bank account during the financial year 2011-12. The Revenue Department initiated proceedings based on the information that the assessee deposited cash of Rs.10 lakhs or more, which had not been scrutinized under Section 143(3) of the Income Tax Act, 1961

The assessee challenged the reassessment order of the CIT(A) - NFAC before the Delhi Bench of ITAT where the assessee’s counsel argued that the reassessment was initiated on vague grounds, as the exact amount of cash deposited, the account details and the date of transactions were not specified.

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The assessee's counsel also argued that they had filed objections against the reasons recorded for the reassessment under Section 147 of the Income Tax Act but the AO failed to dispose of these objections, which clearly violates the procedural requirements established by the Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO [259 ITR 19].

On the contrary, the revenue’s counsel just relied on the orders of the CIT(A) - NFAC.

The Judicial Member, Challa Nagendra Prasad heard both side's arguments. The tribunal observed that the AO did not possess credible information to establish a reasonable belief that income had escaped assessment.

The bench referred to the Delhi tribunal ruling in Nisha Goel Vs. ITO, 2023 where reassessment proceedings were quashed due to vague reasons, non-application of mind, and the absence of tangible material.

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Therefore, the tribunal quashed the reassessment order due to the assessing officer’s vague reasons and non-application of mind for reopening the assessment, making the reassessment invalid. The tribunal did not examine other legal issues and merits of the case as the reassessment order was invalidated. The appeal of the assessee was partly allowed.

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