The Ahmedabad Income Tax Appellate Authority ( ITAT ) has recently held that re-assessment of returns without the formation of belief of escapement of income based on incorrect facts is invalid.
Assessee Bhaveshbhai Manilal Patel after filing the return of the income the assessing officer found that the assessee had deposited cash more than Rs.10,00,000/- in the Central Cooperative Bank Ltd. account during the financial year 2010-11 relevant to the Assessment Year 2011-12. Therefore, the sources of the cash deposits are subjected to verification by the Assessing Officer. Due to this assessing officer reopened the assessment. Against this order, the assessee filed an appeal before the ITAT.
B.T. Thakkar counsel for the assessee contended that,
“Reasons recorded by the assessing officer could not have led to the belief of escapement of income at all, and in any case, the belief of escapement of income was based on incorrect facts, and therefore, the reopening resorted to, was invalid.”
He further pointed out that even otherwise, mere cash deposits in the bank account could not lead to the formation of belief of escapement of income and at best could only lead to suspicion thereof.
M.M. Garg, counsel for the revenue, supported the decision of the lower authorities.
After considering the contentions of both parties the single bench of the ITAT Annapurna Gupta, (Accountant Member) allowed the appeal filed by the assessee and observed that the mere fact of cash deposits in the bank account alone could not lead to the formation of the belief of escapement of income by the assessing officer.
Further, the bench determined that the Jurisdiction assumed in the present case by the assessing officer to reopen the case of the assessee under section 147 of the Income Tax Act 1961 was without any form of belief of escapement of which, based on incorrect facts and thus not in accordance with the law.
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