Reassessment on Demonetization Cash Deposits already Examined in Original Assessment Held Void ab Initio: ITAT [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has held that reconsideration of demonetisation period cash deposits already examined in the original assessment during the reassessment is void ab initio.

The assessee Mithilesh Jagdeo Singh Pawar had filed his return of income on 31.03.2018 declaring a total income of Rs. 4,07,450/-, which was selected for scrutiny and resulted in passing the assessment order, whereby the return of income was accepted.

However, subsequently, the information was received by the department that the assessee had made a cash deposit of Rs. 16,43,600/- in M/s. Janata Sahakari Bank, Amaravati, during the demonetization period, but had not shown the details of cash deposits accurately in the return of income. Thus, the source of cash deposits of Rs. 16,43,600/- remained unexplained. Based on the information, the case of the assessee was reopened by issuing a notice.

The assessee before the Assessing Officer (AO) mainly claimed that his case for the A.Y. 2017-18 was completed on 26.12.2019, wherein the entire amount deposited by the assessee was considered by the AO, though not mentioned in the assessment order, but that cannot be a ground for reopening of the case.

The AO considered the said claim of the assessee but ultimately made the addition of Rs. 16,43,600/- as an unexplained investment u/s 69A of the Act.

The assessee, being aggrieved, challenged the said addition before the Commissioner; the Commissioner decided the appeal filed by the assessee on merit. Thus, the assessee, being aggrieved, filed the appeal before the Tribunal

The Amicus Curiae demonstrated the fact that the AO vide notice issued during the re-assessment proceedings, inquired into the same issue of cash deposit in M/s. Janata Sahakari Bank, Amaravati during the demonetisation period as examined by the AO in the original assessment proceedings, while issuing the notice of the Act, which resulted into passing the original assessment order dated 26.12.2019 accepting the return of income as declared by the assessee to the tune of Rs.4,07,350/- and therefore, the re-examination of the same issue is unsustainable in the eyes of law.

The Tribunal observed that more or less the AO had formed a belief that the source of cash deposit of Rs. 16,43,600/- in M/s. Janata Sahakari Bank, Amaravati has escaped assessment, as no scrutiny assessment was made and the return of income filed by the assessee was processed only under Section 143(1) of the Act, and though the income of the assessee was accepted as contended by the assessee, however, the issue of cash deposit in M/s. Janata Sahakari Bank, Amaravati, was not discussed in the said assessment proceedings.

The tribunal quoted the Jurisdictional High Court in the case of DK Reality India Pvt. Ltd. vs. ACIT in which the court observed that, Once during the course of assessment proceedings a query was raised and replied, it will be presumed that the issue was the subject matter for consideration during the said assessment proceedings, although there is no specific mention that particular issue in specific words in the order of assessment.

The single bench of Narender Kumar Choudhry (Judicial Member) held that the issue, which has already been examined in original assessment proceedings, cannot be reopened in the reassessment proceedings and thus the reassessment proceedings under Section 147 of the Act are unsustainable, which would entail the assessment order passed in consequence thereof as invalid, being void and ab initio.

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