The assessee had deposited cash in excess of Rs
10 lakhs in his saving bank account but he had not filed return of
income. The AO reopened the assessment of assessee, as he had reason to
believe that there was an escapement of income of Rs 10 lakhs. The
Tribunal held that the AO proceeded on the fallacious assumption that
bank deposits constituted undisclosed income and overlooked fact that
the source of deposit need not necessarily be income of the assessee
Facts:
| (a) | The assessee had deposited Rs 10 lakhs (approx) in his saving bank account but no return of income was filed by him. The AO reopened the assessment of assessee, as he had reason to believe that there was an escapement of income of Rs 10 lakhs on part of assessee. | |
| (b) | The instant appeal was filed against validity of reassessment proceedings. |
The Tribunal held in favour of assessee as under:
| (1) | At the stage of recording the reasons for reopening the assessment, the formation of prima facie belief that an income has escaped the assessment is necessary. However, it is also necessary that there must be something which indicates, even if not establishes, the escapement of income from assessment. | |
| (2) | Merely because some further investigation had not been carried out, which, could have led to detection to an income escaping assessment could not be a reason enough to hold the view that income had escaped assessment. | |
| (3) | In the instant case, merely the fact that deposits have been made in a bank account do not indicate that these deposits constitute an income which had escaped assessment. | |
| (4) | AO proceeded on the fallacious assumption that bank deposits constituted undisclosed income and overlooked the fact that the sources of deposit need not necessarily be income of the assessee. The reassessment proceedings could not be resorted to unless there was reason to believe, rather than suspect, that income had escaped assessment. Thus, reassessment proceeding was to be set aside. |
