ITAT Nagpur Remands Reassessment Dispute Involving Section 148 Notice and Cash Deposits

Background of the Appeal

The dispute in ITO Vs Piyush Tushar Paralikar (ITAT Nagpur) stems from reassessment proceedings initiated for Assessment Year 2018-19. The matter reached the Income Tax Appellate Tribunal, Nagpur Bench, by way of an appeal filed by the Revenue against the order dated 03.06.2024 passed by the Commissioner of Income Tax (Appeals)/NFAC, Delhi under Section 250 of the Income Tax Act 1961.

The original assessment had been framed under Section 147 read with Section 144 and Section 144B by the Assessing Officer (AO), determining a significantly higher income than what was ultimately declared by the assessee. The CIT(A) later granted substantial relief by deleting major additions, which prompted the Revenue to challenge the order before the Tribunal.

Key Grounds Raised by the Revenue

Original Grounds Before the ITAT

The Revenue questioned multiple aspects of the CIT(A)’s decision, particularly:

  • Admission of additional evidence at the appellate stage allegedly without complying with the procedural mandate of Rule 46A of the Income Tax Rules, 1962.
  • Deletion of an addition of Rs. 6,30,000 related to a payment to M/s. Samco Securities Ltd. which the AO had taxed under Section 68 as unexplained.
  • Deletion of an addition of Rs. 1,20,47,620 brought to tax under Section 69A as unexplained money, primarily arising from cash deposits in bank accounts.

Additional Grounds by the Revenue

The Revenue further expanded its challenge by filing additional grounds, targeting:

  1. The admission by CIT(A) of an additional legal ground questioning the validity of the Section 148 notice, allegedly without first seeking the AO’s comments or report on admissibility.
  2. The reliance placed by CIT(A) on the decision of the Hon’ble Bombay High Court in “Hexaware Technologies Ltd. Vs. ACIT, Circle-15(1)(2) [2024] 162 taxmann.com 225”, even though the correctness of that judgment is presently under consideration before the Hon’ble Supreme Court.

Factual Matrix and Reassessment Proceedings

Non-Filing of Return and Information Trigger

  • The assessee is an individual who did not file any return of income for AY 2018-19 within the prescribed time.
  • The case came to the notice of the AO through the ITBA portal, which reflected financial transactions aggregating to Rs. 9,91,00,025 during the relevant year.

Initiation Under Section 148A and Information Gathering

  1. A notice under Section 148A(b) was issued and duly served on the assessee.
  2. Despite service, no return of income or reply was initially furnished.
  3. During the reassessment process, the AO obtained information from:
    • ICICI Bank Ltd., and
    • M/s. Samco Securities Ltd.

On analysing the data, the AO noted:

  • Cash deposits of Rs. 64,45,620 in the assessee’s ICICI Bank account.
  • Cash deposits of Rs. 56,02,000 in Yavatmal Mahila Sahakari Bank Ltd.
  • A payment of Rs. 6,30,000 made to M/s. Samco Securities Ltd.

Statutory notices under Section 143(2) and Section 142(1) were then issued.

Belated Return and Best Judgment Assessment