ITAT Panaji confirms reassessment and addition of unexplained deposits in case of dual-identity assessee
Background and case overview
The Panaji Bench of the Income Tax Appellate Tribunal in Sonal Sunil Jolapure Vs ITO dealt with reassessment for Assessment Year 2011–12 initiated on the basis of information unearthed during a Section 132 search on a credit cooperative society. The dispute revolved around:
- Validity of reopening under
Section 147/Section 148 - Alleged non-service of notice under
Section 143(2) - Addition of unexplained investments under
Section 69and related interest income
The reassessment originated from information obtained during a search in the case of VPK Urban Credit Cooperative Society, which revealed substantial cash deposits and term deposit transactions linked to the assessee in Financial Year 2010–11 that did not appear in her original return.
The original return for A.Y. 2011–12 had declared income of Rs. 1,80,000, processed routinely under Section 143(1). Subsequently, based on the search results and corresponding information, the Assessing Officer (“AO”) formed a belief that income had escaped assessment and proceeded under Section 148, culminating in an assessment under Section 143(3) read with Section 147, with significant additions.
Both the reassessment and the quantum additions were sustained by the CIT(A) and later affirmed by the Tribunal, leading to dismissal of the assessee’s appeal.
Chronology of events and proceedings
Original return and search-triggered information
- The assessee filed her return of income for A.Y. 2011–12 on 17-10-2011, declaring total income of Rs. 1,80,000.
- This return was processed under
Section 143(1)on **11-05-2012`. - A search under
Section 132was subsequently conducted in the case of VPK Urban Credit Cooperative Society. - During this search, the department obtained information indicating:
- Cash deposits
- Term deposits
in the name of the assessee pertaining to F.Y. 2010–11, which were not reflected in the return already filed for A.Y. 2011–12.
On the strength of these search-derived details, the AO concluded that income chargeable to tax had escaped assessment.
Initiation of reassessment under Section 147 / 148
- The AO recorded reasons for reopening and issued notice under
Section 148. - In response, the assessee filed a fresh return on 31-07-2018.
- The AO then issued notices under:
Section 143(2)– for scrutinySection 142(1)– calling for details and explanations
The assessee’s authorised representative and her father regularly appeared before the AO and furnished details in compliance with these notices during the reassessment proceedings.
Enquiry into deposits and collection of evidences
Information from VPK Urban Credit Cooperative Society
To verify and quantify the alleged undisclosed transactions, the AO invoked Section 133(6) and sought specific transaction-wise details from the society. In response, the society supplied:
- A comprehensive statement of cash deposits
- Details of term deposits
- Interest credited on such deposits
for F.Y. 2010–11 in the assessee’s name.
The AO also recorded the statement of the senior branch manager of the society regarding how the deposits were collected and the assessee’s dealings with the branch.
Show cause notice and opportunity to explain
- A detailed show cause notice was issued on 05-10-2018, directing the assessee to explain the source of deposits and address the findings arising from the information received and statements recorded.
- Before that, on 31-08-2018, the AO had already supplied to the assessee the reasons recorded for reopening under
Section 147and specifically asked her to justify the source of cash and term deposits found in her name for F.Y. 2010–11.
Initially, the assessee’s authorised representative and her father participated and advanced explanations regarding the availability of funds. However, the stand of the assessee later changed drastically.