HC Strikes Down Reassessment Based on Lack of Bank Clarification

HC Strikes Down Reassessment Based on Lack of Bank Clarification

The petitioner challenged the reopening of assessment for AY 2018-19 initiated through notice under Section 148, along with the order passed under Section 148A(d) of the Income Tax Act. The reassessment was triggered on the basis of certain cash transactions reflected in the petitioner’s bank account.

In response to the show cause notice, the petitioner furnished detailed explanations along with supporting documents, including bank book, cash book, income tax return, balance sheet, and profit and loss account. Despite this, the Assessing Officer proceeded to reopen the assessment, primarily on the ground that no independent clarification was obtained from the bank regarding the cash transactions.

Issue Before Court: Whether reassessment under Section 147 can be initiated merely due to absence of bank clarification despite assessee furnishing complete supporting evidence?

HC Held: The High Court allowed the petition and quashed the reassessment proceedings. It held that the Assessing Officer had acted without jurisdiction in invoking Section 147. The Court observed that the petitioner had already explained the cash transactions through documentary evidence, which was not disputed by the Revenue. Ignoring such material and proceeding solely on the basis that no clarification was obtained from the bank was held to be unjustified.

It was emphasized that mere absence of bank confirmation cannot automatically lead to a conclusion that income has escaped assessment. The reopening must be based on proper appreciation of material on record, which was clearly lacking in the present case.

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