FACTS OF THE CASE

The assessee, Mr. Roop Narayan Pandey, was subjected to reassessment proceedings for Assessment Year 2011-12 after the Assessing Officer received information regarding substantial transactions in a bank account and commodity trading activities. The reassessment was initiated under Section 147 on the ground that income had escaped assessment.

During the proceedings, the Assessing Officer obtained details from the broker through notice under Section 133(6) and identified trading activity on the Multi Commodity Exchange (MCX). Based on the information, income was estimated by applying a net profit rate on the trading receipts. Additionally, deposits in the bank account were treated as unexplained due to the absence of satisfactory explanation regarding their source.

ISSUES INVOLVED

  1. Whether reassessment under Section 147 was validly initiated based on information relating to bank transactions and commodity trading.
  2. Whether additions made on account of unexplained bank deposits were justified.
  3. Whether estimation of income from commodity trading by applying a profit rate was legally sustainable.

PETITIONER’S ARGUMENTS (Assessee)

The assessee contended that the impugned bank account and transactions did not represent his actual income and that the additions were unjustified. It was argued that the transactions were not properly attributable to him and that the Assessing Officer failed to consider relevant circumstances.

The assessee also claimed that certain transactions were linked to other individuals and that reliance on the information obtained without proper verification resulted in an erroneous assessment.

RESPONDENT’S ARGUMENTS (Department)

The Revenue submitted that reassessment was validly initiated based on credible information indicating income escaping assessment. It was emphasized that the Assessing Officer had obtained independent confirmation from the broker and bank records.

The Department further argued that the assessee failed to provide satisfactory evidence explaining the source of deposits or rebutting the trading activity details. Therefore, estimation of income and additions were justified. 

COURT ORDER / FINDINGS (ITAT)

  • The reassessment proceedings were based on tangible material indicating income escaping assessment.
  • Information obtained under Section 133(6) constituted valid evidence.
  • The assessee failed to substantiate the source of funds in the bank account.
  • Estimation of income from commodity trading by applying a profit rate was reasonable in the absence of proper books or explanation.

IMPORTANT CLARIFICATION

The Tribunal emphasized that when an assessee does not provide credible explanations or documentary evidence regarding bank deposits and trading transactions, the tax authorities are empowered to make reasonable estimations and additions. Reassessment proceedings initiated on the basis of third-party information and financial data are valid where income escaping assessment is indicated.

Link to download the order - 

https://itat.gov.in/public/files/upload/1669724826-ITA%20No.%20101%20Alld%202019%20Mr.%20Roop%20Narayan%20Pandey.pdf

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