The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, recently set aside an assessment order by holding that the cash deposited in the bank account of the assessee is not enough to form a “belief of escapement of income” by the Assessing Officer (AO). This ruling was made in response to an appeal filed by the assessee against an order passed by the Commissioner of Income Tax (Appeals), Ahmedabad. The appeal was made under section 250(8) of the Income Tax Act, 1981, pertaining to Asst Year 2010.

During the appeal hearing, the counsel for the assessee contended that the reopening was resorted to based on the information that there were cash deposits in the bank account of the assessee, amounting to Rs.15 lakhs. However, the counsel argued that this information alone could not lead to the formation of a belief of escapement of income for the assumption of valid jurisdiction to reopen the case of the assessee under section 147 of the Income Tax Act. The ITAT considered the contentions of both sides and observed that mere information of cash deposits is not sufficient to form a belief of escapement of income.

Thus, the ITAT concluded that the jurisdiction assumed by the AO to reopen the case of the assessee was not in accordance with the law in the absence of formation of a belief of escapement of income by the AO. The assessment order passed under section 147 was set aside as invalid. Additionally, the ITAT noted that since the assessment order was set aside, adjudication of the addition on merits is merely an academic exercise. Consequently, the appeal of the assessee was allowed, and the case was disposed of accordingly.