SUMAN POPTANI, RAIPUR,RAIPUR vs. ITO-1(3), RAIPUR, RAIPUR

आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 18.02.2026 for the assessment year 2017-18 as per the grounds of appeal on record.

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appellant had deposited cash of Rs.12,00,000/- on 11/11/2016 in Union Bank of India, Main Branch, Raipur, during the demonetization period. The appellant had filed return declaring total income of Rs.4,12,960/- for A.Y. 2017- 18. During the assessment proceedings, notices u/s 143(2) dated 28/09/2018 and subsequently u/s 142(1) dated 02/05/2019 and on various other dates were issued and duly served. In response, the appellant furnished computation of income, capital account for the relevant year and preceding years, and claimed that she derived income from boutique work and from interest on petty advances given to tailors, employees and related persons. The appellant stated that she possessed skill in designing and stitching traditional dresses and undertook such work on job work basis, and that the interest income of Rs.90,800/- was earned from small lending activities without any fixed rate. The AO, in order to verify the veracity of the claim of boutique business and petty lending, deputed an Inspector to conduct field enquiries at the given address as well as at the residential premises. The Inspector's report. as incorporated in the assessment order, categorically stated that enquiries made from neighbours and local shopkeepers revealed that the appellant was a housewife and no boutique or business activity was being carried out by her. Further, when the Inspector visited the residence and enquired as a customer about boutique services, the lady present denied carrying on any such activity, and later introduced herself as Smt. Suman Poptani. The Inspector also noted that no evidence of any business establishment, tailoring setup, employees, or commercial activity was found at the premises. Based on the Inspector's report and other material gathered, the AO issued a detailed show cause notice dated 06/12/2019 confronting the appellant with the findings that (i) no boutique activity was found to be in existence, (ii) no evidence of petty advances or receipt of interest had been furnished, and (iii) the capital claimed to have been accumulated in earlier years lacked credible source. In response, the appellant merely reiterated that she was doing such work out of personal interest and not as a regular business, and that income was offered under the head "Income from Other Sources." However, no supporting documentary evidence such as bills, vouchers, customer confirmations, details of job work undertaken, list of

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customers, details of advances given, confirmations from borrowers, repayment details, or evidence of receipt of stitching charges was produced either before the Assessing Officer or during appellate proceedings. The AO has specifically observed that in the computation of income the appellant herself had described the income as "Income from Boutique business", which contradicted her later claim mat no regular business was carried on. The Assessing Officer further examined the capital formation in earlier years and noted that except for interest income from M/s Rajesh Traders and M/s Vijaya Traders, on which only TDS had been deducted and refund claimed, there was no substantial disclosed income capable of generating the accumulated capital as claimed. The interest income of Rs.1,28,100/- from Rajesh Traders and Rs.43,125/- from Vijaya Traders was accepted; however, the alleged capital buildup prior to A.Y. 2016-17 was held to be unsubstantiated and unsupported by credible evidence. The Assessing Officer therefore concluded that the so-called accumulated capital was a self-generated figure without real source. As per Section 69 of the Act, where an assessee has made an investment which is not recorded in the books of account and offers no satisfactory explanation about the nature and source thereof, the value of such investment may be deemed to be income of the assessee. In the present case, the burden was squarely upon the appellant to establish the source of cash deposit of Rs.12,00,000/- with cogent and credible evidence. The explanation that the deposit was out of accumulated capital from boutique and petty lending activities remained unsubstantiated. Mere production of capital account and self-serving statements, without independent corroborative evidence, cannot be regarded as satisfactory explanation within the meaning of Section 69. The addition has been made only after issuing statutory notices, conducting field enquiry, confronting the appellant with adverse material through show cause notice, and considering her reply. Thus, adequate opportunity of being heard was provided. The conclusion drawn by the Assessing Officer is based on material gathered during enquiry and is not founded on mere suspicion or conjecture. In view of the foregoing discussion, I find that the appellant has failed to discharge the burden cast upon her to explain

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satisfactorily the nature and source of the cash deposit of Rs.12,00,000/- made during the demonetization period. The AO was justified in invoking Section 69 of the Act and treating the same as unexplained investment. I therefore find no infirmity in the assessment order. The addition of Rs.12,00,000/- is confirmed and the ground of appeal is dismissed.”

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Department that some investment has been made by the assessee which is not explained or outside the books of account of the assessee. Therefore, even without going into the merits of the addition, both A.O as well as Ld. CIT(Appeals)/NFAC has erred in invoking incorrect provision for making addition in the hands of the assessee.

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mind, therefore, not a valid approval in the eyes of law. In the case of ACIT, Circle-1(2) Vs. Serajuddin & Co., the Hon’ble Supreme Court vide order in SLP (C) Diary No.44989/2023, dated 28.11.2023 dismissed the appeal filed by the Revenue against the order passed by the Hon’ble High Court of Orissa, wherein the Hon’ble High Court had quashed the assessment order on the ground of inadequacy in procedure adopted for granting approval u/s.153D of the Act by expressing dis- coherent note of such mechanical exercise and ritualistic approval processes vitiate the entire assessment proceedings. There are plethora of judgments in which it has been held that quasi-judicial authority has to specially apply mind to the facts of the assessee’s case as well as enquiry conducted and justify the reasoning through which the tax liability is imposed on the assessee. That in absence of proper application of mind or when there is mechanical exercise of power, in such scenario, the Courts have always struck down the order of the Revenue authorities. In the recent decision of the Hon’ble Supreme Court in the case of Adani Power Rajasthan Limited Vs. Assistant Commissioner of Income Tax, (SLP Diary No.27752/2024) has held that the A.O cannot Act mechanically or merely echo audit parties objection or higher authorities directions. The A.O must conduct independent enquiry and independently frame reasons to believe that income has escaped assessment. Reassessment and assessment order requires statutory approval. The Hon’ble Supreme Court

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mandates that sanctioning authority must apply its mind rather granting approval as empty ritual when the assessment was initiated and finalized by the assessing authority without application of mind, hence, the said order is liable to be struck down.

I find that it has been held by the Co-ordinate Bench of the 7. Tribunal, Delhi in the case of Bhawani Castings P. Ltd. Vs. DCIT ITA No.1362/Del/2024, dated 19.11.2024 that when there is no coherence in the reasons recorded for reopening and additions made in the

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assessment, it is utter non application of mind by the A.O while recording reasons for reopening.

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bad in law. Accordingly, grounds of assessee are allowed and AO is directed to delete the entire addition. 15. In the result, appeal of the assessee is allowed.”

Similarly, in the decision of Hon’ble High Court of Allahabad in 9. the case of Smt. Sarika Jain Vs. The Commissioner of Income Tax, Bareilly and Another, reported in (2018) 407 ITR 254 (All) which decision was referred to and applied in the earlier decision of the Co- ordinate Bench of Delhi (supra), the Hon’ble High Court of Allahabad held as follows: “In the present case, it is apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the addition of alleged amount of the gift received by the appellant-assessee as his personal income under Section 68 of the Act and not whether such an addition can be made under Section 69-A of the Act. In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that "it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant- assessee under Section 68 of the Act. In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law. Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and against the Revenue and hold that the Tribunal was not competent to make any

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addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.”

“……….I further observe that the additions have been made u/s. 68 of the Act which pertains to unexplained cash credit. But in this case, regarding both the additions, there is no trail of any evidence or enquiry by the Department regarding any loan transaction so to justify addition u/s. 68 of the Act as unexplained cash credit. The entire trail of examination is regarding the nature and source of cash deposits and since the addition has been made by the Department stating the said cash deposits were unexplained then the relevant charging section should have been Section 69A and not Section 68 of the Act. Therefore, charging provision itself has been wrongly invoked by the Department which is clearly non application of mind by the quasi judicial authority. I find that it has been held by the Co-ordinate Bench of the Tribunal, Delhi in the case of Bhawani Castings P. Ltd. Vs. DCIT (supra) that when there is no coherence in the reasons recorded for reopening and additions made in the assessment, it is utter non application of mind by the A.O while recording reasons for reopening. 16. In the decision of the Co-ordinate Bench of o Delhi in the case of Sanjeev Kumar c/o M/s Raj Kumar & Associates vs. ITO Ward 2(3)(2), Bulandshahr, reported in 2023(10) TMI 1027-ITAT Delhi on the same issue of non- application of mind, it was observed and held as follows: “14. In view of foregoing discussion, I reach to a logical conclusion that the complete cash book statement clearly

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explains the source of cash deposit to the bank account of assessee, wherein the assessee has not only included cash receipts as salary and capital withdrawal from two partnership firms M/s Umang Beverages and M/s Mohan Oil & Cattle Feed and a cash salary from Bihar Milk Foods Pvt. Ltd. and has also reduced the amount of drawings for household expenses. The copy of return of income of wife of assessee Smt. Shalini and father of assessee Shri Kalu Mal co-jointly established that the other family members of assessee are also earning and contributing towards household expenses. Therefore, in my humble understanding the source of cash deposit during demonetization to the bank account of assesses is properly explained by the assessee by way of self speaking documentary evidence and explanation. Secondly, the AO has made addition u/s 69 of the Act which pertains to unexplained investments, whereas the assessee has not made any investment either in movable or any immovable property during the relevant period by way of using cash amount. The Ld.CIT(A) though has given credit of 25% of Impugned cash deposit confirming the remaining part of addition but there is no logic of this segregation. From the relevant operative part of first appellate order, I also note that the Ld.CIT(A) has upheld the part addition without mentioning any charging section and impliedly adopting section 69 of the Act in the line of assessment order. Therefore, respectfully following the proposition rendered by the Hon'ble Jurisdictional High Court of Allahabad in the case of Sarika Jain (supra). I have no hesitation to hold that the addition made by the AO by mentioning incorrect and irrelevant charging section is not sustainable and valid being bad in law. Accordingly, grounds of assessee are allowed and AO is directed to delete the entire addition. 15. In the result, appeal of the assessee is allowed.” Similarly, in the decision of Hon’ble High Court of 17. Allahabad in the case of Smt. Sarika Jain Vs. The Commissioner of Income Tax, Bareilly and Another, reported in (2018) 407 ITR 254 (All) which decision was referred to and applied in the earlier decision of the Co- ordinate Bench of Delhi (supra), the Hon’ble High Court of Allahabad held as follows: “In the present case, it is apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the addition of alleged amount of the gift received by the appellant-assessee as his personal income

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under Section 68 of the Act and not whether such an addition can be made under Section 69-A of the Act. In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that "it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act. In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law. Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and against the Revenue and hold that the Tribunal was not competent to make any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.” 18. Therefore, on both these counts, additions made by the A.O and sustained by the Ld. CIT(Appeals)/NFAC is unjustified, arbitrary and bad in law.

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thereof, the assessment framed u/s.143(3) of the Act is held as arbitrary, bad in law, hence, quashed.

Order pronounced in open court on 25th day of May, 2026.

Sd/- (PARTHA SARATHI CHAUDHURY) �या�यक सद�य/JUDICIAL MEMBER रायपुर / Raipur; �दनांक / Dated : 25th May, 2026. SB, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The Pr. CIT-1, Raipur (C.G.) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, रायपुर / DR, ITAT, “SMC” Bench, Raipur. गाड� फ़ाइल / Guard File. 5.

आदेशानुसार / BY ORDER, Samiran Bera, Sr. PS, ITAT, Raipur // True Copy // Senior Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur Digitally signed by Samiran Bera, Sr. PS, ITAT, Raipur Date: 2026.05.25 16:57:43 +05'30'