CHAMPALAL RANDER,SILIGURI vs. I.T.O., WARD - 1(1), SILIGURI

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2019-20 dated 20.11.2025. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1) For that the Order passed by the Ld. CIT (Appeal), under section 250 of the Income Tax Act dated 20/11/2025 is bad in law as well as on facts and hence the same may be quashed and/or set aside 2) For that, the Ld. CIT(A) has erred in law and on facts in confirming the addition of ₹8,00,000/- to the total income of the appellant by invoking the provisions of Section 68 of the Income-tax Act, 1961, without appreciating that the said amount represented redeposit of funds withdrawn earlier from the appellant's proprietorship firm 3) For that, the Ld. CIT(A) has erred in not considering that the appellant had clearly explained that the amount of ₹8,00,000/- deposited in cash emanated from earlier cash withdrawals amounting to ₹10,00,000/-, as duly reflected in the Capital of the proprietorship firm. The explanation was fully supported by accounting entries and thus could not be termed unsatisfactory 4) For that, the Ld. CIT(A) failed to appreciate the legal framework of Section 68, which requires (1) existence of books of account, (ii) a credit entry therein, and (iii) failure of the appellant to offer a satisfactory explanation. In the present case, the appellant had provided a complete, coherent, and verifiable explanation for the cash introduced. Hence, the basic conditions for invoking Section 68 were not satisfied 5) For that, the learned CIT(A) erred in confirming the interest u/s 234A/B/C of the Income Tax Act, 1961 the same was unjustified and hence the same may be deleted. 6) For that, the appellant craves to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal”

“7. Discussion & Decision The principal addition of Rs.8,00,000 under section 68 relates to cash introduced in the capital account. The appellant contends that he had withdrawn cash of Rs.10,00,000 during April-May 2018 and reintroduced Rs.8,00,000 during February-March 2019. The Assessing Officer rejected this explanation, holding that it is against the principle of human probability that cash withdrawn nearly 10 months earlier would remain unutilised and intact till the date of reintroduction, particularly in the absence of a daily cash book, cash flow statement, or any supporting evidence. On a careful appraisal of the facts, I find that the explanation furnished by the appellant lacks contemporaneous corroboration. Mere availability of earlier withdrawals in the books does not establish that the same cash remained available for almost a year. The long time gap, the absence of supporting cash records, and the lack of any reasonable business justification render the explanation improbable. The burden under section 68 is on the assessee to prove the nature and source of the credit to the satisfaction of the Assessing Officer. The appellant has not discharged this onus. The AO was justified in applying the test of human probabilities in terms of the Supreme Court decision in Sumati Dayal v. CIT. Accordingly, the addition of Rs.8,00,000 under section 68, along with the consequential application of section 115BBE, is upheld in full. Having considered all issues, I am of the view that while the additions made under section 37 and under section 201(1A) require modification to the extent indicated above, the addition under section 68 has been rightly made and deserves to be sustained. Other grounds being general or consequential do not call for separate adjudication.

In view of the above discussion, the appeal is partly allowed. The disallowance under the head "Penalty Charges is restricted only to Rs.48,738, being the amount admittedly penal in nature, and the remaining disallowance of Rs.2,28,181 is deleted. The addition of Rs.15,910 towards interest under section 201(1A) on delayed remittance of TDS is held to be compensatory and allowable, and is therefore deleted. However, the addition of Rs.8,00,000 under section 68 is confirmed, as the explanation regarding the reintroduction of cash after an 8-10 month gap is improbable and unsatisfactory, and the consequential applicability of section 115BBE is also upheld. Grounds relating to interest and penalty being consequential require no separate adjudication. The appeal is thus partly allowed.”

Hence in the interest of justice and fair play it was considered that the request of the assessee to set aside the case before may be allowed so that a proper opportunity of being heard may be provided.

Copy of the order forwarded to: