RAJ KUMAR BHARTI, RAIPUR,RAIPUR vs. INCOME TAX OFFICER-1(2), RAIPUR, RAIPUR

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ITA 323/RPR/2026Status: DisposedITAT Raipur29 May 2026AY 2011-1213 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO invoked the wrong section (Section 69) as the issue was about cash deposits, not unexplained investments. The Department failed to dispute the source of income or prove any undisclosed source, making the addition arbitrary and bad in law.

What were the facts?

The assessee deposited Rs. 30,00,000/- in cash into their savings bank account, attributing it to agricultural income, sale of land, and previous savings. The AO disallowed Rs. 20,64,200/- of these deposits, citing that the assessee should not have kept such a large amount in cash at home.

What were the issues?

Whether the addition made under Section 69 for cash deposits was justified when the AO invoked the wrong section and failed to prove an undisclosed source of income.

Which sections of the Income-tax Act were involved?

Section 69,Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR

Before: SHRI PARTHA SARATHI CHAUDHURY

For Appellant: Shri Veekaas S Sharma, CA
For Respondent: Shri CH. Rajeswara Reddy, Sr. DR
Hearing: 29.05.2026Pronounced: 29.05.2026

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 16.02.2026 for the assessment year 2011-12 as per the grounds of appeal on record.

2.

The relevant facts in this case are that during assessment proceedings, the assessee had submitted cash flow statement in respect of his cash deposits of Rs.30,00,000/- which was deposited in savings bank account of Oriental Bank of Commerce. The details were as follows:

a) Agricultural income for year earned during 2010-11 Rs.3,46,800/- b) Cash received from sale of land Rs.1,38,000/- c) Sale proceeds on cash sale of land made on 12-02-2010 Rs.4,51,000/- (copy enclosed) d) Cash deposit out of previous savings Rs.20,64,200/- Total Rs.30,00,000/-

The A.O did not accept the cash deposits out of previous savings as assailed by the assessee and had disallowed the amount of cash deposits of Rs.20,64,200/- and added to the income of the assessee by invoking section 69 of the Income Tax Act, 1961 (for short ‘the Act’).

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3.

The only reason for disallowance made by the A.O was that the assessee was not justified in keeping the said amount in his house and he should have deposited the same in the bank account and should have earned interest from therein. The A.O had neither brought on record any other undisclosed source of income of the assessee nor had refuted the fact that the assessee is an agriculturist and living in a village where banking facilities are inadequate, therefore, as stated by the assessee that due to these reasons, he had kept the amount from savings in his possession instead of depositing the same in the bank. The argument was not accepted by the A.O and he had disallowed the same which was finally upheld by the Ld. CIT(Appeals)/NFAC vide order dated 16.02.2026.

4.

Being further aggrieved, the assessee had filed appeal before this Bench. The Ld. Counsel for the assessee submitted that it is not the case of the Department that such amount which was in the possession of the assessee was from undisclosed source. The status of the assessee as agriculturist is also accepted by the Department, hence, the addition is baseless and misplaced and liable to be deleted. That further, the Ld. Counsel submitted that the A.O had not applied his mind and invoked wrong charging section of Section 69 of the Act. This is a case of cash deposits which was disallowed by the Department since according to the A.O, the assessee was not able to explain the nature and source of such

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cash deposits, hence the applicable section should have been Section 69A of the Act.

5.

Per contra, the Ld. Sr. DR relied heavily on the orders of the sub- ordinate authorities.

6.

I find merit in the contention raised by the Ld. Counsel for the assessee that there is no case for the Department for adding amount as unexplained money since the only reason as stated in the assessment order by the A.O for disallowance of the said amount was that it is quite impractical to keep the said amount in home and should have been deposited in the bank. The Department has neither disputed the source of income of the assessee nor has brought on record any undisclosed source of income of the assessee. The Ld. Sr. DR could not justify that the addition should be made and it is not wrong to make savings and keep it in the house since the assessee is a villager where banking facilities were inadequate. These facts were never refuted by the Department. The additions made by the A.O and upheld by the Ld. CIT(Appeals) were not in terms with adjudication to be made by the quasi-judicial authority. That further, findings of the Ld. CIT(Appeals)/NFAC was not in terms with Section 250(4) & (6) of the Act. That further, the trail of enquiry as per assessment order and finally disallowance made refers to the unexplained nature and source of cash deposits. There is nothing on record regarding

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any issue of investment made by the assessee. Therefore, charging section of Section 69 of the Act itself is wrong and it is an example that there has been utter non application of mind by the A.O while framing assessment.

7.

That on this similar issue, this Bench of the Tribunal in the case of Suman Poptani Vs. ITO-1(3), Raipur (C.G.), ITA No.302/RPR/2026, dated 25.05.2026 had held and observed as follows: “4. I have carefully considered the submissions of the parties herein, analyzed the facts and circumstances in this case. That from trail of enquiries as conducted by the both the authorities below and as evident from assessment order, the addition has been made u/s.69 of the Income Tax Act, 1961 (for short ‘the Act’) as unexplained investment whereas the issue was that the assessee had deposited cash of Rs.12 lakhs during demonetization period and whether the nature and source of such cash deposits were proved by the assessee or not. In the case of the assessee there is no evidence to suggest that any investment is made by the assessee outside the books of account and in fact, the purpose of ground verification by deputing Inspector to verify whether the assessee was earning through boutique business or not, was to examine the nature and source of such cash deposits only and there is nothing with regard to the applicability of Section 69 of the Act in the case of the assessee. The assesse had made cash deposits during demonetization period and she was required to explain the nature and source of such cash deposits. There is no trail of enquiry by the Department regarding any unexplained investment made during the year by the assesse. It is not the case of the 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. 5. There is absolutely non application of mind by the A.O in the case of the assessee. The wrong charging provision to the facts and circumstances of the case regarding the assessee is the result of non-application of mind by the

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Assessing Officer. That as per the Department when the source of cash deposits have remained unexplained by the assessee the correct provision for charging should have been Section 69A of the Act and not u/s. 69 of the Act. The fact of non-application of mind and mechanical exercise of power by the Revenue Authorities have been heavily condemned by the various Courts and Tribunals. The decision of the Co- ordinate Bench, Mumbai in the case of Shrilekha Damani Vs. DCIT, 173 TTJ 332 (Mumbai) which was approved by the Hon’ble High Court of Bombay in the decision reported in 307 CTR 218 (Bom.) wherein the question of law before the Court was whether the Tribunal was justified in holding that there was non-application of mind on the part of the Revenue authorities while granting approval and the decision of the Tribunal was upheld that the approval granted by the ACIT was without application of 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 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.

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6.

Reverting to the facts of the present case, the trail of enquires conducted by the Revenue authorities as evident from the assessment order as well as from the impugned order that though the additions has been made u/s.69 of the Act as unexplained investment whereas, the issue was regarding explaining of the source of cash deposits by the assessee of Rs.12 lacs during demonetization period. The unexplained cash deposits had to be charged u/s.69A of the Act and not u/s.69 of the Act. There is complete non- application of mind by the A.O regarding the enquiry that had been made before finalizing the assessment order and finally the charging section that is invoked against the assessee. In other words, the A.O had framed assessment against the assessee without recording valid satisfaction and reasoning regarding provisions of law, in which, he had proceeded against the assessee. 7. 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 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 assessment, it is utter non application of mind by the A.O while recording reasons for reopening. 8. In the decision of the Co-ordinate Bench of 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 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.

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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 9. 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 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.

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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.” This Bench in the case of Prakash Chand Agrawal Vs. 10. ITO, Ward-2, Raigarh (C.G.), ITA No.205/RPR/2026, dated 22.05.2026, has held that when charging section itself is wrong and misplaced and that the Department had proceeded against the assessee without independent application of mind, in such a case, the addition cannot be made in the hands of the assessee based on such wrong provision of law. The relevant observations of the Tribunal are extracted as follows: “……….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:

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“14. In view of foregoing discussion, I reach to a logical conclusion that the complete cash book statement clearly 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.” 17. Similarly, in the decision of Hon’ble High Court of 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

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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 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. 11. In the facts and circumstances and as per applicability of judicial pronouncements as afore-stated even without going into the merits of the matter, I am of the considered view that there is no case brought out by the Department against the assessee to tax u/s.69 of the Act. Charging section itself is wrong and misplaced and as evident, there is utter non application of mind by the Revenue authorities. The assessment has been framed in a mechanical manner without judicious reasoning. In view thereof, the assessment framed u/s.143(3) of the Act is held as arbitrary, bad in law, hence, quashed. 12. Since assessment itself is quashed, subsequent proceedings becomes non-est as per law. Rest other grounds stand academic only.

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13.

That as per the above terms, the appeal of the assessee is allowed.”

8.

That in the above referred decision, the issue was of unexplained cash deposits and instead of invoking Section 69A of the Act, the A.O invoked Section 69 of the Act which pertains to unexplained investment which is absolutely the similar parameters of facts and law as in the present case before me. Further, on merits, the Department has not brought out any reason to hold that such cash deposits of the assessee were unexplained. Considering the examination of the facts and circumstances in the foregoing paras as well as on legal parameter of invoking wrong charging section, in both these counts, therefore, the addition made in the hands of the assessee is unwarranted, arbitrary and bad in law, hence, liable to be deleted. In view thereof, I set-aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete addition from the hands of the assessee while providing appeal effect of this order.

9.

That as per above terms, the appeal of the assessee is allowed.

Order pronounced in open court on 29th day of May, 2026.

Sd/- (PARTHA SARATHI CHAUDHURY) �या�यक सद�य/JUDICIAL MEMBER रायपुर / Raipur; �दनांक / Dated : 29th May, 2026.

13 Raj Kumar Bharti Vs. ITO-2(2), Raipur (C.G.) ITA No.323/RPR/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. Samiran आदेशानुसार / BY ORDER, Bera, Sr. PS, // True Copy // ITAT, Raipur Senior Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur Digitally signed by Samiran Bera, Sr. PS, ITAT, Raipur Date: 2026.05.29 16:49:28 +05'30'

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