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Facts
The revenue filed appeals against the CIT(A)'s order deleting additions made under Section 68 of the Income Tax Act, 1961. The assessee had also filed cross-objections. The primary issue revolves around cash deposits and loans alleged to be unexplained.
Held
The Tribunal held that the CIT(A) was justified in deleting the additions. The assessee had made full and true disclosure before the Settlement Commission, and the AO lacked the authority to reopen assessments in such cases. Even on merits, the CIT(A)'s findings were found to be correct.
Key Issues
Whether the AO was justified in reopening assessments when the assessee had made full disclosure before the Settlement Commission, and whether the additions made under Section 68 were sustainable on merits.
Sections Cited
68, 147, 143(3), 148, 245D, 194
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Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 07.04.2025 घोर्णध की िधरीख/Date of Pronouncement 30.04.2025 आदेश / O R D E R PER BENCH :- The above appeals are filed by the revenue, on which cross objections are filed by the assessee, against the orders of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise [hereinafter referred to as “CIT(A)”] dated 10.04.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Years [A.Ys.] 2011-12, 2012-13, 2013-14, 2014-15 & 2015-16.
The revenue has raised the following grounds of appeal: AY 2011-12 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the re-opening of assessments as bad in law and change of opinion without appreciating that the AO made the reason to believe on the receipt of new information viz cash deposits from Investigation Wing.
2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.3,45,00,000/- made in terms of section 68 of the Income Tax Act without appreciating that the assessee had failed to establish the source of the deposits." AY 2012-13 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the re-opening of assessments as bad in law and change of opinion without appreciating that the AO had the reason to believe on the receipt of new information viz cash deposits from DCIT CC 2(2), Mumbai.
2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 9,71,00,000/- made in terms of section 68 of the Income Tax Act without appreciating that the assessee had failed to establish the source of the deposits.
3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.25 lakhs representing loan taken by the assessee from M/s.Induja Traders Pvt Ltd without appreciating that the assessee failed to discharge its onus as envisaged u/s 68 of the Income Tax Act.
4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 13,52,49,800/- in respect of payment made by the assessee to Prraneta Industries Ltd without appreciating that the assessee failed to provide any documentary support in respect of deal (sub contract) entered with Prraneta Industries Ltd."
3. The assessee has raised the following grounds of cross objections: AY 2011-12 “1. Ground no. 1: On facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in re-opening the Respondent's assessment on mere suspicion and without any credible material on hand to believe that its income chargeable to tax had escaped assessment. The re-assessment proceedings u/s 147 deserve to be quashed in appeal & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise
2. Ground no. 2:- On facts and circumstances of the case and in law, the learned Commissioner (Appeals) ought to have also quashed the re-assessment proceedings as illegal in terms of first proviso to section 147. Here, there was prior assessment u/s 143 (3) and re-assessment was made beyond four year from the assessment year without any failure on part of the Respondent to disclose fully and truly all material facts necessary for the assessment.” AY 2012-13
1. Ground no. 1: On facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in re-opening the Respondent's assessment on mere suspicion and without any credible material on hand to believe that its income chargeable to tax had escaped assessment. The re-assessment proceedings u/s 147 deserve to be quashed in appeal
2. Ground no. 2: On facts and circumstances of the case and in law, the learned Commissioner (Appeals) ought to have also quashed the re-assessment proceedings as illegal in terms of first proviso to section 147. Here, there was prior assessment u/s 143 (3) and re-assessment was made beyond four year from the assessment year without any failure on part of the Respondent to disclose fully and truly all material facts necessary for the assessment”
4. Since similar issues are involved in the appeals and the cross objections and facts and circumstances are the same for AY 2011-12 and 2012-13, these two appeals and cross objections are being disposed of by a common order. is being taken as a lead case. for AY 2011-12 5. The assessee filed its original return on 24.09.2011 at an income of Rs. 3,19,19,160/-. The return was processed u/s 143(1) of the Act. Subsequently, the assessee filed an application before the Hon’ble Income Tax Settlement Commission (ITSC) in respect of certain purchases made by it from suspicious hawala parties, as reported by the Sales Tax Department (STD). The assessee offered additional income of Rs. 1,86,36,506/- in addition to its returned income of Rs. 3,19,19,160/- before the Hon’ble Settlement Commission, which was accepted vide order u/s 245D(4) dated 12.12.2013 of the ITSC. Thereafter, & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise the case was reopened u/s 147 of the Act on account of bogus accommodation entries, and assessment was completed u/s 147 r.w.s. 143(3) after making addition on account of bogus loan of Rs. 50,00,000/- and interest paid thereon of Rs. 3,86,667/-.
6. The assessee preferred an appeal against the above order before Ld. CIT(A) who deleted the addition vide his order dated 15.03.2017.
7. Subsequently, another notice u/s 148 was issued on 29.03.2018 in respect of cash deposits in the bank account of the assessee totalling Rs. 8,77,10,000/- . The assessment was completed u/s 143(3) r.w.s. 147 on 28.12.2018 after making an addition of Rs. 3,45,00,000/- on account of unexplained cash deposits. Aggrieved with the order, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 10.04.2024, Ld. CIT(A) quashed the reassessment proceedings holding it is to be illegal on account of change of opinion, and also deleted the addition on account of cash deposits on merits.
8. Aggrieved with the order of Ld. CIT(A), the revenue has filed the present appeal, on which the assessee has also filed cross objections. The assessee subsequently filed revised cross-objections during the course of the hearing on 20.01.2025. Before us, Ld. AR has argued that the decision of Ld. CIT(A) is justified on merits as well as on the legal issues, and therefore, deserves to be upheld. Further, the assessee had made full and true disclosure of income before the Hon’ble ITSC for three years, viz. AY 2010-11, 2011-12 & 2012-13, & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise which has been finalised u/s 245D(4) vide order of Hon’ble ITSC dated 12.12.2013, wherein the assessee’s offer of additional of income of Rs. 10,18,66,117/- spread over the three years was accepted. It has been submitted that as per the provisions of section 245, the order of the Hon’ble ITSC can only be reopened or revised by the ITSC, and not by any lower authority. Since the assessee has made full and true disclosure of all its undisclosed income, which has been accepted by the Hon’ble ITSC, Ld. AO has no authority to reopen the assessment subsequently. In this regard, Ld. AR has also relied upon the decision of the Hon’ble Delhi High Court Omaxe Ltd. v/s DCIT 364 ITR 223, wherein it has been held that once the Settlement Commission has completed its proceedings as per section 245-I, its order is considered conclusive as regards the matter stated therein, and reopening in respect of matters covered therein would be barred. However, it would be open to revenue to approach the Settlement Commission for declaration that its order u/s 245D(6) was void, in case, it is found that the assessee had not made full and true disclosure of its income. Accordingly, it has been argued by the Ld. AR that the assessee had made full and true disclosure before the Hon’ble ITSC in respect of all his undisclosed income and, therefore, the only course available to the Ld. AO was to approach the Hon’ble ITSC before reopening the assessment. Further, even on merits, it has been argued by Ld. AR that the order of Ld. CIT(A) has been passed after taking into account all the relevant facts and circumstances, and & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise relief has been granted on merits, hence the order of Ld. CIT(A) deserves to be upheld.
9. Ld. DR, on the other hand, vehemently argued that the order of Hon’ble ITSC did not take into account the unexplained cash deposits, which were noticed by the department subsequently, and hence, this issue is not covered by the order of Hon’ble ITSC. He has, further, stated that the order of the Hon’ble ITSC is conclusive only with regard to the matter stated therein. Since this issue is not covered by the order of Hon’ble ITSC, Ld. AO was justified in making the addition on account of the unexplained cash deposit in the bank account.
We have heard the rival submissions and perused the material available on record. Before the Hon’ble ITSC, the assessee had rejected its own books and offered income @9% in respect of the contract work performed by it, and at a lower rate of 5% where it acted as a sub-contractor and 2.85% in case the contract work was further given to sub-contractors. The same has been accepted as a full and true disclosure of the assessee’s income by the Hon’ble ITSC. Accordingly, we are of the opinion that the department ought to have approached the Hon’ble ITSC, in case it was of the view that full and true disclosure of income had not been made by the assessee and the entries in the bank account are undisclosed are not covered therein. The revised cross objections of the assessee that Ld. AO had no power to reopen the assessment passed in compliance with ITSC order u/s 245D is allowed.
& 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise 11. Moreover, even on merits, Ld. CIT(A) has elaborately discussed the issue and allowed relief to the assessee with the following observations: “6.2 The addition made by the Assessing Officer and the submissions of the appellant have been perused. The AO stated that the appellant made huge cash deposits of Rs.8,77,10,000/- in the bank account maintained with Ratnakar Bank in it's a/c.No. 1376 during the period under consideration. The AO by adopting a period of one month from the date of cash withdrawals to cash deposits arrived at Rs.3,45,00,000/- which do not have corresponding cash withdrawals in the immediately preceding month. On the other hand the appellant contended that it had withdrawn on various occasion to the extent of Rs.9,08,00,000/- and has deposited back into the bank account to the extent of Rs.8,77,10,000/- out of such withdrawals. The appellant also contended that it had a closing cash on hand as on 31.03.2011 for Rs.41,36,208/- left after the petty cash expenses and cash deposits. The appellant further contended that in the main contract companies, it need to withdraw from bank for the purpose of contract labour charges to be paid at the site on weekly periodicity basis as labourers needs money for their lively-hood. Simultaneously a cheque for Labour Contract charges was issued to their mukkadam who in turn returns the money after the cheque is being cleared and their payments are all subjected to TDS u/s.1940 of the Act. The appellant further contended that the AO should have considered debit side and telescopic theory has to be applied to the additions made u/s.68 of the Act and once the source was explained, the primary onus was discharged then the theory of human probabilities and preponderance cannot be applied. The appellant placed reliance on the two decisions which are brought out supra in the submissions of the appellant. I have gone through the details filed and addition made by the AO. It is seen from the submissions that the appellant is seeking telescoping benefit for the cash withdrawals. From the assessment order it is seen that the AO brought out cash deposits and cash withdrawn in a statement of table. On a perusal of the table, it is noticed that there are cash deposits and cash withdrawals in all the months from April, 2010 to March, 2011. As held by various Courts/Tribunals, benefit of telescoping has to be considered before arriving unexplained cash deposits by the appellant. On verification of the submissions filed by the appellant, it is seen that the appellant is having sufficient sources for cash deposits and the same have been duly explained and the addition made by the AO is not warranted.”
Thus, even on merits, the decision of Ld. CIT(A) is justified and no interference is called for on this account also. Accordingly, we dismiss the grounds of appeal
raised by the revenue with regard to the merits of the addition. Accordingly, the appeal of the revenue is dismissed & CO. No. 176/Mum/2024 AY 2012-13 & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise
13. The issues involved in this year are also identical to the grounds raised in AY 2011-12. As the assessee had declared income for this year as well before the Hon’ble ITSC, therefore all the facts and circumstances being similar, the decision in the appeal for AY 2011-12 will apply mutatis mutandis to this year also.
14. In the result, both the appeals of the revenue are dismissed. & CO No. 173/Mum/2024 for AY 2013-14 ITA No. 3109/Mum/2024 & CO No. 175/Mum/2024 for AY 2014-15 ITA No. 3107/Mum/2024 & CO No. 174/Mum/2024 for AY 2015-16
The revenue has raised the following grounds of appeal for the above appeals: AY 2013-14 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.8,86,87,600/- made in terms of section 68 of the Income Tax Act without appreciating that the assessee had failed to establish the source of the deposits.
2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.40 lakhs representing loan taken by the assessee from M/s Chaturbhuj Diamonds Pvt.Ltd without appreciating that the assessee failed to discharge its onus as envisaged u/s 68 of the Income Tax Act."
3. "The appellant craves leave to amend or alter or add a new ground which may be necessary." AY 2014-15 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.8,99,05,000/- made in terms of section 68 of the Income Tax Act without appreciating that the assessee had failed to establish the source of the deposits.
2. "The appellant craves leave to amend or alter or add a new ground which may be necessary." AY 2015-16 & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.6,83,67,000/- made in terms of section 68 of the Income Tax Act without appreciating that the assessee had failed to establish the source of the deposits." 2. "The appellant craves leave to amend or alter or add a new ground which may be necessary."
The assessee has raised the following grounds of objections for the above cross-objections: AY 2013-14
1. Ground no. 1: On facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in re-opening the Respondent's assessment on mere suspicion and without any credible material on hand to believe that its income chargeable to tax had escaped assessment. The re-assessment proceedings u/s 147 deserve to be quashed in appeal
2. Ground no. 2: On facts and circumstances of the case and in law, the learned Commissioner (Appeals) ought to have also quashed the re-assessment proceedings as illegal in terms of first proviso to section 147. Here, there was prior assessment u/s 143 (3) and re-assessment was made beyond four year from the assessment year without any failure on part of the Respondent to disclose fully and truly all material facts necessary for the assessment.
3. The Respondent reserves the right to add to, alter or delete any of the above grounds of appeal
.” AY 2014-15
1. Ground no. 1: On facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in re-opening the Respondent's assessment on mere suspicion and without any credible material on hand to believe that its income chargeable to tax had escaped assessment. The re-assessment proceedings u/s 147 deserve to be quashed in appeal
2. The Respondent reserves the right to add to, alter or delete any of the above grounds of appeal
.” AY 2015-16
1. Ground no. 1: On facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in re-opening the Respondent's assessment on mere suspicion and without any credible material on hand to believe that its income chargeable to tax had escaped assessment. The re-assessment proceedings u/s 147 deserve to be quashed in appeal
2. The Respondent reserves the right to add to, alter or delete any of the above grounds of appeal.”
17. Since similar issues are involved in the above appeals and the cross objections and facts and circumstances are the same, these appeals and cross & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise objections are being disposed of by a common order. is being taken as a lead case.
& CO No. 173/Mum/2024 for AY 2013-14
Brief facts of the issue are that the assessee filed its return for AY 2013- 14, declaring income of Rs. 3,21,56,640/- on 30.09.2013. The assessment was completed u/s 143(3) of the Act at an income of Rs. 3,22,56,640/- vide order dated 26.02.2016. Subsequently, Ld. Assessing Officer (AO) reopened the case on the basis of information received from the Investigation Wing, Mumbai with regard to the cash deposits made by the assessee in its bank account with Ratanakar Bank and also a loan of Rs. 40,00,000/- received from M/s. Chaturbhuj Diamonds Pvt. Ltd. The assessment was completed u/s 143(3) r.w.s. 147 at an income of Rs. 12,79,22,420/- after making the following additions u/s 68 of the Act: i. Rs. 40,00,000/- on account of loan from M/s. Chatrabhuj Diamonds Pvt. Ltd. ii. Rs. 8,86,87,600/- on account of deposits in the bank account with Ratnakar Bank.
Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 12.04.2024, Ld. CIT(A) has deleted both the additions made u/s 68 of the Act. Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal against which the assessee has also filed its cross-objections.
& 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise 20. Before us, Ld. AR has argued that there was no new material before Ld. AO, as such, he could not have reopened the assessment as more than 4 years had elapsed. It has been demonstrated by filing relevant documents before us that the bank account with Ratnakar Bank was duly disclosed by the assessee while filing its return. Further, the balance in the name of M/s Chaturbhuj Diamonds Pvt. Ltd. was also declared in the Schedule ‘C’ of the balance sheet, which was filed along with the original return of income. It has further been submitted that even on merits, the assessee has furnished complete details with regard to both issues. It had explained that while cash deposit of Rs. 8,86,87,600/- had been made in the bank account maintained with Ratnakar Bank during the FY 2012-13, the assessee had also withdrawn, on various occasions, a total amount of Rs. 9,51,00,000/- and that the deposits in the bank account were out of such withdrawals. The assessee had also explained before Ld. CIT(A) that these frequent deposits and withdrawals were necessitated due to the fact that the assessee is engaged in the road construction work, which requires a huge labour force. Accordingly, there was a need to withdraw cash from the bank account for the purpose of payment of labour charges at the site on a regular basis. Considering the nature of the work and the huge turnover shown by the assessee, no adverse inference should have been drawn with regard to the cash deposits in the bank account maintained with Ratnakar Bank, & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise which has, in any case, been duly declared in the audit accounts filed with the return of income.
Further, in support of the deposit/loan of Rs. 40,00,000/- received from Chaturbhuj Diamonds Pvt. Ltd., the assessee had duly submitted the loan confirmation and evidence to show that the sum had been received through RTGS on 11.04.2012 and the assessee had also paid interest on this loan after deducting TDS @10% on it. As the assessee had furnished all requisite documents to establish the identity and creditworthiness of Chatrabhuj Diamonds Pvt. Ltd., as well as the genuineness of the transaction, no adverse inference ought to have been drawn by the Ld. AO. Ld. DR, on the other hand, has strongly relied on the order of Ld. AO.
We have heard the rival submissions and perused the material available on record. We find that Ld. CIT(A) has examined in detail the relevant facts and circumstances and passed a speaking order granting relief to the assessee with the following observations: “5.2.1 I have gone through the above, it is seen from the assessment order that the AO brought out details of cash deposits made during the FY 2012-13 relevant to AY 2013- 14 by the appellant in a statement of table. From the table, it is seen that the appellant has mentioned only cash deposits and not given details of cash withdrawn during the same period by the appellant. The AO ought to have given a clear finding regarding withdrawals made by the appellant during the year under consideration. Therefore, in view of the facts of the present case, there are debit entries in the bank statement of the appellant. The addition of entire deposits as unexplained was not justified. Further, the appellant deserves telescoping benefit when there are cash withdrawals. Reference is invited to the assessment order where the unexplained cash deposited is at Rs.8,86,87,600/-. The AO has contended that it is unlikely that the cash withdrawn has been utilized to meet regular expenses and hence is not available for redeposit. 5.2.2 Summary of the appellant recorded that the total cash withdrawn from bank is Rs.9,51,00,000/- and cash re-deposited in bank is Rs.8,86,87,600/-, Hence, the & 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise assumption that cash is not available in redeposit is incorrect. The decision relied by the appellant during the course of appeal proceedings and video conference are as below: (1) Sri Sampathraj Rakeshkumar vs. ITO in dated 03.10.2018 (ITAT Bangalore) (2) ACIT 12(3), Mumbai vs. Chirag Jayant Mehta, ITAT Mumbai in ITA Nos.8548, 8871, 2230 & 2231/Mum/2011, dated 31.07.2017. (3) Shri Shail Jayesh Shah vs. ITO-20(3)(3), Mumbai, ITA No.1102/Mum/2021, dated 02.01.2023 (ITAT Mumbai). 5.2.3. In view of the above, the addition due to cash deposit is deleted, as the contention of the AO is not supported by any evidence. 5.2.4 With regard to loan of Rs.40 lakhs from M/s. Shree Chaturbhuj Diamond Pvt.Ltd, the AO treated the loan as dubious, as it could not be verified. On the other hand the appellant submitted that it had received the sum through RTGS on 11.04.2012 and during the year it had paid interest for deducted TDS @ 10%. The appellant also submitted loan confirmation and bank statements and stated that it had discharged onus of establishing the identity, creditworthiness and genuineness of the loan transaction. The lender was PAN holder and filing IT returns and the transactions have been entered through the banking channel and are reflected therein. It is seen that the appellant had obtained loan from M/s. Shree Chaturbhuj Diamond Pvt.Ltd (PAN AAPC2758H) through RGTS and paid interest on the said loan and also deducted tax at source on the interest paid. As the appellant has filed copy of confirmation and bank statement, the onus lied upon the appellant has been discharged. Upon perusal of above documents, the primary onus of establishing the identity of the lender, proving its creditworthiness and to establish the genuineness of the transactions was duly been discharged by the appellant. Therefore, in the light of judgment of Hon'ble Gujarat High Court in the case of the CIT v. Rohinin Builders reported in 256 ITR 360, the genuineness of such credit of loan cannot doubted. The relevant observation of Hon'ble Court in the aforementioned case reads as under: The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques." 5.2.5 In view of the above decision and after considering the facts in totality, the AO is directed to delete the addition made by him of Rs.40 lakhs as unexplained credit u/s.68 of the Act. Hence, Ground No.1 is allowed.”
In view of the above, we hold that the order of Ld. CIT(A) is justified, and he has rightly deleted both the additions made by the Ld. AO. We, accordingly, find no reason to interfere with the order of Ld. CIT(A). Therefore, the revenue’s appeal is dismissed and the cross-objections of the assessee is allowed.
& 31110/Mum/2024 A.Y. 2011-12 & 2012-13 Jekin Enterprise & CO No. 175/Mum/2024 for AY 2014-15 ITA No. 3107/Mum/2024 & CO No. 174/Mum/2024 for AY 2015-16