KOGOD BASAVARAJU JAYACHANDRA ,HASSAN vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), BANGALORE

8. On the facts and circumstances of the case, learned CIT (A) has erred, as A.O. was not correct in not accepting the explanation that the cash deposits made by Mr. Nandish are out of Borrowed Funds. Hence the addition made by AO treating entire cash deposit as unexplained income in the hands of the Appellant is not correct.

9. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming addition made by AO for entire cash deposits of Rs. 1,49,42,000/- instead of net income as the and 1618/Bang/2024 Page 3 of 45 Appellant has claimed expenditure being Interest expenses in the Return of Income . Hence only net income should have been added.

10. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming in not considering the Interest on loan paid Rs. 1,55,16,000/- to lenders through Banking Channels by AO, which was claimed in Return of Income filed in response to notice u/s.148.

11. The CIT (A) and The A.O. have failed to send letters for confirmation of loans taken from Lenders and also interest paid to them by invoking provisions of section 133(6), as all the lenders, Name and Address were provided during the course of Assessment Proceedings by the Appellant and the CIT (A) simply stated that the Appellant has not maintained books, hence no need to invoke section 133(6). Hence, the averments of the CIT (A) are not as per law.

12. The Appellant objects the levy of interest u/s.234A and B consequential to the addition made by AO.

13. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal.

ON MERITS:

4. On the facts and circumstances of the case, learned CIT (A) has erred, as A.O. was not correct in not accepting the explanation that the cash deposits made by Mr. Nandish are out of Borrowed Funds. Hence the addition made by AO treating entire cash deposit as unexplained income in the hands of the Appellant is not correct.

5. On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming addition made by AO for entire cash deposits of Rs. 1,92,58,000/- instead of net income as the Appellant has claimed expenditure being Interest expenses in the Return of Income . Hence only net income should have been added.

6. The CIT (A) has erred in not appreciating the fact that the AO himself has stated that the cash deposits made by DS Nandish, however he has not declared in his return, hence it is added in the hands of the Appellant. Hence the AO has not established that the cash deposits are relating of Appellant and not even verified the bank statements.

7. The Appellant objects the levy of interest u/s.234A and B consequential to the addition made by AO.

8. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal.

3. During the coure of survey while detailing the name of the companies, name of the assessee is appearing in tthe table prepared but there is amount found as cash deposited in the case of the assessee. Accordingly, after recording the reasons and duly taking approval from the competent authority, the notice was issued on 31.03.2021 at 4:12 P.M with DIN = ITBA/AST/S/148/2020- 21/1032051019(1) and notice was digitally signed and issued. Time was allowed to the assessee to file return of income within 30 days from the date of service of notice. In response to the notice under section 148 of the Act, assessee filed return of income on 16.04.2021 declaring loss of RS. 5,74,000/- . Thereafter notice u/s 143(2) was issued & served to the assessee on 28.06.2021 . In this regard, questionnaire under section 142(1) of the Act dated 02.11.2021 to furnish the details regarding nature of business carried out during the yea,. the details of parties to whom advance had been given and business purpose of the same details of parties to whom interest had been paid with TDS deduction for the business purpose of the same. The cash deposited in bank account held by the assessee for the year under consideration with supporting documentary evidence. In response to the above notice, assessee had submitted reply on 03.11.2021 copy of balance sheet, profit and loss account, interest paid. Further, a notice u/142(1)s was issued to the assessee on 07.02.2022 providng another opportunity to the assessee to comply the earlier notice. On 10.02.20222, assessee submitted the reply alonwith interest paid details financial statement in ITR form computation of income. The AO observed that in spite of giving various opportunities to the assessee, assessee has not provided details of source of cash deposits made into the above bank account. Hence, in the absence of documentary evidence to substantiate the source of cash deposits in bank account the AO observed from the documents available that during the survey proceedings in the case of M/s. Xentric Studios Pvt. Ltd., on 03.05.2017, sworn in statement of Shri. D. S.

and 1618/Bang/2024 Page 6 of 45 Nandish was recorded under section 131 of the Act. During the course of recording of sworn statement under section 131 of the Act, Shri D. S, Nandish was confronted about the source of cash deposited in various bank accounts. In the statement recorded Shri D S Nandish stated that there is no books of the books of accounts maintained and not recorded in the books. The amount of unexplained cash deposit in the account of assessee for the year works out to Rs. 1,49,42,000/- for the year under consideration in search proceedings. Further, the voluntary disclosure made during the course of survey proceedings were confirmed durng the sworn in statement recorded under section 132(4) of the Act dated 28.08.2017 Shri D. S. Nandish has accepted that it is his unexplained money. Since during the coure of assessment proceedings, the assessee was unable to substantiate the source of cash deposits even after providing multiple opportunities. the source of the same remains unexplained and assessee did not furnish business activity carried out of which cash deposits were made. Hence the contention of the assessee that amount deposited out of her business activity was not substantiated, since, the assessee could not substantiate the source of cash deposits in bank account of Rs.1,49,42,000/- for the impugned Assessment Year, the source of which remains unexplained cash credit under section 68 of the Act. Further, from the financial statements, assessee has claimed an amount of Rs.1,55,16,0000/- as interest paid. However, the assessee has not furnished any details regarding the expenses claimed as interest paid. In this regard, assessee neither submitted any documentary proof nor provided the nature of business activity carried out to substantiate the interest expenditure claimed for the year under consideration. Further, it was asked to the assessee regarding TDS on such interest payment in the light of provisions of section 40(a)(ia) of the Act but there is no compliance of the provision of section 40(a)(ia) of the Act by the assessee since on this issue, the assessee was unable to substantiate the genuineness of expenditure incurred for business purposes as well as for non-compliance of section 40(a)(ia) of the Act the interest expenditure were disallowed. But while computing assessed income The disallowance of interest was not added and loss and 1618/Bang/2024 Page 7 of 45 claimed in the return was disallowedAccordingly, the AO completed the assessment on 24.03.2022.

4. Aggrieved from the above Order, assessee filed appeal before the CIT(A). The legal grounds challenging the notice issued under section 148 of the Act, approval under section 151 of the Act and date of issue of notice, etc., assessee furnished return submissions. The learned CIT(A) called for remand report from the AO. The learned CIT(A) has incorporated the approval granted under section 151 of the Act and remand report in order and remand report was provided to the assessee.

5. After considering the submissions, The learned CIT(A) dismissed all legal grounds raised by the assessee. The learned CIT(A), after considering the survey/search statement , dismissed the appeal of the assessee. During the appellate proceedings, as per opinion of the learned CIT(A), assessee was unable to explain the source of cash deposits and interest payment in terms of section 37(1) of the Act. Accordingly, he dismissed the appeal of the assessee on merits also.

ON POINT OF LAW Ground No.1: The entire assessment proceedings are bad in law and null and void as the notice u/s.148 was not issued to the Appellant on 31.03.2021 and the said notice was issued in E –portal on 01.04.2021. Hence, the assessment done under old provisions of section 148 is to be squashed, as these provisions were no longer applicable from 01.04.2021 and 1618/Bang/2024 Page 8 of 45 7. The Appellant has raised legal ground during the course of First Appellate Proceedings that the AO has issued notice u/s.148 on 01.04.2021 under old provisions of section 148 as reflected in E Portal and the same are not applicable and the AO should have proceeded under New provisions of section 148 rws148A, after 01.04.2021.

8. Based on the above legal ground, the CIT (A) has called for the remand report from AO. Accordingly, the AO has submitted the Remand Report to CIT (A). However in the Remand Report, the AO has stated that the notice u/s.148 was generated on 31.03.2024 and also enclosed the order sheet.

9. In this regard, the Appellant submits that in the order sheet of the AO there is no record to show that the AO has issued the said notice on 31.03.2021. However in the E –Portal of the Appellant, it is clearly mentioned that the notice was issued and served on 01.04.2021, which corroborates with the sheet sent by AO.

10. Without prejudice to the above submission, the Appellant submits that even if considered that the notice u/s.148 was generated on 31.03.2021. The said notice was not issued and served to the Appellant on 31.03.2021. As per provisions of section 148, the notice shall be issued on Appellant with in stipulated period. Hence just because the notice was generated on 31.03.2021, it doesn’t mean that it was issued. Hence the provisions of section 148 are very clear that the notice shall be issued/served on Appellant and generating and keeping in the file of the AO has not statutory backing.

12. In this regard the Appellant wishes to submit that the DIN can be generated at later date by mentioning the financial year. Even CBDT has issued notification for generation of DIN within 15 Days from the generation of any notice/order if certain conditions are fulfilled. When DIN can be generated on later date, financial year can be select while generating the DIN and not relates to the date of generation of DIN. Hence the averment of CIT (A) is not correct and reliable.

13. Hence, the notice issued/served on Appellant on 01.04.2021, which is reflected in E portal, establishes that the AO has actually issued/served notice on Appellant on 01.04.2021. Hence old provisions of section 148 are not applicable to the Appellant and hence, the proceedings u/s.148 under old provisions are bad in law and null and void.

The AO has passed the assessment order u/s.147 on 24/03/2022 for AY 2015-16. In the said assessment order there are no details mentioned about recording of satisfaction by A.O. himself before issuing of notice u/s.148 as to whether the income has escaped as contemplated u/s.147 of the Act

 Sai Krupa Developers Vs ACIT (ITAT Ahmedabad), to 250/Ahd/2023 order dated 23/08/2024 AY 2014-15  Hon'ble High court of Rajastan in the case of Tirupati Construction Co Vs ITO (2024) 465 ITR 611 (Raj)  Jurisdictional Hon'ble Bangalore ITAT decision in the case of M/s. Ickon Projects Vs ITO ward 4(3), in Nos. 771 & 772/Bang/2017 AY2006-07 vide order dated 26.10.2023  Karnataka High Court in Sri Dinakara Suvarna Vs. Deputy Commissioner of Income Tax in Income Tax Appeal No.16/2015 on 08.07.2022  Bombay High Court in the case of M/s. Aditi Constructions Vs. Deputy Commissioner of Income Tax & Ors. in Writ Petition No.783/2016 dated 04.05.2023  Shyam Sunder Khandelwal V/s. Assistant Commissioner Of Income Tax, Central Circle 2  Samanthapudi Lavanya Vs ACIT, In ITA No. I.T.A.No.704Niz/2019 to 706/Viz/2019 AY 2019-10 to 2011-12  ITO vs. Vikram Sujitkumar Bhatia, reported in (2023)453 ITR 417  Rajat Saurabh Chatterji v. ACIT ITA NO. 2430/De1/2015

[Income escaping assessment. and 1618/Bang/2024 Page 17 of 45 20 147. If the 21[Assessing] Officer 22[has reason to believe23] that any income chargeable to tax has escaped assessment23 for any assessment year, he 23may, subject to the provisions of sections 148 to 153, assess or reassess23 such23 income 23and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings23 under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year24, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure24 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts24 necessary for his assessment, for that assessment year: 25[Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:] 26[Provided 27[also] that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.—Production28 before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily28 amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; and 1618/Bang/2024 Page 18 of 45 (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; 29[(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;] (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate30 ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] 31[(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;] 32[(d) where a person is found to have any asset (including financial interest in any entity) located outside India.] 33[Explanation 3.—For the purpose of assessment or reassessment30 under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.] 34[Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.] and 1618/Bang/2024 Page 19 of 45 As per the above section the notice u/s 148 was issued within the specified time as prescribed in the Act. Therefore, this ground raised by the assessee also fails.

40.It is seen from the table submitted by you in the above answer, that the cash deposited in to different accouni is totalling to Rs. 68,45,21,295/- Also, you have stated in the above answer that you are unable to explain the source of these cash deposits. In view of this, you tare hereby given one more opportunity to explain the source of the cash deposits failing which the same may be construed as unaccounted income. Please explain the source of these cash deposits andstatewhether all these cash deposits are accounted under the above mentioned entities in respective financial years?

“68. Cash credits. - Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for " Income-tax Officer" (w.e.f. 1.4.1988).], satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.[Provided that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a)the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and(b)such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:[Provided and 1618/Bang/2024 Page 22 of 45 further] that nothing contained in the first proviso 81[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”

" Reasons for reopening of the Assessment in case of M/s N 9 Sports & Leisure Holdings P Ltd for Asst Year 2013-14 u/s 147 of I T Act 1. Brief Details of the assessee: The assessee filed its return of income on 26.09.2013 declaring loss of Rs.27,771/-. In the return of income filed the assessee has declared interest income of Rs.1,37,398/- from bank fixed deposits. There is no other income declared in the return of income.

2. Brief Details of the information collected/received by the AO : Survey u/s 133A of the Income-tax Act, 1961 was carried out in the case of M/s Xentrix Studios P Ltd on 03.05.2017. During the survey, it was found that Shri D S Nandish had floated several companies/firms/business concerns and utilised the bank accounts of these entities for depositing unaccounted and unexplained cash. It was also found that none of these entities were carrying any business activities, nor maintaining any books of account for the transactions in bank accounts and also not filing their returns of income. Shri D S Nandish accepted in his statement that entire cash deposits in these bank accounts were made by him from his unaccounted sources of income. During survey, it was found that there were cash deposits of Rs.33,22,000/- in the bank account of M/s. N 9 Sports & Leisure Holdings P Ltd during the Fin Year 2012-13. In absence of any books of accounts, documentary evidence or explanation to show the sources of unaccounted cash deposits, Mr D S Nandish admitted to disclose an additional income of Rs.32,22,000/- in the hands of M/s N 9 Sports & Leisure Holdings P Ltd in the capacity of promoter/director of the company.

11. Further the addition made by the AO towards interest payment u/s. 37also fails. In this case, the very purpose of reopening of the case is not sustainable, then subsequent addition made by the AO which are not part of the very basis for reopening or part of the reasons recorded , therefore during the course of reassessment proceedings any further addition is made by AO is also not sustainable. Our view is supported by the decision of the coordinate Bench of ITAT Agra reported in [2014] 41 taxmann.com 380 in the case of Asha Kansal wherein it is held as under:- "

7. Section 147 provides that if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, and 1618/Bang/2024 Page 26 of 45 assess or reassess such income "and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section." Explanation 3 to Section 147 inserted by Finance Act 2009 specifically provides that the "Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue has come to the notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under such Section 2 of Section 148". Elaborating upon the scope of these provisions, and dealing with the question whether any addition can be made on account of issues other than the issue in respect of which reasons for reopening have been recorded in a situation in which no additions are made for the reasons recorded, Hon'ble Bombay High Court, in the case of CIT v. Jet Airways (I.) Ltd. [2011] 331 ITR 236/[2010] 195 Taxman 117, has observed as follows :-- 'Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under section 147 and following the issuance of a notice under section 148, the Assessing Officer has the power to assess or reassess the income, which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words "and also" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word "or". The Legislature did not rest content by merely using the word "and". The words "and", as well as "also" have been used together and in conjunction. The Shorter Oxford Dictionary defines the expression "also" to mean 'further, in addition, besides, too'. The word has been treated as being relative and conjunctive. Evidently, therefore, what Parliament intends by use of the words "and also" is that the Assessing Officer, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2) must assess or reassess: (i) 'such income'; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in and 1618/Bang/2024 Page 27 of 45 respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the season to believe is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1-4-1989 clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter.' 8. The legal position is thus clear. When the reasons for reopening the assessment itself is incorrect, as evidenced by the fact that the Assessing Officer accepts that position by not making related addition, no further additions can be made in the course of such reassessment proceedings. The very initiation of reassessment proceedings in such a case ceases to be of any effect. In other words, the resultant reassessment proceedings are rendered infructuous. The underlying principle is not difficult to fathom. When it is a position accepted by the Assessing Officer that no addition can be made on the basis of reasons for which reassessment proceedings were initiated, there cannot be any legal basis for the resultant reassessment proceedings either.

9. Taking the above principle to a little further, we find that whether such an addition is not made by the Assessing Officer himself or whether the Assessing Officer does not challenge the CIT(A) deletion of such additions made by the Assessing Officer, the legal situation remains the same. In both the situations, the Assessing Officer accepts that addition cannot be made on the basis of reasons recorded by him while reopening the assessment. The common thread in both these situations is that the Assessing Officer accepts the situation that based on the reasons recorded, while reopening the assessment, legally sustainable additions cannot be made or deletion of such additions cannot be challenged. Once he accepts such a position, whether at the stage of assessment by not making the related addition, or at a later stage by not challenging CIT(A)'s order deleting such an addition, the reassessment proceedings are rendered infructuous because no other additions, even if any, made by the Assessing Officer can survive the legal scrutiny. It is also important to bear in mind that while deleting the addition before us, as we have seen earlier in this order, learned CIT(A) has given and 1618/Bang/2024 Page 28 of 45 categorical findings which run contrary to the reasons recorded while reopening the assessment and yet the revenue authorities have not raised, either in appeal or by any other mode, even a whisper against such findings which have thus reached finality. While on this issue, it is also important to note that, as is the settled legal position, the reasons recorded for reopening the assessment are to be read exactly as these are recorded and it cannot be open to the Assessing Officer to fill in the gaps, even if any, while justifying the reassessment proceedings. Nothing can be added to these reasons nor anything can be deleted from the same. To highlight this aspect of the matter, we may refer to the following observations made by their Lordships in the case of Prashant S. Joshi v. ITO [2010] 324 ITR 154/189 Taxman 1 (Bom.). 'Sec. 147 provides that if the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of ss. 148 to 163, assess or reassess such income and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The first proviso to s. 147 has no application in the facts of this case. The basic postulate which underlines s. 147 is the formation of the belief by the AO that any income chargeable to tax has escaped assessment for any assessment year. The AO must have reason to believe that such is the case before he proceeds to issue a notice under s.

10. A Division Bench of this Court speaking through Mrs. Justice Sujata Manohar (as the learned Judge then was) held thus in N.D. Bhatt, IAC v. I.B.M. World Trade Corpn. [1995] 216 ITR 811 (Bom): "It is also well-settled that the reasons for reopening are required to be recorded by the assessing authority before issuing any notice under s. 148 by virtue of the provisions of s. 148(2) at the relevant time. Only the reasons so recorded can be looked at for sustaining or setting aside a notice issued under s.

11. The same principle was reiterated in a judgment of the Division Bench of this Court in Hindustan Lever Ltd. v. R.B. Wadkar [2004] 268 ITR 332/137 Taxman 479 (Bom): ".....the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the AO. The reasons recorded should be self- explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The AO, in the event of challenge to the reasons must be able to justify the same based on material available on record. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the AO cannot be supplemented by filing affidavit of making oral submission, otherwise, the reasons which are lacking in material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.' 10. For the reasons set out above, and in view of the fact the Assessing Officer has not challenged the CIT(A)'s deletion of quantum addition made on the basis of reasons recorded for reopening the assessment, we hold that the reassessment proceedings were infructuous and no other additions could have been made by the Assessing Officer either. As we have also observed earlier in this order, learned CIT(A) has given categorical findings which run contrary to the reasons recorded while reopening the assessment and yet the revenue authorities have not raised, either in appeal or by any other mode, even a whisper against such findings which have thus reached finality. In response to specific question by us, learned Departmental Representative could not find out any infirmity in the action of the CIT(A) or factual inaccuracies in the observations made by the CIT(A) on this issue. The very reassessment proceedings were also thus based on, what is now a settled position, erroneous reading of facts which cannot lead to a legally sustainable addition. The reassessment proceedings were thus infructuous and invalid. The assessee succeeds for this short reason alone. In any case, the reasons recorded while reopening the and 1618/Bang/2024 Page 30 of 45 assessment are disapproved, on merits, by the CIT(A) and those findings remain unchallenged and controverted. In this view of the matter, we also see no need to deal with many other erudite contentions raised by the learned counsel. All those aspects will be academic in the situation before us."

ON POINT OF LAW Ground No.1: The entire assessment proceedings are bad in law and null and void as The A.O. has not restricted to scrutiny norms as per CBDT instruction as the scrutiny was selected under CASS The appellant submits that his case was selected for scrutiny under CASS. Accordingly notice u/s 143(2) was served on the appellant notice dt. 14.08.2018. The notice specifically states that the reason for selection of scrutiny under CASS is for the following reasons 1. Agricultural income 2. Cash deposited during demonetization period.

It is pertinent to note that the A.O. has issued 4 notices dt. 29.05.2019, 07.06.2019, 06.08.2019 and 13.09.2019 under section 142(1) of the act, calling for certain information and records pertaining to the return filed.

In none of the above said notices, the details regarding cash deposited in bank account, as per statement of D.S.Nandish, were asked for to be submitted. In the questionnaire of notice u/s 142(1), certain details of my income declared for the year were sought for and the same were submitted during the course of action.

Further, if the scrutiny under CASS was converted into a total scrutiny, the approval from appropriate statutory authority should have been taken and such approval/sanction should be intimated to the Assessee. Such approval or sanction details are not mentioned in the order. Hence, the appellant is of the belief that no approval for total security was obtained hence the entire assessment proceedings are vitiated and same is to be set aside and 1618/Bang/2024 Page 34 of 45 We rely on the following decisions 1.Venkata Ramana Reddy v.ACIT (Hon’ble ITAT Hyderabad Appeal No.ITA Nos 1395 &1396 /HYD/2019 AY 2015-16 Where it was held that A.O. to communicate if case falls under limited scrutiny or complete scrutiny. 2.ChaitanyaBansibhaiNagori v.PCIT (AhmmadabadITAT) 3.RajnikanthS.Bhalavat,Ahmedabad v.ACIT (ITAT Ahmedabad) (23.12.2022)

Ground No.2: The assessment order passed u/s.143(3) was bad in law and null and void as the AO has converted into complete scrutiny without obtaining approval from competent authority and not informing the Appellant also The Assessment order passed u/s.143(3) was bad in law and null and void as the scrutiny selected under CASS for verification of the following issues 1. Agricultural income 2. Cash deposited during demonetization period However, the AO has concluded the assessment based on the survey statement recorded from Mr. D S Nandish (searched person u/s.153A) and there was no enquiry in respect of above issues on which scrutiny was selected.

Further, the scrutiny was selected for limited verification of above issues. However the AO has concluded the assessment beyond the scrutiny norms. However there was no approval obtained from the competent authority for conversion of limited scrutiny to complete scrutiny.

Further the AO has not provided details to Appellant for conversion of limited scrutiny to complete scrutiny and there was no discussion during the assessment proceedings.

However, the CIT (A) has stated that the argument for expanding the scrutiny from limited to complete is weakened by the inclusion of deposits and 1618/Bang/2024 Page 35 of 45 totaling Rs.1,92,58,000/- in a search and seizure operation on 24/08/2017, which coincided with the demonetization period.

From the above observation made by CIT (A) it can be noted that, the Assessment was concluded based on the search proceedings conducted on Mr. D S Nandish (searched person) and not as per the reasons selected for scrutiny under CASS. Hence, the entire proceedings u/s.143(3) of the Act is bad in law and null and void.

Ground No.3: The assessment framed on Appellant was not correct as per provisions of the Act as D S Nandish has stated in survey statement that he has deposited cash in Appellant Bank account. Hence it should have been added in the hands of D S Nandish and not in the hands of Appellant The AO has stated in the assessment order that he has concluded the assessment based on the survey statement recorded from Mr. D S Nandish. However, in the said statement, Mr. D S Nandish has stated that he has deposited entire cash in Bank Account of Appellant. In such a case, the AO should have been assessed in the hands of Mr. D S Nandish and not in the hands of the Appellant.

Further the AO has not collated any information and details as per the reasons selected for scrutiny norms under CASS and the assessment was done solely based on the survey and search statements recorded from Mr. D S Nandish. Even the Bank statement which was recorded in the survey statement was also not verified and not provided to the Appellant for rebuttal. Hence the proceeding u/s.143(3) are bad in law and null and void in this account.

ON MERITS Ground No.4 : On the facts and circumstances of the case, learned CIT (A) has erred, as A.O. was not correct in not accepting the explanation that the cash deposits made by Mr. Nandish are out of Borrowed Funds. Hence the addition made by AO treating entire cash deposit as unexplained income in the hands of the Appellant is not correct and 1618/Bang/2024 Page 36 of 45 Ground No.5: On the facts and circumstances of the case, learned CIT (A) has erred in both on facts and in law in confirming addition made by AO for entire cash deposits of Rs. 1,92,58,000/- instead of net income as the Appellant has claimed expenditure being Interest expenses in the Return of Income . Hence only net income should have been added The AO has made additions of cash deposits of Rs.1,92,58,000/- in the captioned year based on the sworn statement given by Mr. D S Nandish in survey proceedings conducted in case of third party Xentrix Group cases on 03.05.2017 and also search proceedings u/s.132(4) dated 28.08.2017. Further this cash deposit was not relating to Appellant as the searched person Mr. D S Nandish (u/s.153A) has himself confirmed that the said cash deposits are relating to him and deposited by him.

If at all, Mr D.S.Nandish has given a statement that he deposited cash, the natural corollary is that such cash deposit should have been included in his assessment for the said year, and not in the hands of the appellant.

Further we understand that the said cash deposits are relating to Loans from the private lenders as the private lenders have denied to provide any details in respect of cash loans, Mr. D S Nandish has declared as income in the Return and claimed the relevant interest paid to private lenders as expenses. Further Mr. D S Nandish has floated Appellant’s Bank account for his business purpose being production of film. However he incurred huge loss from the productions and hence he has utilized this company for cash deposits which was taken as loans from private lenders.

Further the AO has stated in the assessment order that the Mr. D S Nandish had carried out certain transactions on his behalf and that he had accepted his transactions to be included in his personal assessment. However after verification it is found that the said D S Nandish has not included the cash deposits in Bharat Co-op Bank Ltd in his accounts while filing his Return of Income for AY 2017-18.

From the above observation made by AO it is to be noted that the AO himself was aware that the cash deposits are relating to Mr. D S Nandish and not relates and 1618/Bang/2024 Page 37 of 45 to Appellant. Merely because D S Nandish has not declared in his Return of Income the cash deposits, it cannot be added in the hands of the Appellant though it is established that cash deposits are not relating to Appellant. AS confirmed by AO the said cash deposits are not relating to Appellant, hence, there cannot be any addition on those cash deposits in the hands of the Appellant. Ground No.6.The CIT (A) has erred in not appreciating the fact that the AO himself has stated that the cash deposits made by DS Nandish, however he has not declared in his return, hence it is added in the hands of the Appellant. Hence the AO has not established that the cash deposits are relating of Appellant and not even verified the bank statements.

The AO has categorically stated in the assessment order itself that the Cash deposits are made by Mr. D S Nandish in Appellant’s Bank Account and he has only operated the said Bank account which was opened in Bangalore Branch. However, while concluding the assessment the entire cash deposits made in Bharat Co-op Bank are assessed in the hands of the Appellant stating that the said cash deposits are not declared in the return of Income filed by Mr. D S Nandish for AY 2017-18 and hence the same is assessed in the hands of the Appellant.

The AO has not established that the said cash deposits are relating to Appellant and solely relied upon the statement recorded during survey conducted on Mr. D S Nandish.

The Appellant has not aware of the transaction made in Bharat Co-op Bank ltd by Mr. D S Nandish as the Appellant is staying in Hassan and basically he is a agriculturalist and there is no other business conducted by the Appellant.

Hence, the addition made by AO on account of Cash deposits are liable to be deleted in the hands of the Appellant.

Ground No.7: The Appellant objects the levy of interest u/s.234A and B consequential to the addition made by AO The Appellant objects the levy of interest u/s.234A, B and C consequential to the addition made by AO.

Ground No.8: The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal General in nature.

Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to delete the additions as above and may pass such other as the Appellate Authority deems fit.