M/S. RAKTIKANTA PANDA NIRANJAN PANDA,CHENNAI vs. ITO, NCW-22(4), CHENNAI

The ld. DR Dr. M. Mohan Babu, Addl. CIT fairly conceded that nothing is mentioned in the impugned order, but, however, the assessee is present during the course of appellate proceedings, which clearly shows the assessee is within the knowledge of issue regarding the enhancement. He argued that the ld. CIT(A) followed due procedure as contemplated under law. He prayed to dismiss the ground raised by the assessee.

Heard both the parties and perused the material available on record. As rightly pointed out by the ld. AR that there was no reference or discussion by the ld. CIT(A) in the text of the impugned order that he show-caused the assessee as contemplated under law for enhancement of income. Further, sub-section (2) of section 251 of the Act clearly explains that the JCIT(A)/CIT(A) shall not enhance the assessment unless the assessee has had reasonable opportunity of showing cause against such enhancement. Admittedly, there was no show-cause notice issued by the ld. CIT(A) reflecting in the impugned order. Therefore, the enhancement made by the ld. CIT(A) is not justified and accordingly, the same is deleted. Thus, ground No. 3 raised by the assessee is allowed.

Ground Nos. 2, 4, 5 & 6 raised by the assessee, we note that the assessee filed details of withdrawal from firm’s bank account and deposits into proprietor’s bank account. We note that the withdrawals from firm’s account is ₹.40,60,000/- and deposits were only ₹.26,95,000/-. The Assessing Officer only made the addition with regard to deposits made into the assessee’s account [Proprietor’s account], but, no addition made with reference to balance amount. In this regard, the assessee clearly stated before the both the authorities below, which is clear from para 6.2 of the impugned order that the said cash deposit into the assessee’s account were out of cash withdrawn from the firm in which he is a partner, the cash deposited into his account was utilized to make payments to labourers engaged by the firm. The assessee also furnished bank statement of the firm as well as his own bank statement before the ld. CIT(A) and we find the same before us from page 3 to 31 of the paper book. We note the firm’s bank account is in Canara Bank of Teynampet Branch from pages 3 to 5 of the paper book, wherein, it is clear from the cheque withdrawals on 23.04.2011 to 28.03.2012. Further, the assessee made deposits into his savings account in State Bank of India, Thirumudivakkam Branch and we find no dispute with regard to withdrawals and cash deposits, however, the addition was made by the Assessing Officer only on account of that there is no need to redeposit the cash in assessee’s savings bank account or that he could have transferred the amount from firm’s account to his savings account through banking channels. We find the explanation given by the assessee that a firm by name Aloknath Enterprises, labour contractor for civil constructions in and around city of Chennai and also some other locations. All the labourers engaged by them are from State of Orissa and their families living in the State of Orissa. The assessee, as a partner of the firm used to withdraw the monies from his ATM card and pay wages to the labourers, which enables the said labourers to deposit the said monies for their families in the state of Orissa. The ld. AR also submits that the assessee still into the said business and no addition is made in the subsequent assessment years. Therefore, we force in the arguments of the ld. AR that the cash deposits were out of cheque withdrawals from firm’s account and deposit the same into his savings bank account, in turn, cash withdrawals are made to make the payments towards labour wages. Thus, the order of the ld. CIT(A) is not justified in confirming the addition made by the Assessing Officer under section 68 of the Act by modifying under section 69A of the Act. Thus, ground No. 2, 4, 5 & 6 are allowed.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 24th October, 2025 at Chennai.