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Facts
The assessee filed returns declaring losses. The assessment was reopened under Section 147. During scrutiny, the AO noticed cash deposits of Rs. 3.63 crores and Rs. 1.40 crores in the assessee's bank account. The assessee claimed the source was business income from scrap sales. The AO also noted a cash receipt of Rs. 43 lakhs from M/s. Analogics Tech India.
Held
The Tribunal held that the CIT(A) erred in deleting the addition of Rs. 1.43 crores as the assessee failed to provide sufficient evidence regarding the source of funds from scrap sales, including TCS details. The Tribunal also noted that the deletion of Rs. 43 lakhs by the CIT(A) on technical grounds was contrary to the material on record, and remanded this issue for further verification.
Key Issues
Whether the CIT(A) was justified in deleting the additions made by the AO on account of cash deposits and cash payments, and whether the reassessment notice was valid.
Sections Cited
147, 148, 68, 115BBE, 69A, 133A, 145(3), 151, 206C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “B” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
ORDER PER MANJUNATHA G. : This appeal has been filed by the Revenue against the order of the learned CIT(A)-National Faceless Appeal Centre [in short the “NFAC”] Delhi, relating to the assessment year 206-2017.
Briefly stated facts of the case are that, the assessee filed it’s return of income for the assessment year 2016-2017 by declaring loss of Rs.(-)14,77,94,649/- and the 2 ITA.No.837/Hyd./2024 said return has been subsequently revised declaring total income loss of Rs.(-)16,01,94,516/-. The assessment has been subsequently reopened u/sec.147 of the Income Tax Act, 1961 [in short “the Act”] and after due procedure provided as per sec.148, notice u/sec.148 of the Act dated 29.07.2022 was issued. In response, the assessee filed return of income declaring total loss of Rs.16,60,69,771/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that during the investigation carried-out, it was noticed from the HDFC Bank account of the assessee that, there are deposits to the tune of Rs.3.63 crores by way of cheque/RTGS and Rs.1.40 crores by cash during the financial years 2015- 2016 and 2016-2017. The assessee was called-upon to explain the source for the above cash deposits and in response, the assessee submitted that the source for cash deposits are out of it’s business income. The Assessing Officer further noted that the impugned material shows that the company M/s. Analogics Tech India has acknowledged receipt of Rs.43 lakhs in cash from the appellant company
3 ITA.No.837/Hyd./2024 on 07.10.2015. The Assessing Officer called-upon the appellant company to explain the transactions and also source. In response, the appellant company submitted that as per the books of accounts, we do not have any such transaction as cash paid to M/s. Analogics Tech India and with respect to the above receipt, the current management is unaware of any cash receipt from M/s. Analogics Tech India.
The Assessing Officer after considering relevant submissions of the appellant company issued final show cause notice and called-upon the assessee to file relevant evidences for cash deposit into bank account and also to explain the transactions with M/s. Analogics Tech India. In response, the appellant company submitted that, the source for cash deposit is out of business receipts being amount received from sale of scrap like hardware e-waste and the same has been sold to local un-organised persons depending upon the market availability and the cash collected was deposited in bank on regular basis and the same has been offered to tax. As far as cash receipt of Rs.43
4 ITA.No.837/Hyd./2024 lakhs is concerned, the management of the company has been completely changed and we are not aware of tehs aid transaction with M/s. Analogics Tech India. The Assessing Officer after considering the relevant submissions of the appellant company and also taken note of explanation furnished by the appellant company to explain source for cash deposit observed that, although, the appellant company claimed to have received cash on sale of scrap, but, could not file relevant evidences including the details of tax collected at source on sale of scrap and returns filed in Form no.27EQ to report the said transaction. The appellant company could not file relevant details of the persons to whom it has sold scrap and, therefore, the Assessing Officer observed that in absence of any details about the amount received from sale of scrap, the explanation of the appellant company with regard to source of cash deposited into bank account cannot be accepted. Therefore, the Assessing Officer rejected the explanation of appellant company and made addition of Rs.1,40,00,000/- towards cash deposits
5 ITA.No.837/Hyd./2024 into bank account u/sec.68 r.w.s.115BBE of the Income Tax Act, 1961.
3.1. Further, the Assessing Officer made addition of Rs.43 lakhs u/sec.69A r.w.s.115BBE of the Act towards cash payment to M/s. Analogics Tech India on the basis of receipt found during the course of investigation as per which there is a signed receipt from M/s. Analogics Tech India for receipt of cash of Rs.43 lakhs from the appellant company. Since the appellant company could not explain the transaction except stating that as per the books of accounts we do not have any such transaction. Therefore, the Assessing Officer was of the opinion that, the appellant company could not explain the amount recorded in the receipt and accordingly treated as unexplained money and added back to the total income of the appellant company.
Being aggrieved by the assessment order, the appellant company preferred an appeal before the learned CIT(A). Before the learned CIT(A), the appellant company has reiterated it’s submissions made before the Assessing
6 ITA.No.837/Hyd./2024 Officer in respect of source for cash deposit and argued that the bank account held with HDFC Bank is part of regular books of accounts of the assessee and whatever cash deposit into the said bank a/c has been already considered in the books of accounts. Further, the appellant company has received cash towards sale of scrap to local unorganised dealers and the same has been reported under ‘Direct Income’ and also paid relevant taxes. Therefore, the Assessing Officer is erred in making addition towards cash deposit as unexplained cash credit u/sec.68 of the Act. The assessee further contended that, in respect of addition of Rs.43 lakhs towards alleged cash payment to M/s. Analogics Tech India, the assessee submitted that, the Assessing Officer does not have any evidence to prove that, assessee has made cash payment. Further, there is a complete change in the management of the company and as per the books of accounts, there is no such transaction. Since the Assessing Officer has not given any details as to the nature of transactions, the assessee was not in a position to explain the said transaction. Although, the 7 ITA.No.837/Hyd./2024 appellant company has explained it’s position on the issue, but, the Assessing Officer has made addition without providing relevant materials for the verification of the appellant company.
The learned CIT(A), after considering the relevant submissions of the appellant company and also taken note of certain judicial precedents, deleted the additions made by the Assessing Officer towards cash deposited into bank account u/sec.68 r.w.s.115BBE of the Act on the ground that as per the cash flow statement submitted by the appellant company, there is sufficient cash to explain the amount of cash deposited into bank a/c. The Assessing Officer could not find any fault in the cash flow statement submitted by the appellant company nor has Assessing Officer disputed the claim of the appellant company that, cash deposited has been recorded in the books of accounts /Profit & Loss A/c. It is, thus, clear that cash received on sale of scrap had been recorded in the books of accounts and, therefore, the Assessing Officer has erred in making addition on account of cash deposit duly reflected in the 8 ITA.No.837/Hyd./2024 books of accounts without rejecting the books of accounts and book results of the appellant company and without recording satisfaction u/sec.145(3) of the Act.
5.1. As far as addition of Rs.43 lakhs towards cash payment to M/s. Analogics Tech India, the learned CIT(A) deleted the addition made by the Assessing Officer on the ground that when the Assessing Officer issued show cause notice dated 07.05.2023 to the appellant company proposing to make addition of Rs.1.43 crores towards cash deposit into bank a/c, has not specifically referred or proposed any addition towards cash payment to M/s. Analogics Tech India. Therefore, making addition without issuing show cause notice is bad in law and, therefore, deserves to be deleted. Accordingly, deleted the addition made by the Assessing Officer. The learned CIT(A) further observed that, the Assessing Officer made addition of Rs.43 lakhs, but, has not given any material to the assessee to make out a case against the appellant company contrary to the settled position of law that, if any addition is proposed on the basis of third party evidence, the same should be 9 ITA.No.837/Hyd./2024 given to the assessee for it’s comments and rebuttal. Since the Assessing Officer has made addition without providing reasonable opportunity to the assessee to rebut the case, the same cannot be upheld. Thus, deleted the addition made by the Assessing Officer towards alleged cash payment on the basis of receipt found during the course of survey as unexplained money.
Aggrieved by the order of the learned CIT(A), the Revenue is now in appeal before the Tribunal.
The first issue that came-up for consideration from ground nos.2 to 4 of Revenue’s appeal is deletion of addition of Rs.1.43 crores made u/sec.68 r.w.s.115BBE of the Act towards cash deposited into HDFC Bank account.
Shri Narender Kumar Naik, learned CIT-DR, supporting the order of the Assessing Officer submitted that, the learned CIT(A) was erred in deleting the addition made by the Assessing Officer without appreciating the fact that the appellant company could not furnish relevant evidences of amount received from sale of scrap including
10 ITA.No.837/Hyd./2024 TCS collected from the buyer and the relevant quarterly statement filed in Form-27EQ. The Learned DR further submitted that, the learned CIT(A) was erred in deleting the addition on the basis of copy of ledger account in respect of income from scrap sales, copy of bank a/c statement for the relevant period, without any supporting evidence. Therefore, he submitted that, the addition made by the Assessing Officer should be upheld.
MS. Hema Murali Krishnan, Advocate-Learned Counsel for the Assessee on the other hand, supporting the order of the learned CIT(A) submitted that, notice issued u/sec.148 of the Act dated 29.07.2022 is invalid as sanction from Appropriate Authority not obtained in terms of sec.151 of the Income Tax Act, 1961. Learned Counsel for the Assessee further referring to the decision of Hon’ble Supreme Court in the case of Union of India vs., Rajeev Bansal (2024) 469 ITR 46 (SC) submitted that, if any notice issued after 01st April, 2021, the Competent Authority for sanctioning of reopening of assessment is Principal Chief Commissioner or Chief Commissioner. Further, the same
11 ITA.No.837/Hyd./2024 has not been done and the sanction was obtained from the Principal Commissioner as is evident from the notice issued u/sec.148 of the Act dated 29.07.2022. Learned Counsel for the Assessee further submitted that, the appellant company has explained the source of cash deposit of Rs.1.43 crores in the HDFC Bank with relevant evidences including amount received from sale of scrap. Learned Counsel for the Assessee further referring to the main business activity of the appellant company submitted that, the appellant company was into business of implementation of GPS based e-ticketing system of all buses in Tamilnadu. During financial year 2015-2016, used electronic items has accumulated e-waste were sold to local unorganised persons /kabadiwalas. The amount received from sale of scrap has been accounted in the books of accounts under the head ‘Direct Income’ and also paid relevant taxes. The appellant company has received cash from sale of scrap and the same has been deposited in the bank a/c on various dates, the assessee filed relevant details before the learned CIT(A). The learned CIT(A) after considering the relevant details
12 ITA.No.837/Hyd./2024 submitted by the appellant company has rightly deleted the addition made by the Assessing Officer and, therefore, the order of the learned CIT(A) should be upheld.
She further submitted that, the addition made by the Assessing Officer for Rs.43 lakhs on the basis of alleged signed receipt given by M/s. Analogics Tech India Ltd., has rightly deleted by the learned CIT(A) on the ground that when addition was made without issuing show cause notice, the same cannot be upheld. Further, the Assessing Officer has not shared the information to the assessee with regard to nature of payment. The assessee has explained to the Assessing Officer that no such transaction is taken place between the appellant company and M/s. Analogics Tech India Ltd. The learned CIT(A) after considering relevant facts has rightly deled the addition made by the Assessing Officer and, therefore, the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. As regards the legal argument taken by 13 ITA.No.837/Hyd./2024 the Learned Counsel for the Assessee on the issue of notice u/sec.148 of the Act and consequent approval required to be obtained as per sec.151 of the Act, in our considered view, the said argument does not hold good for the simple reason that, assessee neither challenged the issue by filing any cross-objection or appeal before the Tribunal. In absence of any ground before us challenging the issue of validity of notice issued u/sec.148 of the Act, in our considered view, the written submissions or oral arguments made by the Counsel for the Assessee at the time of hearing cannot be accepted. Therefore, we reject the arguments of the appellant company on the issue of validity of notice issued u/sec.148 of the Act.
Coming back to the issue on hand. The first addition made by the Assessing Officer is towards cash deposit of Rs.1.43 crores into the HDFC Bank A/c. There is no dispute with regard to the fact that, the appellant company has made cash deposit of Rs.1.43 crores into HDFC Bank a/c. The appellant company claims that, the source for cash deposit is out of amount received from sale
14 ITA.No.837/Hyd./2024 of scrap. The appellant company further contended that, it has generated e-waste from it’s business of providing services to Government of Tamilnadu for implementing e- ticketing system and in the process, it has replaced old electronic items and the same has been sold to local unorganised persons/kabadiwalas. The appellant company further contended that, the amount received from sale of scrap has been periodically deposited into bank a/c and the same has been reported under the head ‘Direct Income’ and also paid relevant taxes. We find that, the learned CIT(A) has given relief to the appellant company on the basis of submissions of the appellant company that, amount received from sale of scrap has been accounted in the books of accounts and reported under the head ‘Direct Income’, even though, the Assessing Officer has given a categorical finding that, the appellant company neither furnished name and addresses of the persons from whom it has collected amount on sale of scrap and further, the assessee has failed to furnish relevant TCS details and quarterly returns submitted in Form-27EQ. In our considered view, if at all
15 ITA.No.837/Hyd./2024 the claim of the appellant company is correct that it has received amount from sale of scrap, then, the appellant company being a company is required to collect TCS from the buyer for sale of scrap in terms of sec.206C of the Act and also report relevant transactions in Form-27EQ. Since the appellant company has not been able to file relevant evidences including details of TCS collected from the dealers, in our considered view, the reasons given by the learned CIT(A) on the basis of submissions of the appellant company that, the said income is part of regular books of accounts of the appellant company and also reported under the head “Direct Income”, is not based on any evidences. Further, the learned CIT(A) has recorded a finding that the appellant company has reported said transactions in it’s books of accounts, but, the fact remains that, appellant company neither furnished any details with regard to income reported under the head “Direct Income” and also relevant bank statement for the year under consideration. In absence of any details as to the details of the amounts received towards sale of scrap and the same is part of 16 ITA.No.837/Hyd./2024 regular books of accounts of the appellant company, in our considered view, the arguments of the appellant company that it has received amount towards sale of scrap, cannot be accepted, more particularly, when there is no details about from whom the appellant company has received cash on sale of scrap. Since the sale of scrap attracts provision of sec.206C of the Act, the appellant company ought to have collect TCS on sale scrap sale and also report the transactions to the Income Tax Department in Form-27EQ. Since the appellant company has failed to file relevant evidences, in our considered view, the explanation of the appellant company with regard to source of cash deposit cannot be accepted. Further, since the learned CIT(A) has given a finding that, the amount received towards sale of scrap is part of regular books of accounts, in our considered view, these aspects needs to be examined by the Assessing Officer, more particularly, in light of the fact that, the appellant company could not furnish relevant bank statements for re-verification. Thus, we set-aside the order of the learned CIT(A) on this issue and restore the issue
17 ITA.No.837/Hyd./2024 back to the file of the Assessing Officer. The Assessing Officer is directed to verify the relevant books of accounts and financial statements to ascertain the fact that with regard accounting the amount received towards sale of scrap under the head “Direct Income”. In case, the appellant company is able to prove the amount received from sale of scrap is part of their regular books of accounts and the same is source for cash deposit into bank account, then, the Assessing Officer is directed to delete addition made towards cash deposit of Rs.1.43 crores u/sec.68 r.w.s.115BBE of the Income Tax Act, 1961.
In so far as addition of Rs.43 lakhs towards alleged cash payment to M/s. Analogics Tech India Ltd., there is no dispute with regard to the fact that, during the course of survey u/sec.133A of the Act, certain loose sheets were found and seized and as per the said documents, a signed receipt acknowledged by M/s. Analogics Tech India Ltd., for receipt of Rs.43 lakhs in cash, was found. The appellant company could not explain the said transaction except stating that, because of change in the management
18 ITA.No.837/Hyd./2024 of company, they do not have any information with regard to the said payment in their books of accounts. In our view, it is the obligation of the appellant company to explain the transactions with relevant evidences to the satisfaction of the Assessing Officer. In the present case, although, the appellant company could not explain the said transaction, but, the learned CIT(A) has deleted the addition on technical grounds of not specifying the addition in the final show cause notice issued to the appellant company dated 07.05.2023. However, on verification of the relevant show cause notice dated 07.05.2023, the Assessing Officer has discussed the issue in light of variation proposed on the issue of addition towards cash deposit and also towards cash payment to M/s. Analogics Tech India Ltd., and from the above it is undisputedly clear that, Assessing Officer has discussed the issue in light of relevant materials and also gave an opportunity to the appellant company to explain it’s case. Therefore, in our considered view, the reasoning given by the learned CIT(A) to delete the addition made by the 19 ITA.No.837/Hyd./2024 Assessing Officer towards alleged cash payment is contrary to material on record and cannot be accepted.
Be that as it may, when it comes the issue of cash payment, it was explanation of appellant company that, since there was change in the management of the company, there were no details as regards cash payment of Rs.43 lakhs to above company viz., M/s. Analogics Tech India Ltd. In our considered view, it is for the appellant company to explain it’s case with relevant details to prove to the satisfaction of the Assessing Officer that, the said transaction is neither carried-out by the appellant company nor belongs to the appellant company. Since the appellant company could not explain the transactions and merely stated that it does not belongs to the appellant company, in our considered view, the matter needs to be set-aside to the file of Assessing Officer for further verification in light of relevant evidences which is basis for making addition. The Assessing Officer is directed to re-consider the issue and also provide relevant evidences to the appellant company for 20 ITA.No.837/Hyd./2024 it’s rebuttal and explanation and also decide the issue in accordance with law.
In the result, appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the open Court on 19.05.2025