NIKUNJKUMAR NARBHERAM THAKKAR,TALUKA-RADHANPUR, DIS-PATAN, GUJARAT vs. WARD 3, PATAN (PRESENT JURIS. ITO WARD 1 PATAN), INCOME TAX DEPARTMENT

This appeal has been filed by the Assessee against the order passed by the Ld. ADDL/JCIT(A), Panchkula (hereinafter referred to as "CIT(A)" for short) dated 10.01.2025 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2017-18.

The assessee has raised the following grounds of appeal:-

In this case, the assessee is engaged in the wholesale & retail trading business of Charcoal at Radhanpur. The assessee has filed his return of income for the year under consideration on 28.10.2017, declaring total income at Rs.2,96,940/-. The case of the assessee was selected under CASS as Limited Scrutiny with reason to verify cash deposit during the year. During the course of assessment proceedings, on verification of the bank book of the assessee, it was noticed by the Assessing Officer that the assessee has shown total credit of Rs.2,22,07,784/- in his bank account maintained with Bank of Baroda, whereas as per Trading Account, his total sales during the year was Rs.65,50,425/-; hence, there is a difference of Rs.1,54,57,359/- between assessee’s bank book and sales/turnover during the year under consideration. Accordingly, the Assessing Officer treated the said amount as undisclosed turnover and computed income @ 8% thereon, resulting in an addition of Rs.12,52,589/-.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

We have heard the rival contentions and perused the material available on record. The total cash deposits were to the tune of Rs.43.72 lakhs. Further, we find that the assessee had filed an explanation regarding the cash deposits during the assessment proceedings. There is no finding in the assessment order that such explanation was found to be incorrect or false. The sources have been proved and Assessing Officer made no addition on account of cash deposits. It is evident from the assessment records that the case was selected for Limited Scrutiny, specifically for the purpose of verifying cash deposits; therefore, the Assessing Officer was not empowered to travel beyond the limited scope of scrutiny unless prior approval was obtained from the competent authority to convert the case into Complete Scrutiny. No such approval has been brought on record. Since the Assessing Officer travelled beyond the issue of Limited Scrutiny without the much- needed approval of the PCIT, we hold that the addition made in the assessment order cannot be sustained.

In the result, appeal of the assessee is allowed.