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Facts
The assessee, Shri Suresh, deposited Rs. 10,04,000/- in his bank account in FY 2010-11. The AO made an ex-parte addition under Section 68, treating it as unexplained credit, after issuing notices under Sections 147 and 148, which the assessee claimed were not properly served. The CIT(A) upheld the addition, noting the assessee's failure to substantiate the source, despite claims of receiving the amount from the sale of ancestral agricultural land via a Power of Attorney.
Held
The Tribunal found procedural irregularities due to non-service of notice under Section 148, violating principles of natural justice, and held the assessment invalid. On merits, the Tribunal accepted the assessee's explanation that the funds were an advance from ancestral agricultural land sale, substantiated by a Bayana agreement and POA, noting similar treatment for a co-owner. Consequently, the addition of Rs. 10,04,000/- under Section 68 was deleted, and the consequential penalty under Section 271(1)(c) was also deleted.
Key Issues
1. Validity of assessment proceedings due to alleged non-service of notice under Section 148 and violation of natural justice. 2. Whether the addition under Section 68 for cash deposits from the sale of ancestral agricultural land was justified. 3. Consequential validity of penalty under Section 271(1)(c).
Sections Cited
147, 148, 142(1), 144, 68, 271(1)(b), 271(1)(c), 2(14)
AI-generated summary — verify with the full judgment below
सुनवाई की तारीख/Date of Hearing : 24/07/2025 उदघोषणा की तारीख/Date of Pronouncement : 29/07/2025 आदेश/Order PER LALIET KUMAR, J.M: Both the above appeals have been filed by the Assessee against the separate orders of the Ld. CIT(A)/NFAC, Delhi dt. 11/11/2024 and 18/11/2024 respectively for the Assessment Year 2011-12.
Since both the above appeals were heard together therefore they are being disposed off by this consolidated order for the sake of convenience.
We shall first deal with the appeal of the Assessee in wherein the Assessee has raised the following grounds:
1. BECAUSE, while holding the assessment to be valid the Ld CIT(A) omitted to consider that no Notice under section 148 of the 'Act' was served upon the 'appellant' and ex- parte assessment was completed without serving any Notice under section 148 of the 'Act' the completion of assessment which render the Assessment Order void-ab-initio.
2. BECAUSE, the Ld. CIT (A) has erred in law by confirming an addition of Rs 10,04,000/- u/s 68 of the Income Tax Act in respect to the amount received from sale of agriculture land on power of attorney which was duly registered in Tehsil ignoring the fact that the cash of Rs. 10,00,000 was deposited on the same date of execution of power of attorney and same belongs to seven family members of his family. Ld. CIT(A) ignored the fact that relevant information/documentation regarding the source were produced during the assessment and appellate proceedings.
2 3. BECAUSE, the Ld. CIT (A) has not asked for sale deed before confirming additions and whereas appellant and his family members have waived his right in favour of power of attorney holder Kishan after getting money as per bayana from dealer. 4. The appellant craves leave to add or amend the Grounds of appeal before the appeal is finally heard and disposed of.
4. Briefly the facts of the case are that the assessee, Shri Suresh, is an individual, and during the financial year 2010-11, the assessee deposited cash totaling Rs. 10,04,000/- in his savings bank account. The Income Tax Department received AIR information about these deposits and initiated proceedings under Section 147 of the Income Tax Act, 1961, by issuing a notice under Section 148 dated 16.03.2018, as the assessee had not filed his return of income within the statutory period. Despite multiple notices under Section 142(1) and a show-cause notice under Section 144, the assessee failed to respond or furnish details. Consequently, the AO framed an ex-parte assessment under Section 144, treating the cash deposits as unexplained credits under Section 68 and added Rs. 10,04,000/- to the assessee’s taxable income. Penalty proceedings under Sections 271(1)(b) and 271(1)(c) were also initiated.
5. Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The assessee appealed before the CIT(A), challenging the validity of the assessment and the addition. The CIT(A) dismissed the appeal, observing that the assessee failed to provide documentary evidence to substantiate the source of the cash deposits, despite being granted multiple opportunities. The CIT(A) noted that the assessee claimed the amount was received from the sale of agricultural land through a Power of Attorney (POA) but did not furnish the sale deed or confirmation from the POA holder, Kishan. The CIT(A) upheld the AO’s addition under Section 68, citing lack of evidence and non-cooperation by the assessee.
6. Against the order of the Ld CIT(A), the assessee preferred an appeal before the Tribunal.
During the course of hearing the assessee submitted its reply on both jurisdictional and merits also.
7.1 On Jurisdictional Grounds assessee submitted that the assessment is void ab initio as no notice under Section 148 was served prior to 31.03.2016, a mandatory condition for validity. Reliance is placed on the RTI reply dated 16.05.2025 (Application No. COITC/RE/250/0111) and the precedent Ghirajkripa Developers Pvt. 3 Ltd vs. ITO (ITA No. 168/JP/2020). The alleged affixture of the show-cause notice dated 22.10.2018 lacks proof, as it neither appears on the portal nor is corroborated by RTI records. The ex-parte order passed by the JAO disregards the assessee’s reply dated 01.09.2018 and violates principles of natural justice, exacerbated by parallel proceedings and an undated order. The penalty under Section 271(1)(c) was levied prematurely, pending quantum appeal.
7.2 On Merits assessee submitted that the deposit of Rs. 10 lakhs in the assessee’s account (supported by passbook entries) arose solely from the sale of ancestral agricultural land (Bayana agreement enclosed) to fund his sisters’ marriages, as evidenced by the Power of Attorney (pages 29–35) and joint affidavit. The land, located in a rural area (village Bitra, population 2,082), falls outside the definition of a capital asset per Section 2(14). The transaction predates the 2015 ban on cash dealings above Rs. 20,000/-, rendering it compliant. The assessee, a 22-year-old MBA graduate with no independent means, could not have sourced such funds otherwise.
Per contra, the Ld. DR relied on the orders of the lower authorities.
We have considered the rival submissions and perused the material available on the record. In the present case we observed that the AO’s failure to provide verifiable proof of service of the notice under Section 148, as claimed through affixation, constitutes a significant procedural lapse. The assessee’s assertion, supported by the RTI response, that no notice was served or reflected on the portal, undermines the validity of the assessment proceedings. Furthermore, the Tribunal notes that the assessee’s reply was not considered by the AO, indicating a lack of due opportunity for the assessee to present their case. The absence of a specific date on the assessment order and the simultaneous pendency of multiple proceedings further suggest procedural irregularities. We hold that the principles of natural justice, requiring adequate notice and opportunity to be heard, were not adhered to in this case.
Further In the course of appellate proceedings, it was contended by the assessee that the deposit in question represented the assessee’s share out of the advance received against the proposed sale of ancestral agricultural land and other coowner shares. It was submitted that a Power of Attorney had been executed jointly by the assessee along with his widowed mother and five sisters in 4 favour of one Shri Kishan, for the purpose of facilitating the sale transaction. It was further submitted that a sum of Rs.10,00,000/- had been received in cash at the time of execution of the Bayana (advance agreement), and out of the said amount, Rs.8,75,000/- was deposited in the assessee’s bank account. The explanation for the deposit was that, being the only male member of the family and considering the secluded location of the family residence, the funds received on behalf of all the legal heirs were deposited in the assessee’s account for safekeeping.
It was also contended that the subject property was jointly held by the assessee and other family members, and that the assessee’s individual share therein was limited to 1/7th. It was further pointed out that the assessee’s uncle, who was also a co-owner of the other portion property, had received an identical sum in his own bank account pursuant to the identical transaction, and no addition was made in his case. The explanation furnished by the assessee was duly supported by documentary evidence including the registered Power of Attorney, joint affidavit of the family members, copy of the sale deed evidencing the sale of property by the attorney holder, and the assessee’s bank passbook showing the impugned deposit.
Upon careful consideration of the material placed on record, we find merit in the contentions advanced by the assessee. The receipt of advance against the sale of ancestral agricultural land stands substantiated through the Bayana agreement and the duly registered Power of Attorney executed by all legal heirs. The subsequent sale of the property through the Power of Attorney holder further corroborates the transaction. It remains undisputed that the assessee’s uncle, who also received an equivalent amount under the same arrangement, was not subjected to any addition. This parity further supports the genuineness of the assessee’s claim.
Considering the totality of the facts and circumstances of the case, and having regard to the evidences placed on record, we are of the considered view that the explanation furnished by the assessee in respect of the source of cash deposit stands satisfactorily established. Accordingly, the addition of Rs.10,04,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, is directed to be deleted.
We shall now proceed to deal with the appeal of the assessee in which pertains to the levy of penalty under Section 271(1)(c) of the 5 Income Tax Act, 1961. It is noted that the said penalty was levied with reference to the addition made under Section 68 in the quantum proceedings for A.Y. 2011–12.
Since, by a separate above order, the quantum addition of Rs.10,04,000/- made under Section 68 has already been deleted, the foundation for the levy of penalty does not survive. The penalty being purely consequential in nature, the same is liable to be deleted.
Accordingly, the penalty levied under Section 271(1)(c) is hereby directed to be deleted, and the appeal of the assessee in is allowed.
In the result both the above appeals are allowed.