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Facts
The assessee filed a return for AY 2012-13 which was processed under section 143(1). Based on information regarding substantial cash deposits, a notice under section 148 was issued, leading to a reassessment under section 143(3) r.w.s. 147. An addition of Rs. 1,58,84,450 was made for unexplained cash deposits.
Held
The Tribunal held that the reopening of the assessment under section 147 was valid as the AO had a prima facie belief based on tangible material, especially since the assessee failed to respond to the initial enquiry. On merits, the Tribunal found that the assessee failed to substantiate the source of the entire Rs. 1 crore cash deposit. Only Rs. 51,30,000 was accepted based on registered sale deeds.
Key Issues
Whether the reopening of assessment under Section 147 was valid and whether the source of cash deposits was adequately explained by the assessee.
Sections Cited
147, 148, 143(1), 143(3), 69, 234A, 234B
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 05/07/2024 pertaining to Assessment Year 2012-13. 2. In the present appeal Assessee has raised the following grounds:
1. That the Ld. CIT(A) has grossly erred in upholding addition under section 69 to the returned income to the extent of Rs. 1,07,54,450/- in the order passed by Ld. AO under section 147 of the Act.
2. That the initiation of assessment proceedings by issuing notice under section 148 is bad in law and liable to be quashed.
3. That the Ld. CIT(A) has erred in upholding the reopening as it is based on borrowed satisfaction and without any independent application of mind.
4. That under the facts and circumstances of the case, the Ld. Assessing Officer has erred in levying interest under section 234A and 234B of the Income Tax Act, 1961.
5. That the Ld. Assessing Officer has erred in not considering allowing the benefit of cash withdrawal and redeposit in the bank account.
6. That the Appellant craves leave to add or amend the grounds of appeals before the appeal is finally heard or disposed of.
3. Briefly the facts of the case are that the assessee filed his return of income for AY 2012–13, which was processed u/s 143(1). Based on information received from the Investigation Wing regarding substantial cash deposits, a notice u/s 148 was issued on 25.03.2019. The reassessment was completed u/s 143(3) r.w.s. 147 on 27.12.2019 assessing the income at Rs. 1,60,79,020/- after making an addition of Rs. 1,58,84,450 /- u/s 69 for unexplained cash deposits.
4. The assessee has challenged the reopening on the ground that the AO acted mechanically and did not form an independent belief. The Ld. Counsel for the assessee vehemently submitted that the reopening of the assessment was initiated merely on the basis of information received from the Investigation Wing. The reasons recorded do not reveal any independent application of mind by the AO. It is a settled law that the AO must form his own belief after applying mind to the information, which is absent in this case. Reliance was placed on the following judicial precedents: a. PCIT v. G&G Pharma India Ltd. [384 ITR 147 (Del)] b. Meenakshi Overseas Pvt. Ltd. [395 ITR 677 (Del)] c. Signature Hotels Pvt. Ltd. v. ITO [338 ITR 51 (Del)]
5. On the merits of the addition, the Ld. AR submitted that: The assessee had duly filed a cash flow statement explaining sources of cash deposits. The cash deposits were out of earlier year’s withdrawals, agricultural income, and loans and advances from family and friends. The assessee is residing in a rural area and is engaged in traditional agricultural and allied activities, and banking transactions were done out of business exigencies and household liquidity. The AO failed to appreciate the redeposit pattern of cash in the same bank accounts where withdrawals were made earlier. The Ld. CIT(A) did not appreciate the factual matrix and rejected the explanation without cogent reasoning.
6. The Ld. Departmental Representative supported the findings of the AO and CIT(A). It was submitted that the AO had received credible information and was well within his jurisdiction to reopen the case. On merits, it was contended that the assessee failed to correlate specific withdrawals with specific deposits and had not furnished documentary evidence to prove the genuineness of loans or the agricultural income claimed. Therefore, the AO rightly invoked Section 69 for unexplained money. It was submitted that No evidence for "bayana" from the developer (e.g., MOU, receipt, identity) was provided and even Agricultural income was unsupported by land records. The opening cash and withdrawals were not linked to subsequent deposits, and lastly, the cash flow appeared reconstructed and unverifiable.
We have heard the rival contentions and perused the material available on record. The first ground raised by the assessee pertains to the legality of the reassessment proceedings initiated under section 147 of the Act. In this regard, it is observed that the Assessing Officer had issued a specific enquiry letter dated 07.02.2019, based on information received from the Investigation Wing, New Delhi, seeking an explanation regarding the cash deposits amounting to Rs.1,07,54,450/- in the assessee’s ICICI Bank account. However, the assessee failed to respond to the said enquiry.
7.1 In the absence of any reply or explanation from the assessee during the enquiry stage, the Assessing Officer was constrained to proceed based on the information available before him. It is a well-settled position in law that if the assessee does not respond to the queries raised by the Assessing Officer during the preliminary enquiry, the AO is entitled to form a prima facie belief that income has escaped assessment.
7.2 The Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) has laid down the principle that, at the stage of formation of belief under section 147, conclusive evidence is not required, and the adequacy or sufficiency of material is not to be examined by the court. The only requirement is that the AO should have some tangible material on the basis of which such belief is formed.
7.3 In the present case, the Assessing Officer had in his possession specific information in the form of bank statements showing substantial cash deposits, and in the absence of any explanation offered by the assessee despite being provided an opportunity, the belief formed by the AO cannot be termed as mechanical or based on borrowed satisfaction. This aspect was also considered by the Ld. CIT(A), who has dealt with this issue in paragraphs 6 to 8 of the appellate order, and observed as under:
“The AO had received information from the Investigation Wing, New Delhi regarding the cash deposits in the bank accounts of the assessee amounting to Rs.1,07,54,450/-. In order to verify the source, a letter dated 07.02.2019 was issued asking for an explanation. The assessee did not file any reply. Based on the material and non-compliance, reasons to believe were recorded and approval obtained. Therefore, reopening is not mechanical or based on borrowed satisfaction." 7.4 In light of the above discussion and the reasoning given by the Ld. CIT(A), we find no infirmity in the action of the Assessing Officer in initiating reassessment proceedings under section 147. The failure of the assessee to respond to the preliminary enquiry provided sufficient ground for the AO to form a belief that income had escaped assessment. Accordingly, we uphold the finding of the Ld. CIT(A) and dismiss the ground of appeal challenging the reopening of assessment.
The Ld. AR had submitted that the Assessing Officer had made the addition of Rs. 1,58,84,450/- on account of alleged cash deposit in the bank account. It was submitted that an amount of Rs. 1,45,00,000/- was deposited in SBI, Keorak Branch and an amount of Rs. 13,84,450/- was deposited in Kaithal Central Cooperative Bank Limited. During the assessment proceedings the assessee was asked to produce the copy of the Registry executed in respect of property for agreement to sell dt. 03/05/2011 and other documents. In the reply dt. 26/11/2019 the assessee had submitted that Rs. 1 Crore were received as per the agreement dt. 03/05/2011 . The Assessing Officer had asked the assessee to produce the original agreement dt. 03/05/2011 copy of Registry if any executed thereafter and to produce Sukhnandan alongwith the ID and source of Rs. 1 Crore with his bank statement.
The assessee failed to supply and therefore the Assessing Officer confirmed the addition in the hands of the assessee for the amount of Rs. 1,58,84,450/-.
Feeling aggrieved the assessee preferred the appeal before the Ld. CIT(A) who had granted the partial relief to the assessee. The finding of the Ld. CIT(A) in paragraph 7.4.2 to 7.4.5 of the impugned are as under: 7.4.2 In the course of appellate proceedings on this issue, the appellant submitted as under: Source of Cash Depositlt is submitted that the assessee entered into an agreement to sell his agriculture land situated at vill. Keorak Distt. Kaithal (Haryana) and received an amount of Rs. 1,00,00,000.00 (rupees one crore) as earnest money. The earnest money was received on 03.05.2011. Out of the earnest money received, the assessee deposited the amounts in his two bank accounts. The cash deposits are explained as under: Cash Deposit in 'The Kaithal Central Co-op. Bank Ltd., Keorak' Sr. Date of Deposit Amount(Rs) Source of Amount No. 1 11.05.2011 1,50,000.00 Out of earnest money 2 14.05.2011 34,450.00 —do— 3 23.07.2011 10,00,000.00 —do— 4 22.09.2011 2,00,000.00 1,70,000.00 out of the amount withdrawn from bank on 06.08.2011. 30000.00 out of earnest money reed. 5 Total Deposit 13,84,450.00 It is submitted that total amount of Rs. 13,84,450.00 has been deposited in bank and after deducting amount of Rs. 1,70,000.00 (amount withdrawn from bank and re-deposited), net amount deposited in the account comes to Rs. 12,14,450.00 (13,84,450.00-1,70,000.00=12,14,450.00) and the amount has been deposited out of the earnest money of Rs. 1,00,00,000.00 received on 03.05.2011. B. Cash deposited in State Bank of India, Keorak.
Date Amount(Rs) Source of Amount Sr. No. of Deposit 1 03.08.2011 8,00,000.00 Out of earnest money 2 18.11.2011 68,50,000.00 12,40,000.00 out of cash withdrawn between 08.10.2011 to 2.11.2011 from Kaithal Co-op. Bank, Keorak. 8,00,000.00 out of the cash withdrawn during 19.10.2011 to 01.11.2011 from SBI, Keorak. 48,10,000.00 out of earnest money reed. 3 21.11.2011 68,50,000.00 Out of the cash ofRs. 68,50,000.00 withdrawn on same day i.e. 21.11.2011 from SBI, Keorak.
The net amount of cash deposited in State Bank of India, Keorak comes to Rs. 56,10,000.00 (8,00,000.00 + 48,10,000.00) and the remaining amount of 88,90,000.00(12,40,000.00+8,00,000.00+68,50,000.00) has only been rotated during the year i.e. cash withdrawn and re-deposited into the same bank and from other bank.
Sr. No. Particulars Amount(Rs.) 1 12,14,450.00 Net cash deposit in The Kaithal Central Co-op. Bank Ltd., Keorak as per detail given above at 1A. 2 56,10,000.00 Net cash deposit in 'State Bank of India, Keorak' as per detail given above at 1 B. 3 Total Amount deposited or say net peak credit 68,24,450.00 The net amount deposited together in both the banks comes to Rs. 68,24,450.00 as per the following details : The source of this amount as explained above is out of the earnest money of Rs. 1,00,00,000.00 (rupees one crore) received in consideration of agreement to sell the agriculture land, executed on 03.05.2011. It is humbly submitted that source of cash deposit of Rs. 1,58,84,450/- is well proved and the impugned addition may please be deleted. 7.4.3. Further, the appellant filed additional evidence which was found integral to the issues to be adjudicated and accordingly admitted in the interest of justice. The evidence was remanded to the A.O for verification and his comments. The Assessing Officer has submitted remand report dated 03/05/2024 as under: In this connection, it is submitted that the case was re-opened u/s 147 on the basis of information regarding cash deposits of Rs.2,35,34,450/- during the F.Y. 2011-12 relevant to A.Y.2012-13. Notice u/s 148 was issued on 25.03.2019 after getting the prior approval of the worthy Pr. CIT, Kamal, In compliance to notice u/s 148 assessee has filed 1TR on 09.09.2019 declaring salary income ofRs. 1,68,586/-. Further, during the course of assessment proceedings, it was found that total cash of Rs. 1,58,58,450/- only was deposited in the bank accounts. After that Notices u's 142(1) along with questionnaire were issued from time to time for submitting the source of cash deposits. During the course of assessment proceedings, assessee had submitted that cash deposited is out of amount received on Bayanama (agreement to sell) of agricultural land from Shri Sukhnandan S/o Shri Narmail Singh R/o Vill; kangwal, Ambala. Assessee was asked to produce the original agreement dated 03.05.2011 and produce Shri Sukhnandan S/o Shri. Narmail Singh R/o Vill: kangwal, Ambala. However, the assessee was not interested in availing the opportunities offered to him and the sale of immovable property agreement was fabricated just to manage the entries in bank accounts. After due analysis of the information available with this office, the total income of the assessee was assessed at Rs. 1,60,79,020/- after making addition of Rs. 1,58,54.450/- on account of cash deposits as per provisions of the IT Act, 1961. Being aggrieved with the order of the A. O. The assessee tiled an appeal before your good self and remand report has been sought by your good office on the basis of additional evidences filed by the assessee during appellate proceedings. Accordingly, on the basis of additional evidence' a letter was issued to the assessee on 25.10.2023 for furnishing the additional details on or before 02.11.2023 submitted before the worthy CI T(Appeal) in compliance to the letter issued, assessee submitted the reply along with cash flow statement, Bayanama, sale deed, affidavit of witnesses.
On perusal of the reply filed by the assessee it was found that as per the Bayanama dated 03.05.2011 assessee had sold the agricultural land approx 48 Kanal @ 85 Lac per acre to Shri. Sukhnandan S/o Shri Narmail Singh R/o Vill: kangwal, Ambala as mentioned in Bayanama. But the assessee had submitted the sale deeds of Plots sold to various other parties Rs.51,30,000/- details of which are as under:-
Sr. No. Seller Purchaser Amount land Area Date of sale deed 1 Sh. Ram Singh Sh. Matlesh 2.40.000/- 200 Sq Yards 20.03.2012 2 Sh. Ram Singh Smt Bcgbatli 3,00.000/- 250 Sq Yards 20.03.2012 3 Sh. Ram Singh Smt Sumitra 3,00.000/- 250 Sq Yards 20.03.2012 4 Sh. Ram Singh Smt Shakutla Dev 1.80,000/- 150 Sq Yards 22.02.2012 . 5 Sh. Ram Singh Smt Shakutla 3.02,500/- 252 Sq Yards 17.11.2011 6 Sh. Ram Singh Smt Deepika 2,40,000/- 200 Sq Yards 15.11.2011 7 Sh. Ram Singh Smt Monika 2,40.000/- 200 Sq Yards 15.11.2011 8 Sh. Ram Singh Smt Salealta 3.60.000/- 300 Sq Yards 15.11.2011 9 Sh. Ram Singh Sh. Gurdeep 1.68.000/- 140 Sq Yards 08.11.2011 10 Sh. Ram Singl Smt Shim la Devi. 3,60.000/- 300 Sq Yards 08.11.2011 11 Sh. Ram Singh Smt Jagwati 4.80.000/- 400 Sq Yrads 17.10.2011 12 Sh. Ram Singh Smt Manisha 19,60,000/ 400 Sq Yards 04.10.2011 Total 51,30,000/ According to assessee, the value of 48 Kanal i.e. 6 Acres @85 Lacs comes to Rs.5,10.00.000/- and the assessee failed to prove the nexus of transactions i.e. cash is deposited out of money received on account of Bayanama (agreement) money.
7. In view of the above, it is stated that assessment has been rightly framed after making addition on account of cash deposit assessee was not able to prove genuineness of said cash transactions made in bank accounts. Further, during the remand report proceedings also assessee could not prove genuineness of cash transactions in his bank 7.4.4 The appellant submitted rejoinder to above report of the A.O, relevant extract of which is as under: It is submitted that original agreement to sell always remain with the buyer so assessee cannot produce the same. The assessee produced certified copy of register of Notary Public who entered contents of agreement to sell in his register, which he is legally required to do so, at Sr. No. 1091. The assessee, the buyer Mr. Sukhnandan and two witnesses Mohan Lai and Karnail also signed before the notary in his register. The assessing officer could have summoned to notary public along with his register to check the veracity of copy of register produced by the assessee but the assessing officer did not summon the notary public. Not to believe the document produced by the assessee without verifying the same is unjustified and against the law. -Regarding producing Sh. Sukhnandan (the buyer of land) S/o Sh. Narmail Singh R/o village Kangwal Distt. Ambala it is submitted that the assessee had no control over Mr. Sukhnandan. He entered into an agreement to buy the land of assessee, gave advance against the agreement and asked the assessee to get the land registered in the name of different person later on. The assessing officer could have summoned him in case he desired to record his statement but the assessing officer did not consider to do this. The law does not compel a person to do what he can't possibly do. -The sale deeds were executed at the directions of buyer Mr. Sukhnandan and also at the time and day fixed by him. The assessee is approx. 80 years of age at this stage with restricted movements. Sale deeds are always kept by the buyers so assessee submitted the sale deeds which he could possibly collect. It is not possible for him at this age to go after every buyer and produce the sale deeds. -The assessee submitted affidavits of Mohan Lai S/o Sh. Pawan Kumar R/o village Jagdishpura Distt. Kaithal and Karnail S/o Sh. Sahab Singh R/o Bhayankar Patti village Keorak Distt. Kaithal who were witness to the deal and also signed in the register of notary. Both the persons in their affidavits have confirmed to be the witness to the agreement to sell, the deal finalized in front of them and payment of Rs. 1,00,00,000.00 (rupees one crore) was also made to the assessee by Mr. Sukhnandan (the buyer) in their presence. The assessing officer did not consider it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. 7.4.5 On examination of the evidence and consideration of all the facts on record, the submissions of the appellant and the A.O's report, it is noted the appellant has not been able, even in the present proceedings to establish satisfactorily, the source for the cash deposits. It is claimed by him that Rs. 1,00,00,0007-was from earnest money on sale of land received on 03.05.2011. Though he has produced agreement copy, the same is not substantiated by the original document, nor by subsequent registration of sale deed, nor any confirmation by the said buyer. In this regard, it may be noted that as per the relevant provisions of the transfer of property Act, and Indian Registration Act, the sale transaction of an immovable property above the value of Rs. 100/- and above is required to be reduced into writing and registered. As per Section 17 of the Registration Act, 1908, all transactions involving the sale of an immovable property for a value exceeding Rs.100, should be registered. Any document that is mandatorily required to be registered but is not registered, cannot be admitted as evidence in any court of law. Thus, the affidavits of the witnesses or notary can at best be supporting evidence but cannot by themselves establish the veracity of a claim of transfer of property made on the basis of an unregistered document. Accordingly the claim that Rs.1,00,00,000/-cash was received as earnest money on sale of land is not acceptable in view of the lacunae in the evidence as discussed above. It is noted however, that the appellant had produced registered sale deeds for sale of Plots sold to various other parties totalling Rs.51,30,000/-. On verification of dates of the sale deeds vis a vis the dates of cash deposit in banks, the former can be accepted as credible evidence for the sources of such cash deposits to the extent of Rs.51,30,000/-. In view of the above, the addition made as unexplained cash deposits to the extent of Rs. Rs.51,30,000/- is deleted and the balance i.e., Rs.1,07,54,450/- is sustained. This groundis partly allowed.
Feeling aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us and submitted the written submission which is taken on record .
Per contra, the Ld. DR relied upon the orders of the lower authorities.
We have heard the rival contention of the parties and perused the material available on the record, including the written submissions filed by the assessee. The primary controversy in the present appeal revolves around the source of the cash deposit of ₹1 crore made by the assessee in his bank account. The assessee initially claimed that the said amount was received in cash from one Shri Sukhnandan under an agreement dated 03.05.2011 as bayaana (advance) money in respect of a property transaction. However, on scrutiny, we find that this explanation is unsubstantiated. The assessee failed to produce the original agreement either before the Assessing Officer or the Ld. CIT(A). Further, the assessee did not produce the alleged executor, Shri Sukhnandan, nor his bank statements or any evidence of his financial capacity to advance such a substantial amount. In the absence of the original document and examination of the concerned party, the genuineness of the transaction remains highly doubtful. The explanation of ₹1 crore, which was found deposited in the bank account after being received by way of bayaana, is, thus, without evidentiary support and cannot be accepted.
14.1. In the course of appellate proceedings, the assessee took an altogether different plea. It was submitted that the assessee had sufficient cash on hand from sale of land parcels and part of the cash deposit in question was explained by way of withdrawals and redeposits. In particular, it was contended that an amount of ₹68,50,000/- deposited on 18.11.2011 was withdrawn on 21.11.2011, indicating a cycle of deposit and withdrawal of the same amount. This explanation stands in direct conflict with the assessee’s earlier stand that ₹1 crore was received in May 2011 from Shri Sukhnandan. If the assessee's explanation of redeposit in November 2011 is to be accepted, the entire premise and admission of having received ₹1 crore in May 2011 collapse. Such contradictory and inconsistent versions severely erode the credibility of the assessee’s case. The assessee can not wriggle out of the admission of alleged receipt of Rs 1 crore during the assessment proceedings 14.2. We further note that the Ld. CIT(A), after calling for a Remand Report, examined the alternative claim of the assessee regarding the availability of cash from sale of land. The Assessing Officer tabulated twelve registered sale deeds executed between 04.10.2011 and 20.03.2012 aggregating to ₹51,30,000/-. After considering the submissions and factual matrix, the Ld. CIT(A) granted relief to the assessee to the extent of ₹51,30,000/- by accepting the cash receipts arising from these sale deeds. This part of the order has attained finality and is not in dispute.
14.3. However, the assessee also claimed that a sum of ₹8,00,000 was deposited on 03.08.2011 and sourced from sale proceeds. This explanation is factually incorrect since no sale transaction took place in August 2011. The nearest reported sale dates are 04.10.2011 and 17.10.2011. It is implausible to accept that money was deposited before it was received. Therefore, the deposit of ₹8,00,000/- on 03.08.2011 cannot be attributed to any sale consideration, and the explanation deserves to be rejected.
14.4. As regards the remaining amount of ₹68,50,000/-, the assessee has claimed that ₹12,40,000/- was withdrawn from Kaithal Cooperative Bank, ₹8,00,000/- was withdrawn from another bank account on 19.10.2011 and 01.11.2011, and the balance amount of ₹48,10,000/- was stated to be sourced from sale of land. However, no documentary evidence whatsoever has been placed on record to establish the receipt of ₹48,10,000/- through sale transactions, apart from the already verified and accepted instances of ₹51,30,000/- as noted by the Ld. CIT(A). The claim of ₹48,10,000/- from alleged land sales, thus, remains unsubstantiated and lacks evidentiary support.
Further, the explanation regarding cash withdrawals from bank accounts and subsequent redeposits into another account also does not inspire confidence. No prudent person would ordinarily withdraw substantial cash from one bank account only to redeposit the same into another bank account without any business exigency or compelling reason. The absence of any explanation for such movement of funds further undermines the credibility of the assessee’s stand. We are, therefore, of the considered opinion that this explanation is not only unsupported by evidence but also inherently improbable, and hence deserves to be rejected.
14.5. The claim that ₹68,50,000/- was withdrawn on 21.11.2011 after being deposited on 18.11.2011 suggests a circular transaction of deposit and immediate withdrawal. For such an explanation to be accepted, it is necessary that the assessee maintain contemporaneous cash flow records or other corroborative material to demonstrate that the exact same cash was being redeposited. In the absence of such evidence, this contention appears to be an afterthought and cannot be relied upon.
14.6. On an overall appraisal of the facts, we find that the assessee has not come forward with a consistent and credible explanation regarding the cash deposit of ₹1 crore. The initial version of receipt of bayaana money under an unverified agreement has not been substantiated. The alternative explanation of availability of cash from land sales is partly accepted to the extent of ₹51,30,000/- by the Ld. CIT(A), and no further supporting evidence has been placed to justify the balance deposit. The contradictory versions taken by the assessee during assessment and appellate proceedings further weaken the case.
14.7. In view of the above discussion, we find no infirmity in the order of the Ld. CIT(A) in sustaining the addition to the extent of the unexplained cash deposit, after granting partial relief. Accordingly, the grounds raised by the assessee on this issue are dismissed.
15. The appeal of the assessee is dismissed .
Order pronounced in the open Court on 30/06/2025. मनोज कुमार अ"वाल लिलत कुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद"/ ACCOUNTANT MEMBER "ाियक सद" /JUDICIAL MEMBER