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Facts
The assessee filed a return of income for AY 2012-13 declaring Rs. 1,71,700/-, but the AO reopened assessment under Section 147/148 after noting cash deposits of Rs. 49,45,000/- in an ICICI Bank account. The AO made an addition of Rs. 48,10,000/- under Section 69 and Rs. 31,863/- for interest income, assessing the total taxable income at Rs. 50,13,463/-. The Ld. CIT(A) upheld the AO's order, leading the assessee to appeal before the Tribunal.
Held
The Tribunal observed that the assessee had sufficiently explained the sources of the cash deposits, including opening cash in hand, withdrawals from FDRs and bank accounts, proceeds from asset sales, and gifts. It was noted that the AO failed to properly examine these explanations or compute the peak deposits, instead focusing on minor discrepancies in the submitted Cash Flow Statement. Consequently, the Tribunal ruled that no addition was warranted, deleting the addition of Rs. 48,10,000/-.
Key Issues
Whether the addition made under Section 69 for unexplained cash deposits in bank accounts was justified, given the assessee's detailed explanations of the sources of funds and the AO's failure to consider them properly.
Sections Cited
147, 148, 69, 139(1), 143(2), 142(1), 133(6)
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Income Tax Appellate Tribunal, CHANDIGRH BENCH, ‘SMC’ CHANDIGARH
Before: SHRI RAJPAL YADAV
PHYSICAL HEARING O R D E R The assessee is in appeal before the Tribunal against the order of ld. CIT(Appeals) dated 08.11.2023 passed for assessment year 2012-13.
2. The assessee has taken five grounds of appeal. Out of that, ground No. 5 is a general ground which does not call for recording of any specific reason. In rest of the four grounds, the grievance of the assessee revolves around two A.Y.2012-13 2 fold; (a) The ld. CIT(A) has erred in upholding the re-opening of assessment; (b) The ld. CIT(A) has erred in confirming the addition of Rs.48,10,000/- which was added by the AO with the aid of Section 69 of the Income Tax Act.
The assessee thereafter moved an application for additional ground of appeal. It was contended that the assessment order was not bearing document identification number, therefore, it is bad in the eyes of law. However, at the time of hearing, ld. Counsel for the assessee did not press this ground of appeal, hence rejected.
The brief facts of the case are that assessee has filed his return of income on 21.03.2013 declaring total income of Rs.1,71,700/-. It came to the notice of AO that assessee has deposited a sum of Rs.49,45,000/- into Saving Bank Account with ICICI Bank. The AO has recorded reasons and reopened the assessment.
In response to the notice received under Section 148, assessee has filed his return of income on 20.11.2019 declaring the same income as was filed originally under Section 139(1) of the Act. The ld. AO thereafter issued A.Y.2012-13 3 notices under Section 143(2) and 142(1). The ld. AO has confronted the assessee about the source of cash deposits in two Saving Bank Accounts, namely : a) State Bank of Patiala Rs. 13,00,000/- b) ICICI Bank Rs. 36,45,000/- 4.1 The assessee furnished a Cash Flow Statement exhibiting the source of deposits. Somehow ld. AO did not accept that Cash Flow Statement and made the addition of Rs.48,10,000/-. He further made addition of Rs.31,863/- on account of interest income. In this way, he determined the taxable income of the assessee at Rs.50,13,463/- as against Rs.1,71,700/- disclosed by the assessee.
The appeal to the CIT(A) did not bring any relief to the assessee.
As far as first fold of grievance is concerned, the ld. Counsel for the assessee has not raised any arguments.
Copy of the reasons recorded for issuance of notice under Section 148 has not been placed on record. However, with regard to the additions on merit, he has filed a detailed submission wherein he has tabulated the source for such A.Y.2012-13 4 cash available with the assessee. Copy of the tabulated detail read as under :
Written submissions Respected Madam/Sir The facts of the case, in brief, are that return of income for AY 2012-13 was originally filed on 21.03.2013. Subsequently, re-assessment proceedings U/s 147 were initiated U/s 148 and assessment was framed on total income of Rs. 5013563/- vide order dated 17/12/2019 making thereby an addition of Rs. 4810000/- on account of cash deposits in bank accounts and Rs. 31863/- being interest. The assessment so framed and additions made are objected to on the following grounds .
2. Before issue of notice, the Ld. AO issued inquiry letter, referred to in the assessment order. Since there was no pendency of assessment before issue of notice without obtaining the approval of competent authority and hence inquiry letter issued is bad in law and proceedings initiated on the basis of such letter are also bad-in-law. The Ld. AO could not adduce any evidence in regard to obtaining of any permission from the competent authority despite a letter issued in this behalf. Even from the copy of order sheet entries (Annexure -A), it would be seen that no entry has been made for submission of proposal for seeking approval U/s 133(6) and granting any approval by the competent authority. In the case of Smt. Ragni V/s ITO, the Hon'ble ITAT, Delhi SMC-2 Bench,, referred the decision of Hon'ble ITAT, Amritsar where in it was held that there is no such procedure to conduct any inquiry for collecting information without pendency of assessment proceedings. In view of these facts, the letter issued itself is invalid and hence the re-assessment proceedings initiated/completed on the basis of such letter is nul and void and therefore, it is prayed to quash the same.
3. The Ld. AO has made an addition of Rs. 4810000/- on account of total cash deposits in bank accounts after allowing credit for opening cash-in-hand of Rs. 135000/-. Before the addition so made and objections are discussed, it would be worthwhile to mention facts of the case. The assessee was running business of printing press and purchase/sale of stationery during the year. There was family dispute with the wife and ultimately the matter was settled for which the assessee had to pay substantial amount and remained in depression. The assessee had to go for heart operation and remained disturbed for looking after the daughter who remained with the assessee. Due to these disturbing facts, the assessee had to close the business and the machinery and stock in the shop were sold. During the course of assessment proceedings, the assessee was asked to submit cash- flow statement to prove the source of cash deposits made during the year. Since the assessee was not aware of accountancy system, an accountant prepared the A.Y.2012-13 5 same. As the assessee was not aware of the facts mentioned in the cash-flow statement, the same was submitted as prepared by the accountant. However, there were some discrepancies, the AO required the assessee to prepare cash book which was got prepared form chartered accountant on the basis of bank statement and evidence available with the assessee and it was requested the AO to consider cash book for deciding the case. However, the Ld. AO considered both cash flow statement and cash book and on the basis of some discrepancies, made the addition of total cash deposited during the year even without allowing credit of opening balance with the bank, prior withdrawals for deposit and the deposits, the source of which was duly explained with documentary evidence. It was categorically informed the Ld. AO to consider the entries made in the cash- book which she did not consider in the order passed by her. For deciding as to whether any addition is called or not she had to work out peak of the deposits, which the Ld. AO failed. However, before raising objections against the addition so made, the source of deposits on the basis of cash-book and documentary evidence is discussed hereunder:- A.Y.2012-13 6 A.Y.2012-13 7 A.Y.2012-13 8 A.Y.2012-13 9
A perusal of the above details would indicate that assessee has explained each entry of the deposits in his Saving Bank Accounts. The assessee has submitted that he was having opening cash balance of Rs.1,35,000/- which has come from the previous year. He has disclosed about the availability of FDRs amounting to Rs.9 lacs which was deposited in the last year i.e. 16.12.2010 and it was withdrawn on 20.04.2011, just before the deposit of Rs.5 lacs in the ICICI Bank in the month of May, 2011. Similarly, assessee has explained the deposits on 23.06.2011. A perusal of all these details would indicate that assessee has sufficient source of money. The AO has not pointed out any specific defect in the source. His reasons are only with regard to certain discrepancies in preparing the Cash Flow Statement. We would appreciate the findings of the AO if he has A.Y.2012-13 10 pointed out defects in the FDRs maintained by the assessee or sale of land by his brothers and other relatives and the return of money to those persons, but no aspects have been examined by the AO. He simply incorporated the cash flow submitted by the assessee instead of examining the basic entries in that Cash Flow Statement with the help of documentary evidence. There might be some discrepancy in reconciliation of the amounts in the cash flow but apart from that assessee has demonstrated as to how he has withdrawn the money from State Bank of India Account, encashed the FDRs etc. In my opinion, assessee has demonstrated sufficient sources available with him for making the alleged cash deposit in the bank accounts. Therefore, no addition is required to be made in the total income of the assessee.
In view of the above discussion, I allow the appeal of the assessee partly and addition to the extent of Rs.48,10,000/- stands deleted.
In the result, appeal of the assessee is partly allowed.