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Facts
The assessee's income tax assessment for AY 2015-16 was initially framed under Section 143(3). The PCIT set aside this assessment under Section 263, directing re-assessment due to unexplained deposits of Rs. 4,88,000/- from Pawan Jaiswal HUF and Rs. 4,68,172/- from Tata Aldesa (JV). In the re-assessment, the AO added both amounts to the assessee's income under Section 68. The NFAC (CIT(A)) partly allowed the appeal, restricting the Section 68 addition for Pawan Jaiswal HUF deposits to 50% (Rs. 2,44,000/-) and directing the AO to verify and allow the other addition.
Held
The Tribunal held that the CIT(A)'s decision to reduce the Section 68 addition by 50% without providing logical reasoning was invalid. According to Section 68, an addition for unexplained cash credit must be either entirely confirmed or entirely deleted if the explanation is found satisfactory. The Tribunal found no justification for a partial deletion and directed the deletion of the entire addition of Rs. 2,44,000/-.
Key Issues
Whether the CIT(A) was justified in upholding a 50% addition under Section 68 for unexplained cash credit without proper reasoning, given the assessee's explanations regarding the source of funds.
Sections Cited
143(3), 263, 144B, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2015-16 Pawan Jaiswal v. The Income Tax Officer 1(3) 29/43, Ghumni Bazar Kanpur Kanpur TAN/PAN:AEXPJ4999Q (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri Sanjeev Krishna Sharma, D.R. O R D E R
This appeal has been preferred by the Assessee against the order dated 15.12.2023, passed by the ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2015-16.
2.0 The brief facts of the case are that the assessee filed his return of income for the year under consideration on 07.09.2005 declaring a total income of Rs.7,35,470/-. The case of the assessee was selected for scrutiny under CASS and the assessment was framed under section 143(3) of the Income Tax Act, 1961 (hereinafter called “the Act’), assessing the total income of the assessee at Rs.7,95,470/-. The assessment so framed by the Assessing Officer (AO) was set aside by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Act on the ground that the deposits of Rs.4,88,000/- appearing in the name of Pawan Jaiswal HUF and also the closing balance of Rs.4,68,172/- appearing in the name of Tata Aldesa (JV) was unexplained and, therefore, he directed the AO to reframe the assessment. In the set aside proceedings, the Assessing Officer treated the deposits of Rs.4,88,000/- in the name of Pawan Jaiswal HUF as unexplained and added the same to the income of the assessee under section 68 of the Act and the AO also added the amount of Rs.4,68,172/- appearing in the name of Tata Aldesa (IV) to the income of the assessee, vide order dated 28.03.2022 passed under section 143(3) read with sections 263 and 144B of the Act.
2.1 Aggrieved by the order of the AO, passed under section 143(3) read with sections 263 and 144B of the Act, the assessee preferred an appeal before the NFAC. The NFAC partly allowed the appeal of the assessee by restricting the disallowance made under section 68 of the Act to 50%, i.e., Rs.2,44,000/- and with regard to the addition of Rs.4,68,172/- on account of Sundry Creditors, the NFAC directed the AO to allow the same subject to verification.
2.2 Now, the assessee has approached this Tribunal challenging the impugned order of the NFAC by raising the following grounds of appeal:
1. Because the CIT(A) has erred on facts and in law in upholding an addition of Rs.2,44,000/- in the name of Pawan Jaiswal (HUF), out of the total amount of Rs.4,88,000/- as unexplained u/s.68 of the Act, 1961, which addition is contrary to facts, bad in law be deleted.
Because the depositor Shri Pawan Jaiswal (HUF) being an independent entity holding separate PAN AANHP5285R and having its own source of income including rental income, assessed to tax, the deposits made having being accepted in the earlier years, there was no justification for CIT(A) not to accept the deposits made by it during the year, the addition made and upheld be deleted.
Because the entire deposit of Rs.4,88,000/- having being received through banking channels, copy of account, bank statement, confirmation alongwith proof of filing the return of income having being filed, tax deducted at source, the identity, genuineness and credit worthiness of the depositor being established and proved beyond doubt the authorities below were not justified in believing the same in part, the addition made be deleted.
Because the interest paid/credited on the deposit and TDS deducted thereon being allowed, the addition of Rs.2,44,000/- upheld by CIT(A) being contrary to the provisions of law be deleted. 3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the assessee has an annual rental income of more than Rs.4 lakhs and also earned income from interest. It was further submitted that the rental income was received in cash and was deposited in the bank account regularly from time to time. It was submitted that the amount of Rs.4.88 lakhs was deposited by the assessee in the Bank on various dates by means of either account payee cheque or through RTGS and an amount of Rs.79,754/- was also credited in the bank account as interest. It was submitted that inspite of explanations and evidences filed in this regard before the AO and further before the Ld. First Appellate Authority, the addition of Rs.4.88 lakhs was made by the AO, which was reduced to 50%, i.e., Rs.2.44 lakhs by the Ld. First Appellate Authority without assigning any reason. It was further submitted that there was no change in the nature or source of income received by the assessee as compared to earlier assessment years and in earlier assessment years, no addition had been made on this account. It was further submitted that the assessee had furnished explanation which was neither found to be false nor untrue and, therefore, the impugned addition had been made merely by disbelieving the explanation and such addition was based only on surmises and conjectures. The Ld. A.R. prayed that since the impugned addition was based entirely on suspicion and had been partially retained by the Ld. First Appellate Authority only on estimate basis, the entire addition made under section 68 of the Act deserved to be deleted.
4.0 Per contra, the Ld. Sr. D.R. supported the order of the Ld. First Appellate Authority and submitted that the Ld. First Appellate Authority had already given due relief to the assessee on the facts of the case.
5.0 I have heard the rival submissions and have also perused the material on record. It is seen that the only dispute before me is for the amount of Rs.2.44 lakhs sustained by the Ld. First Appellate Authority, out of the addition of Rs.4.88 lakhs added by the AO in terms of section 68 of the Act being cash deposit in the bank account. The assessee had explained before the AO that the source of this cash deposit was loan and rental income of Pawan Jaiswal HUF, which was received in cash. However, as per the AO, the profile of Pawan Jaiswal HUF did not match giving of loan to the assessee. Accordingly, an amount of Rs.4.88 lakhs was deemed to be the income of the assessee from undisclosed source and was treated as unexplained cash credit under section 68 of the Act. The Ld. First Appellate Authority reduced the quantum of addition by 50% by simply observing that in the interest of justice and considering the submissions made by the assessee, it would be reasonable to restrict the disallowance to 50%. However, the Ld. First Appellate Authority has not assigned any reason for reaching the conclusion as to how reducing the addition to 50% would meet the ends of justice.
In my considered opinion, the act of the Ld. First Appellate Authority is not valid in the eye of law inasmuch as as per section 68 of the Act, additions have to be based entirely on unexplained amounts found credited in the books of account and such credit balance is to be satisfactorily explained in entirety. Therefore, the Ld. First Appellate Authority should have either confirmed the entire addition or deleted the entire addition. However, the Ld. First Appellate Authority has chosen to delete a part sum without any logical reasoning. Therefore, I am unable to uphold the adjudication arrived at by the Ld. First Appellate Authority and I direct the deletion of the entire addition.
6.0 In the final result, the appeal of the assessee stands allowed.
Order pronounced in the open Court on 04/07/2025.