SEEMA DEVI AGRAWAL,RAIGARH, CHHATTISGARH vs. INCOME TAX OFFICER, BILASPUR

3. In this case, the assessee has filed both legal grounds as well as grounds on merits. The Ld. Counsel for the assessee submitted that he would assail the legal ground first and if the said legal ground is answered affirmative, then the grounds on merits shall become academic only.

4. In so far as the first legal ground is concerned, the Ld. Counsel for the assessee submitted that though the assessee had filed return of income, however, the CPC/A.O, Bengaluru had wrongly mentioned that no return was filed by the assessee. As per the records, the facts of the matter is that the return of income filed by the assessee was treated as invalid for the reason that there was no compliance in so far physical issuance of the acknowledgement is concerned back to the CPC/A.O, Bengaluru within 30 days by the assessee. Since this was not complied, therefore, the return of income was treated as invalid by the CPC/A.O, Bengaluru. The aforesaid legal ground raised by the Ld. Counsel is rejected for the fact that invalid return of income tantamount to non-filing of return of income.

5. In so far the second legal ground is concerned, the Ld. Counsel for the assessee submitted that there was non-application of mind by the A.O while recording reasons to believe for reassessment proceedings. The Ld. Counsel in support of his aforesaid contention refers to the copy of the “reasons to believe”. For the sake of completeness, the same is culled out as follows: “As per information available with this office (Cycle 5 P-1), the assessee had done following transactions during the F.Y 2014-15 relevant to the AY 2015-16: a) Purchase of immovable property exceeding Rs.30,00,000/- (AIR 006 001) A letter was issued to the assessee on 1.2.2017 seeking clarifications on certain points, but no reply was filed. On checking from the system it was noticed that the assessee had not filed Return of Income for the year under consideration. As per information available with the office, the assessee had made investment in purchase of immovable property at Rs.1,22,80,100/- during the F.Y 2014-15, Therefore, the capital gain arising out of the sale from the properties has not been disclosed, thus confirming that the income chargeable to tax has escaped assessment for the AY 2015-16. Thus, I have reason to believe that the income of the assessee to the tune of Rs.1,22,80,100/- for the A.Y.2015-16 has escaped assessment within the meaning of explanation 2(a) of sec.147 of the Act. I am therefore of the considered opinion that it is a fit case for reopening u/s.147 of the IT Act, 1961. Hence, it is proposed to assess the escaped income and any such other income which comes to the notice subsequently during the course of assessment proceedings u/s 147 of the IT Act, 1961. For these reasons, a proposal u/s.147 of the Act is submitted to Hon'ble CIT, Range-1, Bilaspur for according approval to issue notice u/s.148 of the Act.

Sd/- (Sujit Biswas) Income tax Officer-3 Raigarh.”

15. In the result, appeal of the assessee is allowed.”

In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that "it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act. In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and against the Revenue and hold that the Tribunal was not competent to make any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.”

Further, ITAT, “SMC” Raipur Bench in the case of Raghvendra 10. Singh Thakur Vs. The Income Tax Officer, Ward-4(1), Raipur dated 14.07.2025 on the similar facts and circumstances has held and observed as follows: “5. At the outset, on this issue, it is noted that the AO had made addition u/s.69 of the Act which refers to unexplained investment. However, in this case, the assessee had neither purchased nor sold any moveable or immoveable property, nor had invested in any such property. In fact, the verification of facts as emanating from the assessment order as well as the findings of the Ld. CIT(A)/NFAC all pertains to and revolves on un-explained cash deposits by the assessee which resulted in addition of 1/3 of the total deposit since the account was in the name of three persons, including the assessee, so as per his share 1/3 of the said deposit was added as the assesse was unable to prove the nature and source of such cash deposit. In this periphery of investigation and addition made by the department, the correct provision of law to have been applied is Section 69A of the Act, which deals with unexplained money, bullion, jewelry or other valuable article for which the assessee offers no explanation about the nature and source of acquisition of such money, bullion, jewelry or other valuable article etc. The wrong application of provision of law to the facts and circumstances of the case regarding a particular assessee tantamount to non-application of mind by the assessing officer. This itself vitiates and makes the addition void ab initio, since there is no application of mind, much less than any satisfaction arrived at by the AO. In a recent decision of the Co-ordinate Bench of Delhi in the case of Sanjeev Kumar c/o M/s Raj Kumar & Associates vs. ITO Ward 2(3)(2), Bulandshahr, reported in 2023(10) TMI 1027-ITAT Delhi on the same issue of applying wrong provision of the Act, it was observed and held as follows: “14. In view of foregoing discussion, I reach to a logical conclusion that the complete cash book statement clearly explains the source of cash deposit to the bank account of assessee, wherein the assessee has not only included cash receipts as salary and capital withdrawal from two partnership firms M/s Umang Beverages and M/s Mohan Oil & Cattle Feed and a cash salary from Bihar Milk Foods Pvt. Ltd. and has also reduced the amount of drawings for household expenses. The copy of return of income of wife of assessee Smt. Shalini and father of assessee Shri Kalu Mal co-jointly established that the other family members of assessee are also earning and contributing towards household expenses. Therefore, in my humble understanding the source of cash deposit during demonetization to the bank account of assesses is properly explained by the assessee by way of self speaking documentary evidence and explanation. Secondly, the AO has made addition u/s 69 of the Act which pertains to unexplained investments, whereas the assessee has not made any investment either in movable or any immovable property during the relevant period by way of using cash amount. The Ld.CIT(A) though has given credit of 25% of Impugned cash deposit confirming the remaining part of addition but there is no logic of this segregation. From the relevant operative part of first appellate order, I also note that the Ld.CIT(A) has upheld the part addition without mentioning any charging section and impliedly adopting section 69 of the Act in the line of assessment order. Therefore, respectfully following the proposition rendered by the Hon'ble Jurisdictional High Court of Allahabad in the case of Sarika Jain (supra). I have no hesitation to hold that the addition made by the AO by mentioning incorrect and irrelevant charging section is not sustainable and valid being bad in law. Accordingly, grounds of assessee are allowed and AO is directed to delete the entire addition.

6. Similarly, in the decision of Hon’ble High Court of Allahabad in the case of Smt. Sarika Jain Vs. The Commissioner of Income Tax, Bareilly and Another, reported in (2018) 407 ITR 254 (All) which decision was referred to and applied in the earlier decision of the Co- ordinate Bench of Delhi (supra), the Hon’ble High Court of Allahabad held as follows: “In the present case, it is apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the addition of alleged amount of the gift received by the appellant-assessee as his personal income under Section 68 of the Act and not whether such an addition can be made under Section 69-A of the Act. In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that "it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act. In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and against the Revenue and hold that the Tribunal was not competent to make any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.”

7. Considering the aforestated legal principles and on examination of the facts and circumstances, the addition made u/s 69 of the Act is uncalled for and void ab initio. The AO is directed to delete the said addition from the hands of the assessee……”