RAJESH MANGLA,FARIDABAD vs. DCIT, CENTRAL CIRCLE-2, FARIDABAD
Facts
A search and seizure operation led to assessment proceedings under Section 153A for AYs 2008-09, 2011-12, and 2012-13. The Assessing Officer made additions for unexplained cash deposits, bank interest, and undisclosed share investments, subsequently imposing penalties under Sections 271(1)(c) and 271AAA. The assessee contested these additions and penalties, arguing a lack of incriminating material and valid explanations for cash deposits.
Held
The Tribunal deleted additions for cash deposits and bank interest for AY 2008-09 due to the absence of incriminating material, citing the Supreme Court's Abhisar Buildwel judgment. The issue of undisclosed share investment was remanded to the Assessing Officer for re-examination regarding the calculation of the peak amount. For AYs 2011-12 and 2012-13, additions for cash deposits were deleted, accepting the assessee's explanation of prior withdrawals. Consequently, all penalties imposed were also deleted.
Key Issues
Whether additions under Section 153A require incriminating material found during search for non-abated assessment years. The validity of cash deposit additions when explained by prior withdrawals, and the sustenance of penalties based on such additions.
Sections Cited
Section 271(1)(c), Section 271AAA, Section 132, Section 153A, Section 143(3)
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Income Tax Appellate Tribunal, DELHI BENCH, ‘F’: NEW DELHI
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘F’: NEW DELHI
BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER
ITA Nos.2811, 2813 & 2814/DEL/2018 [Assessment Years: 2008-09, 2011-12 & 2012-13]
Sh. Rajesh Mangla, vs Dy. Commissioner of Income RRA Taxindia, Tax, D-28, South Extension, Central Circle-II, Part-1, New Delhi-110049 Faridabad, Haryana PAN-AKBPM6493Q Appellant Respondent
ITA Nos.2994, 2996 & 2997/DEL/2022 [Assessment Years: 2008-09, 2011-12 & 2012-13]
Sh. Rajesh Mangla, vs Dy. Commissioner of Income RRA Taxindia, Tax, D-28, South Extension, Central Circle-II, Part-1, New Delhi-110049 Faridabad, Haryana PAN-AKBPM6493Q Appellant Respondent
Appellant by Dr. Rakesh Gupta, Adv. & Sh. Somil Agrwal, Adv. Sh.Deepesh Garg, Adv. Respondent by Sh. Daya Inder Sidhu, CIT-DR
Date of Hearing 07.02.2024 Date of Pronouncement 21.02.2024
2 ITA Nos.2811/Del/2018 & Ors.
ORDER PER BENCH, Captioned appeals by the assessee arise out of separate
orders of learned Commissioner of Income Tax (Appeals)-2,
Gurgaon and culminate from quantum as well as penalty
proceedings under section 271(1)(c)/271AAA of the Income Tax
Act, 1961 (hereinafter ‘the Act’). The appeals pertain to
Assessment Years 2008-09, 2011-12 and 2012-13
Since, the appeals relate to the same assessee and involve
common issues, they have been clubbed together and disposed
of in a consolidated order, for the sake of convenience.
ITA No.2811/Del/2018 (Quantum Appeal) (Assessment Year-2008-09) 3. The grounds of appeal raised by assessee in ITA
No.2811/Del/2018 are as under:-
“1. That having regard to the fact and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction and issuing of notice u/s 153A of the Act. 2. That in any case and in any view of the matter, the assessment framed under section 153(1)(a) of the Act, is bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in making addition of Rs. 17,20,000/- on account of cash deposited in the bank account as alleged income from undisclosed sources and that too in the proceedings u/s 153A of the Act.
3 ITA Nos.2811/Del/2018 & Ors.
That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs. 17,20,000/- is bad in law and against the facts and circumstances of the case. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in making addition of Rs. 1,340/- on account of saving bank interest and that too in the proceedings u/s 153A of the Act. 6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. A.O. in making addition of Rs. 22,98,414/- on account of alleged undisclosed investments in the shares and that too in the proceedings u/s 153A of the Act. 7. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs. 22,98,414/- on account of alleged investment in shares out of alleged undisclosed sources is bad in law and against the facts and circumstances of the case. 8. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned order without giving adequate opportunity of being heard.” 4. Briefly the facts are, the assessee is a resident individual.
A search and seizure operation under section 132 of the Act was
carried out on assessee on 09.05.2012. Consequent upon search
and seizure operation, proceedings under section 153A of the
Act were initiated. In course of assessment proceeding, the
Assessing Officer observed that as per the bank statement of the
assessee, cash deposit of Rs.17,20,000/- were found to have
been made during the year. Therefore, he called upon the
assessee to explain the source of such cash deposit. Though, the
assessee explained that such deposits were out of earlier
withdrawals, however, the Assessing Officer was not convinced
4 ITA Nos.2811/Del/2018 & Ors.
with the submissions of assessee and proceeded to add the
amount of Rs.17,20,000/- to the income.
Further, he noticed that assessee has earned interest
income of Rs.1,340/- from savings bank account, which he also
added to the income of the assessee. Besides aforesaid additions,
referring to seized material found in course of search and seizure
operation, the Assessing Officer called upon the assessee to
explain transactions made in shares during financial year 2007-
In reply, the assessee explained that seized material is a
loose sheet, hence, does not relate to the assessee. The
Assessing Officer, however, was not convinced with the
explanation of the assessee. Holding that the transactions
appearing in the seized documents relates to the assessee, he
treated the purported investment in shares amounting to
Rs.22,98,414/- as income of the assessee.
Though, the assessee contested the aforesaid additions
before learned First Appellate Authority, however, he was
unsuccessful.
We have considered rival submissions and perused
materials available on record. In so far as, additions of
5 ITA Nos.2811/Del/2018 & Ors.
Rs.17,20,000/- and Rs.1,340/- representing cash deposits in
bank account and savings bank account interest, respectively,
the submission of the assessee, in nutshell, is they have not
been made with reference to any incriminating material found as
a result of search. Hence, these additions are unsustainable. A
reading of assessment order clearly indicates that the Assessing
Officer has not referred to any incriminating material qua the
aforesaid two additions. The Assessing Officer has simply made
these additions based on the bank account statement furnished
by the assessee.
Considering the fact that assessment for the impugned
assessment year did not abate on the date of search and seizure
operation, the Assessing Officer could not have made any
addition in absence of any incriminating material. This is so
because of the ratio laid down by the Hon’ble Supreme Court in
case of PCIT vs Abhisar Buildwel (P.) Ltd. [2023] 150
taxmann.com 257 (SC).
Before us, the Revenue was unable to bring on record any
material to establish that the aforesaid two additions were made
based on any incriminating material found as a result of search.
In view of the aforesaid, following the ratio laid down by the
6 ITA Nos.2811/Del/2018 & Ors.
Hon’ble Supreme Court in case of Abhisar Buildwell (P.)
Ltd.(supra), we delete the additions.
In so far as, the addition of Rs.22,98,414/- is concerned,
ld. Counsel for the assessee has submitted before us that in
course of proceedings before learned First Appellate Authority,
an enhancement notice was issued, wherein, based on certain
documents furnished by the assessee, learned First Appellate
Authority has worked out peak amount of Rs.46,56,796/- as on
24.03.2008 and considered the same for addition. It is the
specific contention of learned counsel for the assessee that
neither in the enhancement notice nor anywhere else in the
order, learned First Appellate Authority has discussed in detail
or furnished any working of the peak amount of Rs.46,66,796/-.
He submitted, the assessee is completely in dark regarding the
working of the peak amount of Rs.46,66,796/-. Thus, he
submitted, the issue may be restored back to learned First
Appellate Authority for providing the detail working of the peak
amount added to the income of the assessee.
Learned Departmental Representative agreed for
restoration of the issue to learned First Appellate Authority.
7 ITA Nos.2811/Del/2018 & Ors.
Having considered the submissions of both parties, we find
the addition of Rs.22,98,414/- has been enhanced by learned
First Appellate Authority to Rs.46,66,796/- by applying peak
theory. However, how the peak amount was arrived at is not
discernible from the order of learned First Appellate Authority.
In view of the aforesaid, we are inclined to restore this issue to
the file of the Assessing Officer for examining afresh and decide
it after providing due and reasonable opportunity of being heard
to assessee.
In the result, appeal is partly allowed.
ITA No.2994/Del/2022 (Penalty Appeal) Assessment Year 208-09 14. This appeal is against the confirmation of penalty imposed
under section 271(1)(c) of the Act for an amount of
Rs.12,41,689/-. As discussed in the earlier part of the order
while dealing with the quantum appeal, being ITA
No.2811/Del/2018, at the time of completion of assessment
under section 153A r.w.s 143(3) of the Act, the Assessing Officer
made following three additions.
i. Unexplained cash deposits of Rs.17,20,000/- ii. Interest from bank account of Rs.1,340/-
8 ITA Nos.2811/Del/2018 & Ors.
iii. Undisclosed income from shares of Rs.22,98,414/- 15. The additions so made were confirmed by learned
First Appellate Authority. Based on these additions, the
Assessing Officer initiated proceeding for imposition of penalty
under section 271(1)(c) of the Act and ultimately passed an order
imposing penalty of Rs.12,41,689/-. The penalty so imposed
was confirmed by learned First Appellate Authority.
We have heard both the parties and perused the
material available on record. While dealing with the quantum
appeal of assessee (supra), we have deleted the additions of
Rs.17,20,000/- and Rs.1,340/-. Whereas, the issue relating to
the addition of Rs.22,98,414/- has been restored back to the
Assessing Officer for deciding afresh. Thus, at present, there is
no surviving additions against the assessee. That being the
factual position on record, the penalty imposed u/s 271(1)(c) of
the Act cannot survive. Accordingly, we delete the penalty
imposed u/s 271(1)(c) of the Act.
ITA No.2813/Del/2018 (Quantum Appeal) Assessment Year 2011-12 17. The only dispute in the present appeal is in relation to
addition of Rs.13,50,000/- made on account of cash deposits in
bank account.
9 ITA Nos.2811/Del/2018 & Ors.
Briefly the facts are, in course of assessment
proceeding, the Assessing Officer, on examination of bank
account statement noticed that in the year under consideration,
the assessee had deposited cash aggregating to Rs.13,50,000/-
in bank account. Therefore, he called upon the assessee to
explain the source of cash deposits. In reply, the assessee
submitted that cash deposits were made out of earlier
withdrawals. The Assessing Officer, however, was not convinced
with the submission of the assessee and proceeded to treat the
amount of Rs.13,50,000/- as income from undisclosed sources
and accordingly, added back to the total income of the assessee.
Though, the assessee contested the aforesaid addition
before learned First Appellate Authority, however, learned
Commissioner (Appeals) confirmed the same.
Before us, learned counsel for the assessee reiterated
the stand taken before the authorities below. He submitted the
assessee had sufficient cash withdrawals from the bank account
to explain the source of cash deposit. He further submitted that
Departmental Authorities have not established on record that
the cash withdrawals were utilized for any other purpose.
Therefore, the cash deposits have to be telescoped in to the cash
10 ITA Nos.2811/Del/2018 & Ors.
withdrawals. In support of said contention, ld. Counsel for the
assessee relied upon following decisions:-
i. Jaya Aggarwal vs ITO [2018] 254 taxman 398 (Del) ii. Moongipa Investment Limited vs ITO [2012] 70 DTR 132 iii. ACIT vs Baldev Raj Charla & Ors. [2009] 18 DTR 413 21. Learned Departmental Representative strongly relied
upon the observations of the Assessing Officer and learned
Commissioner (Appeals).
We have heard both the parties and perused the
material available on record. As could be seen from the bank
account statement, in the year under consideration, the
assessee had deposited cash amounting to Rs.30,95,000/-,
whereas, he had total withdrawals of Rs.25,50,000/-. The
consistent stand taken by the assessee is to the effect that cash
deposits were made out of cash withdrawals. As can be seen
from the materials on record, on 03.04.2010, the assessee
withdrew cash of Rs.7,50,000/-, whereas, he deposited cash of
Rs.3,00,000/- on 25.05.2010. Similarly, he withdrew cash of
Rs.7,50,000/- on 26.06.2010 and 26.08.2010 and deposited
cash aggregating Rs.4,45,000/- on 31.08.2010 and 21.10.2010.
Further, cash aggregating to Rs.10,50,000/- was withdrawn on
11 ITA Nos.2811/Del/2018 & Ors.
06.12.2010 and 18.01.2011. Whereas, cash deposits of
Rs.6,50,000/- was made on 02.02.2011. As can be seen from
the aforesaid facts, the proximity between cash withdrawal and
deposit is quite close. Further, the Departmental Authorities
have not brought any material on record to establish that the
cash withdrawals were utilized for any other purpose and not
available with the assessee for re-deposit. Thus, applying the
ratio laid down in the judicial precedents cited before us, we
hold that the source of cash deposit has been explained by the
assessee. Accordingly, we delete the addition of Rs.13,50,000/-
In the result, the appeal is allowed.
ITA No.2996/Del/2022 (Penalty Appeal) Assessment Year 2011-12 24. We have hard the parties and perused the material
available on record. While deciding the quantum appeal of the
assessee, being ITA No.2813/Del/2018 (supra), we have deleted
the addition based on which penalty under section 271(1)(c) of
the act was imposed. That being the case, the penalty imposed
cannot survive. Accordingly, we delete it.
In the result, appeal is allowed.
12 ITA Nos.2811/Del/2018 & Ors.
ITA No.2814/Del/2018 (Quantum Appeal) Assessment Year 2012-13 26. At the outset, learned counsel for the assessee, on
instructions, submitted that he does not want to contest the
addition of Rs.10,090/- on account of interest from savings bank
account as raised in ground nos. 5 and 6. Accordingly, ground
nos. 5 and 6 are dismissed as not pressed.
The only surviving addition is of Rs.7,22,000/- made
on account of cash deposits in the bank account.
Briefly the facts are, in course of assessment
proceeding, while examining the bank account statement of the
assessee, the Assessing Officer noticed that in the year under
consideration, the assessee has deposited cash amounting to
Rs.7,22,000/- in the bank account. Though, the assessee
explained that the said deposits were made out of opening cash
balance and earlier withdrawals, however, the Assessing Officer
remained unconvinced and proceeded to treat the amount of
Rs.7,22,000/- as undisclosed income and added back to the
income of the assessee.
13 ITA Nos.2811/Del/2018 & Ors.
The addition so made was also sustained by learned
First Appellate Authority.
Before us, learned counsel appearing for the assessee
submitted that the cash deposits were made out of opening cash
balance and earlier cash withdrawals. Whereas, learned
Departmental Representative relied upon the observations of the
departmental authorities.
We have considered rival submission and perused material
available on record. From the material placed on record, it is
observed that in the year under consideration, the assessee had
opening cash balance of Rs.6,62,200/- and cash withdrawals
from bank account amounting to Rs.8,00,000/- . Thus, the total
cash available with the assessee was to the tune of
Rs.14,62,200/-. Whereas, the assessee has deposited cash in
the bank account to the tune of Rs.11,72,000/-. As could be
seen from the aforesaid facts and figures, out of the total cash
deposit, the Assessing Officer has disputed the source of cash
deposit amounting to Rs.7,22,000/- . Whereas, he has accepted
the balance amount. As discussed earlier, the assessee had
total cash available with him to the tune of Rs.14,62,200/-.
Thus, assessee’s explanation that the cash deposits were out of
14 ITA Nos.2811/Del/2018 & Ors.
cash available cannot be disbelieved in absence of any material
brought on record by the Departmental Authorities to establish
that the cash available with the assessee was utilized for some
other purpose. In view of the aforesaid, we delete the addition of
Rs.7,22,000/-.
Appeal is partly allowed.
ITA No.2997/Del/2022 (Penalty Appeal) Assessment Year 2012-13 33. The present appeal is against imposition of penalty
under section 271AAA of the Act.
While deciding the quantum appeal of the assessee,
being ITA No.2814/Del/2018, we have deleted the addition
based on which penalty under section 271AAA was imposed.
That being the factual position on record, penalty imposed
cannot survive. Accordingly, we delete the penalty imposed
under section 271AAA of the Act.
Appeal is allowed.
To sum up ITA No.2811/Del/2018 and ITA
No.2814/Del/2018 are partly allowed, ITA No.2813/Del/2018 is
15 ITA Nos.2811/Del/2018 & Ors.
allowed, ITA No.2994/Del/2022, ITA No.2996/Del/2022 and ITA
No.2997/Del/2022 are allowed.
Order pronounced in the open court on 21st February, 2024.
Sd/- Sd/- [M. BALAGANESH] [SAKTIJIT DEY] ACCOUNTANT MEMBER VICE PRESIDENT Delhi; Dated: 21/02/2024. f{x~{tÜ? f{x~{tÜ? f{x~{tÜ? f{x~{tÜ?
