ABDUL RAZAQUE,JABALPUR vs. ACIT CIRCLE 2(1), JABALPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SH. KUL BHARAT, VICE PRESIDENT AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.84/JAB/2024 A.Y. 2016-17 Abdul Razaque, vs. ACIT, 903, Badi Omti, Jabalpur, M.P. Circle-2(1), Jabalpur PAN:AFGPR9967N (Appellant) (Respondent) Assessee by: Sh. Sapan Usrethe, Advocate Revenue by: Sh. Alok Bhura, Sr. DR Date of hearing: 18.09.2025 Date of pronouncement: 16.10.2025 O R D E R PER NIKHIL CHOUDHARY, A.M. This is an appeal filed by the assessee against the order of the ld. Addl JCIT(A), Mysore, wherein the ld. Addl JCIT(A) has partly allowed the appeals of the assessee against the orders of the ld. AO dated 19.11.2018, passed under section 143(3) of the Income Tax Act, 1961. The grounds of appeal are as under:- “1. The learned Commissioner of Income tax (Appeal) ADDL/JADDL JCIT(A)- Mysore was not Justified in deciding the legal ground that case was selected for limited scrutiny under CASS to examine the reasons of (i) Return filed after 7.11.2016' and cash deposit during demonetization period and addition was made on some other issue which was not the reason for selection and without taking any approval from higher authorities. 2. The learned Commissioner of Income tax (Appeal) ADDL/JADDL JCIT(A)-Mysore was not Justified in confirming the addition of Rs. 4,48,584 by ignoring all the evidences and documents by simply observing that no new documents were filed even though documents which are filed are sufficient and self-explanatory and the order of learned CIT Appeals is passed in a Mechanical manner, without any application of mind and appears that it was passed with predetermined mind.

ITA No.84/JAB/2024 A.Y. 2016-17 Abdul Razaque 3. The learned Commissioner of Income tax (Appeal) ADDL/JADDL JCIT(A)- Mysore was not Justified in confirming the addition of Rs. 4,48,584 made by the AO without appreciating that appellant have sufficient opening cash balance and bank account itself is self-explanatory. 4. The appellant craves for leave to amend, add to or omit any ground up to the time of hearing of the appeal.” 2. The facts of the case are that the assessee filed its return of income for the A.Y. 2016-17 on 11.03.2018 declaring total income of Rs. 47,06,510/-. The case was selected for limited scrutiny under CASS to examine; (i) Return filed after 7.11.2016 and (ii)cash deposit during demonetization period. The ld. AO records that statutory notices under section 143(2) and 142(1) were served upon the assessee through ITBA Portal and through email. In response, assessee filed submissions. The ld. AO observed that the assessee had deposited cash in his bank account at Union Bank of India to the extent of Rs. 4,48,584/- and he was asked to furnish the sources of the cash deposits vide questionnaire dated 11.10.2018. Assessee was also asked to submit the details for the period post demonetization in F.Y. 2016-17. When no response was received, a show cause notice was issued. In response, it was submitted that the assessee had made cash deposit to the extent of Rs. 40 Lacs in A.Y. 2017-18 and the same had been duly declared under IDS 2016. He said that regarding source of cash deposits of Rs. 4,84,584/- in F.Y. 2015-16, the assessee had sufficient cash in hand and had made an earlier withdrawal. However, the ld. AO did not accept the said submission and he added back the sum of Rs. 4,48,584/- as unexplained cash credit under section 68 of the Act. He also made an addition of Rs. 10,200/- on account of unexplained expenditure in the purchase of a Gas Cylinder. 3. Aggrieved with this order, the assessee went in appeal before the ld. Addl JCIT(A). The ld. Addl JCIT(A) records that he issued five notices for hearing to the assessee between the period 27.01.2021 and 24.01.2024 but no response was received except for adjournment petitions on certain dates. These adjournments were either

ITA No.84/JAB/2024 A.Y. 2016-17 Abdul Razaque sought on account of not having complete documents or suffering from some medical condition but in the absence of any reply on subsequent dates, the ld. Addl JCIT(A) decided to adjudicate the matter on the basis of materials on record. The ld. Addl JCIT(A) went through the statement of facts in which the assessee had submitted that the case had been selected for limited scrutiny on account of late filing of return and cash deposit during demonetization period, and he admitted to the fact that he had deposited Rs. 40 Lacs during the demonetization period but stated that the same would fall under assessment year 2017-18 and that it already stood disclosed under IDS 2016. As regards the addition of Rs. 4,38,584/- on account of cash deposit during the year, the ld. AO had asked questions and made the addition even though it was not one of the reasons for selection for limited scrutiny during the year. It was, however submitted that the assessee had sufficient cash balance which was shown in the balance sheet for the A.Y. 2015-16 and the same had been verified during assessment proceedings of that year. The assessee had participated in bid for three shops and invested Rs. 3,44,584/- for purchase of these shops by way of three demand drafts dated 3.07.2015. However, upon failure to be allotted, the amounts had been deposited back on 30.07.2015. Regarding deposit of Rs. 70,000/- and Rs. 34,000/-, the same was explained out of cash and bank balance and regarding addition of Rs. 10,200/-, it was submitted that the AO had not appreciated the fact that the assessee had shown other income of Rs. 9,47,086/- which included the aforesaid sum. The ld. Addl JCIT(A) considered the arguments furnished by the assessee and he held that the assessee had not furnished any submissions substantiating the grounds of appeal and not submitted any reasonable evidence before the ld. Addl JCIT(A) to prove the credits in the bank being out of earlier cash withdrawals and therefore, since the assessee had failed to discharge his onus, the grounds of appeal raised by the assessee were dismissed. Similarly, on consideration of the assessee’s plea that Rs. 10,200/- already stood accounted for, the ld. Addl JCIT(A) restored the matter back to the file of the ld. AO to verify the genuineness of the assessee’s claims. 3

ITA No.84/JAB/2024 A.Y. 2016-17 Abdul Razaque 4. The assessee is aggrieved with this order of the ld. Addl JCIT(A) and has accordingly come before us. Sh. Sapan Usrethe, Advocate appearing on behalf of the assessee, invited our attention to the grounds on which the case was selected for limited scrutiny and pointed out that the same were clearly erroneous because this assessment pertain to F.Y. 2015-16 and not F.Y. 2016-17. He also pointed out that the ld. AO was constrained by the parameters of limited scrutiny and could not have transgressed into other areas without obtaining the approval of the ld. PCIT in writing. In the circumstances, the addition made by the ld. AO, besides being unwarranted, were outside the purview of his jurisdiction and therefore bad in law. He placed reliance on the judgments passed by the ITAT Kolkata Bench in the case of Srimanta Kumar Shit vs. ACIT, dated 19.11.2024 and the ITAT Ahmedabad Bench in the case of Kintu kumar Ambalal Patel vs. DCIT, dated 31.05.2022. He accordingly, prayed that the additions may be deleted on this account. 5. On the other hand, Sh. Alok Bhura, ld. Sr. DR pointed out that the assessee had failed to submit convincing replies to the queries raised by the ld. AO regarding the source of cash deposit and investment into purchase of Gas Cylinder and therefore, the ld. AO was justified in addition these amounts back in his hands. 6. We have duly considered the facts and circumstances of the case. It is clear that the grounds on which the case was selected for limited scrutiny, did not include investigation into the source of cash deposits during F.Y. 2015-16. Therefore, before the ld. AO could embark upon such investigations, he was obliged as per CBDT instructions, to seek the prior approval of the ld. PCIT in writing and only then could he convert the limited scrutiny into a full scrutiny. However, it appears that in the instant case, this had not been done. Thus, since the mandate given to the ld. AO was to enquire into source of cash deposited during demonetization period, the ld. AO was not authorized to look into the sources of cash deposit in the preceding financial year. Any addition made on this account is therefore, beyond the jurisdiction of the ld. AO

ITA No.84/JAB/2024 A.Y. 2016-17 Abdul Razaque and is accordingly bad in law. Therefore, it is deleted. Similarly, the investment of Rs. 10,200/- in the purchase of the Gas Cylinder (Gas Subsidy) is also beyond the scope of limited scrutiny as outlined in the second paragraph of the assessment order. Accordingly, the addition made in this regard is also deleted for similar reasons. 7. In the result, ground no. 1 is allowed while ground nos. 2, 3 & 4 being infructuous are dismissed as such. 8. In the result, the appeal of the assessee is partly allowed. Order pronounced on 16.10.2025 in the open Court. Sd/- Sd/- [KUL BHARAT] [NIKHIL CHOUDHARY] VICE PRESIDENT ACCOUNTANT MEMBER DATED: 16/10/2025 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR, ITAT, 4. CIT, 5. The ADDL JCIT(A) By order Sr. P.S.