KAMLESH NARANG,GWALIOR vs. INCOME TAX OFFICER, WARD 1(3), GWALIOR , GWALIOR
Facts
The assessee filed her return of income for AY 2017-18 declaring income of Rs. 10,58,720/-. The assessment was selected for limited scrutiny to examine cash deposits. The assessee explained cash deposits in her bank account by stating that a significant portion was from IDS-2016 declarations and the balance was from opening cash balance as on 01.04.2016, income from job work, and rent received.
Held
The Assessing Officer (AO) accepted the explanation for job work and rent income but disbelieved the opening cash balance of Rs. 11,85,478/- on the grounds that it was not declared in the ITR for AY 2016-17 and was not supported by proper evidence, invoking Section 69A. The CIT(A) dismissed the appeal. The Tribunal found that the authorities below did not make a fair, reasonable, and honest assessment and that a legal ground regarding the invocation of Section 69A was not adjudicated.
Key Issues
Whether the addition of Rs. 11,85,478/- as unexplained money based on opening cash balance was justified, and whether the authorities below properly adjudicated the grounds and evidence presented by the assessee.
Sections Cited
69A, 115BBE, 143(3), 250, 139, 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI RAMIT KOCHAR
This appeal in ITA No. 104/Agr/2024 for the assessment year
2017-18 has arisen from the appellate order dated 31.01.2024 [DIN &
Order No. ITBA/NFAC/S/250/2023-24/1060307935(1)], passed by
learned Commissioner of Income-tax (Appeals), NFAC, Delhi, which
appeal in turn has arisen from the assessment order dated 09.12.2019
passed by Assessing Officer u/s. 143(3) of the Income-tax Act,
1961(Order No. ITBA/AST/S/143(3)/2019-20/1021942080(1)).
ITA No.104/Agr/2024
Grounds of appeal raised by the assessee in the Memo of appeal
filed with ITAT, Agra Bench, Agra as well as additional grounds of appeal
raised by the assessee during the course of proceedings before ITAT
reads as under :
That On the fact and in the circumstances of the case the order passed by the Hon'ble Commissioner of Income-tax (Appeals), Income Tax Department ("CIT(A)") u/s 250 of the Income Tax Act, 1981 ("the Act") is arbitrary, illegal, unjustified, without jurisdiction, bad in law and against the principal of natural justice hence void ab intio. 2. That on the fact and in the circumstances of the case the Hon'ble CIT(A) has grossly erred, both facts and in law, in dismissing the appeal field by the Appellant being aggrieved by the assessment order passed by the Income-Tax Officer, Ward 1(3), Gwalior ("the AO") u/s 143(3) of the Act without providing sufficient opportunity of being heard. 3. That on the fact and in the circumstances of the case Hon'ble CIT(A) has grossly erred, both facts and in law, in confirming the order passed by the Ld. AO u/s 143(3) of Act on December 8,2019 and assessed income at Rs. 22,44,198/- by making addition in the returned income of Rs. 11,85,478/- u/s 69A of the Act as unexplained money. 4. That on the fact and in the circumstances of the case Hon'ble CIT(A) has grossly erred, both facts and in law, in confirming the order passed by the Ld. AO u/s 143(3) without considering the fact that the Ld. AO erred in making addition on arbitrary basis without providing any opportunity of being heard with regards to the reason of addition stated in Assessment Order dated 09/12/2019. The AO has made an addition of Rs. 11,85,478 stating that such amount of opening cash in hand was not stated in the schedule of Assets and Liabilities as closing cash in hand as on 31.03.2016 in ITR-1 SAHAJ of A.Y. 2016-17 as filed on 22.09.2016 and hence stated in the order that our claim of opening cash in hand as on 1st April, 2016 is contradictory as per the ITR filed which is absolutely wrong on the part of the AO as the liability to fill the details in the schedule of Assets and Liabilities arises only when the Income is more than Rs 50,00,000 which is clearly mentioned on the top of Asset and Liability schedule in ITR-1 but in this case the Total Income of A.Y. 2016-17 was Rs 4,77,100 only. hence there was no requirement as per Income Tax Law to report cash in hand in schedule of Assets and Liabilities, which clearly states that the argument of AO that claim of Rs 11,85,478 is contradictory as per ITR filed for A.Y. 2016-17 is indeed wrong, unjustified and bad in law.
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That on the fact and in the circumstances of the case Hon'ble CIT(A) has grossly erred, both facts and in law, in confirming the addition of opening cash in hand made by the Ld. AO by invoking section 69A Unexplained Money read with Section 115BBE of the income tax act, 1961 without considering the fact that the Appellant have duly explained the source of money was Cash in hand as on 1st April 2016 which is evident from the Balance Sheet as on 31-03-2016 submitted during assessment proceedings. 6. That on the fact and in the circumstances of the case Hon'ble CIT(A) has grossly erred, both facts and in law, in confirming the addition of opening cash in hand made by the Ld. AO by invoking section 69A Unexplained Money read with Section 115BBE of the income tax act, 1961 without considering the fact that the Appellant is a 57-year-old woman and had been earning income from stitching since a very long time and have been regularly filing income tax returns and the opening cash in hand represents balance of her accumulated savings. 7. The Appellant craves leave to add, alter, modify or amend the above grounds of Appeal.” Additional legal Ground No. 8-
"8. That the appellate order passed by the learned NFAC dated 31.01.2024 is bad in law being passed not in accordance with the provisions of Section 250(6) of the Income Tax Act and also without disposing of the specific ground taken as per 'ground No. 5' against invoking of provisions of Section 69A of the Income Tax Act. That the appellate order passed dated 31.01.2024 is bad in law, liable to be set aside." Additional legal Ground No.9.
"9. That while passing of the appellate order dated 31.01.2024, the learned NFAC have not considered the submissions and not adjudicated the grounds taken by the appellant regarding invoking of Section 69A of the Income Tax Act, that the provisions of Section 69A of the Income Tax Act are not attracted in the case of the appellant, the order passed by learned NFAC dated 31.01.2024 without adjudicating of specific ground is bad in law, addition made by the AO, sustained by learned NFAC is liable to be deleted."
Brief facts of the case are that the assessee filed her return of
income on 21.03.2018 declaring income of Rs.10,58,720/-. Said return of
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income was processed by Revenue u/s. 143(1) of the Act. Case of the
assessee was selected by Revenue for framing limited scrutiny
assessment under CASS to examine the cash deposits during the year.
Statutory notices u/s. 143(2) as well as 142(1) were issued by the
Assessing Officer to the assessee. It was noticed by the AO that the
assessee has deposited cash in her bank account as under :
Sr. No. Bank Name Account No. Aggregate gross amount credited in the account 1. Punjab National 0291000100113215 95,04,190/- Bank
3.2. The Assessing Officer observed that the assessee has deposited
huge amount of cash of Rs.95,04,190/- in her bank account during the
year under consideration. The assessee was asked by the AO to explain
the cash deposits. Assessee was engaged in the business of job work of
stitching from home. The assessee submitted that the assessee has
deposited cash of Rs.96,54,190/- in the bank accounts during the year
under consideration, of which Rs.80 lakhs have been deposited from the
income declared under IDS-2016. The assessee submitted copy of Form
No. 4 of IDS. The AO accepted this contention of the assessee, and the
matter attained finality. It was further submitted by the assessee that the
balance amount of Rs.16,54,190/- was deposited in cash in bank 4 | P a g e
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accounts of the assessee out of the savings of the previous years and
income earned during the financial year 2016-17. With respect to amount
of Rs.16,54,190/- deposited with the bank in cash, the sources of cash
deposits were explained by the assessee as under : Rs.11,85,478/- : Opening cash balance in hand as on 1st April, 2016. Rs.3,90,000/- : Income from job work of stitching from home. Rs.1,20,000/- : Income from rent received in period before the cash deposit.
3.3 The assessee explained that the assessee is 57 years old woman
and had been earning income from stitching since long time and regularly
filing her return of income. It was submitted that the cash in hand
possessed by her as on 01.04.2016 of Rs.11,85,478/- was accumulated
from her earnings and that she was able to save money from earning
from previous years. Assessing Officer observed that the assessee has
claimed an amount of Rs.11,85,478/- as opening cash balance in hand
as on 01.04.2016 while the assessee has filed return of income for the
assessment year 2016-17 in ITR-1 (SAHAJ FORM) on 22.09.2016 with
total income of Rs.4,77,100/-. Assessing Officer observed that as per
schedule-AL (assets and liabilities), the assessee has not shown any
cash in hand as on 31.03.2016 and the assessee is claiming opening
cash balance of Rs.11,85,478/- as on 01.04.2016 as a device to justify
the cash deposited in her bank account, which is not supported by any
evidence. The AO observed that the assessee does not have any 5 | P a g e
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explanation for nature and source of the amount of Rs. 11,85,478/- being
cash deposited by her in her bank accounts. The Assessing Officer
invoked the provisions of section 69A read with section 115BBE and
made additions of Rs.11,85,478/- to the income of the assessee being
credited in cash in assessee’s bank account as unexplained money.
4 Assessee filed first appeal with ld. CIT(Appeals) and raised as
many as 8 grounds of appeal, wherein the assessee challenged the
addition made both on merits as well as on legal grounds. The Ld.
CIT(Appeals) dismissed the appeal of the assessee by observing that
there was no evidence or proof before the Assessing Officer in respect of
the claim of the assessee of opening cash in hand as on 01.04.2016
amounting to Rs.11,85,478/-.Assessee has filed balance sheet as at
31.03.2016 during the assessment proceedings ,to explain her case.
CIT(Appeals) observed that assessee’s accounts are not audited and the
balance sheet has been prepared on standalone basis. No reliance can
be placed on such a self made document to accept the assessee’s claim
of opening cash in hand as on 01.04.2016 and the ld. CIT(Appeals)
disbelieved the balance sheet filed by the assessee. CIT(Appeals) also
observed that the claim of assessee is devoid of merits keeping in view
the consumption expenditure of the assessee in respective years.
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Still aggrieved, the assessee has filed an appeal with the Tribunal.
The assessee has raised as many as 7 grounds of appeal in the memo
of appeal filed with the Tribunal. Further the assessee has raised two
more additional grounds No. 8 & 9 during the proceedings before the
Tribunal.
5.2 When this appeal was called for hearing before the Bench, ld.
Counsel for the assessee submitted that the assessee has raised two
additional grounds, which are legal grounds and goes to the root of the
matter and same may be admitted in the interest of justice. Learned
CIT(Appeals) has not adjudicated ground No. 5 raised by the assessee in
her appeal. It was submitted that this ground is a legal ground
challenging the invocation of section 69A with respect to additions being
made by the AO. My attention was also drawn to the assessment order
as well as CIT(Appeals)’s appellate order, and page No. 15 of the paper
book of the assessee, which is balance sheet of the assessee as at
31.03.2016 ( assessment year 2016-17) filed by the assessee before the
Assessing Officer showing cash in hand of Rs. 11,85,478.75 . The
assessee’s counsel also drew my attention to ITR’s filed for the
assessment year(s) 2015-16 and 2016-17. Assessee has also submitted
that the appellate order of ld. CIT(Appeals) is not in consonance with
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section 250(6), as the CIT(A) has not adjudicated the legal ground raised
by the assessee as to the invocation of section 69A of the Act.
5.3. Learned Sr. DR, on the other hand, submitted that there is cash
deposit of Rs.96.54 lakhs, out of which Rs.80,00,000/- was declared
under IDS-2016, which was accepted by the department. It was
submitted that it is the amount of Rs.11,85,478/-, which the assessee has
claimed to be the opening cash balance in hand as on 01.04.2016, which
was not accepted by the department as no explanation/evidence to that
effect was submitted. The Assessing Officer has doubted the same, as
the assessee could not giver proper explanation for such cash in hand
and the same was not declared by the assessee while filing return of
income.
5.4 Learned AR in rejoinder submitted that the assessee has raised legal
challenge to the addition made by invoking the provisions of section 69A.
It was submitted that for the preceding year, the Revenue has invoked
the provisions of section 147/148 of the Act. It was further submitted that
the assessee has not maintained any books of account. Learned
CIT(Appeals) has accepted the balance sheet, but has not given credit
for cash in hand of Rs.11,85,478/- as on 01.04.2016, which was the
lifelong savings of the assessee. Rs. 80 lakhs were surrendered in IDS-
2016 scheme which was accepted by the department and Rs.11,85,478/- 8 | P a g e
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was part of the balance sheet, which was not accepted by the ld. AO and
CIT(Appeals).
5.5 Ld. Sr. DR submitted that section 148 was invoked with respect to
preceding year and is not relevant for the present proceedings.
I have considered rival submissions and perused material on
record. I have observed that the assessee filed her return of income on
21.03.2018 declaring income of Rs.10,58,720/-. The return of income
filed by the assessee was processed by Revenue u/s. 143(1) of the Act.
Case of the assessee was selected by Revenue for framing limited
scrutiny assessment under CASS to examine the cash deposits during
the year. Statutory notices u/s. 143(2) as well as 142(1) were issued by
the Assessing Officer to the assessee. The assessee is engaged in the
business of job work of stitching from home. The assessee participated in
assessment proceedings. There was total cash deposit of Rs.95,04,190/-
in the bank account of the assessee with Punjab National Bank. The total
deposits made by the assessee in banks accounts were to the tune of
Rs. 96,54,190/-. The assessee explained that Rs.80 lakhs have been
declared under IDS-2016. The said declaration was accepted by
Revenue. Balance amount of Rs.16,54,190/- was sought to be explained
by the assessee from the following sources : Rs.11,85,478/- : Opening cash balance in hand as on 1st April, 2016. 9 | P a g e
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Rs.3,90,000/- : Income from job work of stitching from home. Rs.1,20,000/- : Income from rent received in period before the cash deposit.
6.2 Assessing Officer accepted the explanation of the assessee with
respect to cash deposit of Rs.3,90,000/- being income from job work and
also Rs.1,20,000/- being rent received by the assessee and deposited by
way of cash in bank account. Assessing Officer, however, disbelieved the
explanation of the assessee so far as opening cash in hand of
Rs.11,85,478/- is concerned as on 01.04.2016. The assessee has
sought to explain the same by filing balance sheet for financial year
2015-16. The said cash balance of Rs. 11,85,478/- is reflected as closing
cash balance as on 31.03.2016 in the said balance sheet. It is an
admitted position that the assessee is not maintaining books of account.
It is also admitted position that the assessee has not declared the said
cash in the return of income filed for the assessment year 2016-17. The
assessee has sought to explain the said opening cash in hand as on
01.04.2016 by filing balance sheet as on 31.03.2016 ,and it is submitted
that this is out of past savings earned in the earlier years. Both the
authorities below have disbelieved the said contentions of the assessee.
So far as the contention of the assessee that there was no obligation to
declare said cash in hand in the ITR, as the assessee’s income is below
Rs.50 lakhs, is not acceptable, as the liability of the assessee to file
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schedule-AL, i.e., statement of assets and liabilities, arise only when the
income is above Rs.50 lakhs provided the assessee does not have
income from business or profession, but in the instant case the assessee
is having income from business of job work of stitching. Attention is
drawn to the Explanation to section 139, wherein under clause (f), where
regular books of account are not maintained by the assessee, the return
of income is to be accompanied by statement indicating amounts of
turnover or gross receipts, gross profits, expenses and net profit of
business or profession and the basis on which such amount has been
computed and also disclosing the amount of total sundry debtors, sundry
creditors, stock-in-trade and cash balance as at the end of the previous
year. The assessee has not disclosed cash in hand as on 31.03.2016 in
the return of income filed for assessment year 2016-17. The Income-tax
Act is governed by preponderance of probabilities which has to be seen
in context of factual matrix and circumstances surrounding the assessee.
A reasonable, fair and honest assessment is required to be made based
on factual matrix and prevailing circumstances. The assessee has sought
to explain that the opening cash balance as on 01.04.2016 was out of
past earnings and past savings. The assessee has also claimed that the
assessee is engaged in the business of job work of stitching from home,
for a very long time and regularly filing her return of income with 11 | P a g e
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department for last several years.The Assessing Officer and CIT(A) have
simply disbelieved the contentions of the assessee without making fair,
reasonable and honest assessment based upon the factual matrix and
circumstances surrounding the assessee and the explanation given by
the assessee. It was incumbent on the authorities below to have made
fair, honest and reasonable assessment of the availability of cash in
hand as on 31.03.2016 held by the assessee based upon the entire
factual matrix of the case and the circumstances prevailing. The
assessee is also required to submit the complete details of income
earned, ITR filed for the preceding years before the authorities below so
that fair, reasonable and honest estimation can be made. The primary
onus is on the assessee. Further, I have observed that the assessee has
raised legal grounds questioning the invocation of section 69A while
making the addition by the Assessing Officer which stood confirmed by
ld. CIT(Appeals). The said ground of appeal is not adjudicated by ld.
CIT(A). While making reasonable, fair and honest assessment of cash in
hand held by the assessee as on 31.03.2016 which was sought to be
explained by the assessee to have been utilized by her for deposit in her
bank accounts, the AO may require to make necessary enquiries and
verifications. Thus, on the facts and circumstances of the case, I set
aside the orders of the authorities below and restore the matter back to 12 | P a g e
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the file of the Assessing Officer for de-novo assessment after giving
reasonable opportunity to the assessee.I clarify that I have not
commented on the merits of the issues in this appeal. The appeal is
allowed for statistical purposes. I order accordingly.
In the result, appeal of the assessee is allowed for statistical
purposes.
Order pronounced in the open court on 28.01.2025.
Sd/-
(RAMIT KOCHAR) ACCOUNTANT MEMBER Dated: 28.01.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra
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