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Facts
The assessee, a doctor running a nursing home, deposited Rs. 31,86,500/- and Rs. 4,00,000/- in her bank accounts during the demonetization period. The Assessing Officer (AO) treated Rs. 30,00,000/- as undisclosed income under Section 68, disallowing the explanation that the cash came from professional receipts, and the CIT(A) upheld this addition.
Held
The tribunal noted that the AO and CIT(A) failed to consider the detailed cash book, OPD cash memos, and patient register submitted by the assessee. It also highlighted that the remand report called by the CIT(A) was not shared with the assessee, violating natural justice. Therefore, the tribunal set aside the orders of the lower authorities and remanded the matter back to the AO for fresh adjudication.
Key Issues
The key legal issues are the validity of the cash deposit explanation during demonetization under Section 68 and the violation of natural justice due to non-sharing of the remand report.
Sections Cited
Section 68, Section 143(2), Section 142(1), Section 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
ORDER PER : S. RIFAUR RAHMAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal against the order of the learned ADDL/JCIT(A), Thiruvanantpuram dated 05.03.2025 for the Assessment Year 2017-18. 2. Brief facts of the case are, the assessee filed its return of income on 06.12.2017, declaring total income of Rs.36,76,600/-. Case was selected for scrutiny under CASS. Accordingly, notices u/s. 143(2) and 142(1) were issued and served on the assessee. In response, learned AR of the assessee attended the proceedings time to time.
Assessee is a doctor by profession and runs a nursing home and earned income from her medical profession. During the demonetization period, the assessee has deposited Rs.31,86,500/- in Oriental Bank of Commerce and Rs.4,00,000/- in Canara Bank. Assessing Officer asked the assessee to furnish source of cash deposit in the bank accounts with supporting evidences. In response, learned AR of the assessee submitted as under :
“The cash deposited in the account of oriental bank of commerce between 09.11.2016 to 90.12.2016 amounting to Rs. 31,86,500/- in difference date and regarding maintained the account in course of carrying an activity of nursing home as business in context of her professional activity. The proceeding of treating patient in the OPD is treat when patient came for treatment in the hospital OPD she deposited as consultation fees as cash and the patient are admitted under treatment after discharged of patient from hospital they deposited cash and cash memo are given to them in which from that cash are deposited in the account of bank during whole year as per requirement of business. The cash receipt and cash memo are entered in cash book regularly book day to day, the only method adopted for recording of cash receipt is to count cash daily at end of the day and find out cash after making necessary adjustment for expenses and outgoing. The remaining balance of cash book is brought forward to next day and all entries in the cash book by contemporaneous and showing cash balance on day to day and where in are kept large balance which were not required for the day to do working in the business and same lay balance which was sufficient amount was kept by applicant and such amount was deposited to OBC bank between 09.11.2016 to 30.12.2016. That fact remains that cash balance of the applicant was sufficient to cover demonetization at time of depositing amount of Rs. 31,86,500/- in her bank current account between of 09.1112016 to 30.12.2016 in difference date which is covered cash book amounting to Rs.30,67,439/- on 12.11.2016 therefore obviously the cash deposited in bank account cannot be regard as undisclosed income because cash balance usually more than Rs. 30,06,500/- likewise the cash balance is showed in cash 2 | P a g e book amounting to Rs.203237/-on Rs. 21.11.2016, the cash balance is usually more than Rs. 1,80,000/-.”
The assessee was asked to furnish relevant cash book, patient register, ledger, cash receipt book and expenses vouchers, which were produced by the ld. AR. Since not satisfied with the information furnished by the assessee, the Assessing Officer analyzed the cash deposit pattern during the year 2015-16 and 2016-17. Based on the above analysis, he observed that the assessee has made cash deposit during 2015-16 at Rs.4,49,000/- whereas in 2016-17 from 01.04.2016 to 31.10.2016, cash deposit in bank was Rs.16,70,000/-. Receipt in the month of November, 2015 was Rs.1,70,000/- and cash deposited on 12.11.2016 was Rs.35,86,500/-. He further observed that since most of the receipts of the assessee from OPD and Nursing Home were in cash, out of Rs.35,86,000/-, he proceeded to give benefit of Rs.5,86,500/- as regular receipts of assessee from OPD and nursing home and the remaining amount of Rs.30,00,000/- was treated as undisclosed income of the assessee and added to the income of assessee u/s. 68 of the Act.
5. Aggrieved with the above order, assessee preferred an appeal before learned CIT(Appeals), Thiruvanantpuram and filed detailed submissions as under :
"That it is not accepted that assessee of firm no explanation about nature of source thereof. Appellant produced written 3 | P a g e submission before AO on 07.11.2019 and 26.11.2019 in which are clearly mentioned to explanation nature and source of income. Appellant has successful in proving the nature of source of cash receipt during course of assessment. The appellant is caring as activity of nursing home business in context of her professional activity. The patient came for treatment, he deposited a consultation fee for particular medical section at cash counter of hospital and issue him receipt of fee. If the patient is to be admitted in the hospital added to the total income of assessee under section 68 of the IT Act1961 which is absolutely not justified and illegal as well as not accordance with law.
Lalchand Bhagat Atma Ram Vs. CIT (1959) 37 ITR 288- if the entries in the books of account on regard to the balance in the ROKAR are held to be genuine logically enough there is no escape from conclusion n that assessment has offered reasonable explanation.
CIT Vs Laxmandad Bhatiya (1996) 217 ITR 878- where the tribunal has recorded a finding of facts that cash balance of the assessee was sufficient to cover the value of high denomination notes such as fining cannot give rise to any question of law. Violation of Article 141 of constitution of India- It is settled principle of law laid down by court is binding on all courts/ tribunal/authority in our country by virtue of article 141 of constitution of India. It is the for most duty of court/ tribunal/ authority to decide the issue in the light of text laid down by supreme court deciding an issue in ignorance of the text vitiates the decision. Appellant produced before AO judgment of Supreme Court as well as various high court and also mentioned in passing order 17.12.2019 without considering the law. Judgment of Supreme Court and various high courts as binding on all authority of income tax. Neither the consider case of law nor mentioned in passing order 17/12/2019 which is not accordance with law.
That there are additional point also which likely to be raised during course of hearing in appeal. That impugned order of assessing officer is liable to quash because the assessment is not make accordance with law and not justified and used arbitrary power as well as capricious methods.”
After considering the same, learned CIT(Appeals) dismissed the appeal of the assessee by sustaining the findings of the Assessing Officer.
Aggrieved with the above order, assessee is in appeal before us, raising following grounds of appeal :
1. The Ld. ADDL/JCIT(A) has erred in law and in facts in confirming the assessment order u/s 143(3) Income Tax Act 1961 passed by AO, assessing the total income at Rs. 66,76,600/- as against returned income of Rs.36,76,600/- for assessment year 2017-2018. The appellant is carrying on activity of nursing-home in name and style M/s Aashirwad Hospital, in this case appellant has filed her return electronically on 06/12/2017 declaring total income 36,76,600/-. The case was selected for complete scrutiny and the notice u/s 143(2) was issued on 08/08/2018, finally the assessment was completed on 17/12/2019 making an addition of Rs. 30,00,000/ by DCIT/ACIT- 3(1), Gwalior in arbitrarily manner.
2. The Ld. ADDL/ICIT(A) has erred in law and in facts in confirming addition Rs. 30,00,000/- was made of u/s 68 of income tax act 1961 on account of cash deposited by appellant in its OBC Bank account post demonization since said cash deposits was toward receipts of hospital records as well as part of Gross turnover Rs. 80,71,750/- which was already offered to tax by appellant at time filing of ITR and admitted by AO as revenue receipt, impugned addition made u/s 68 resulting in double taxation are liable to be deleted.
3. The Ld. ADDL/JCIT(A) has erred in confirming the action of Id. AO in passed the order 143(3) whereas A.O. has never rejected cash-book, ledger, Patient Register, Cash-Receipt Memo, OPD Receipt, Patient Admit and Discharge Summary record in his order 143(3), made addition Rs.30,00,000/- in arbitrarily manner, the provision u/s 68 of income tax act 1961 is not applicable for depositing cash at bank during period demonetization whereas cash depositing to bank are properly recorded in cash-book for A.Y. 2017-2018. Ld. AO had examined and tallied all entries of cash-receipt with aforesaid records and book of account before demonetization period as well as above mentioned documents were also found to be correctly matched with cash-book.
4. That Ld. ADDL/JCIT(A) has erred in deciding the appeal without considering facts and law as well without considering the replies submitted by appellant during course of assessment 4 proceeding and thus ignoring the vital documents such as cash- Rs. 0 book, ledger, patient Register, OPD Receipt, Patient Admit and Discharge Summary record thus the order of Id. ADDL/ICIT(A) is against the principle of nature of justice.
5. That the Ld. ADDL/JCIT(A) has erred in confirming the order of the id. AO ignoring the position of law that provision of law 5 | P a g e
section 68 cannot be applied in respect of income from a source which has already been taxed which would amount to double taxation, Gross Receipt from business has been accepted by assessing officer during the course of assessment, never rejected the books of account as well as no any expenses were disallowed of PL. account whereas case was selected for complete scrutiny under CASS.
6. That Ld. ADDL/JCIT(A) has erred in passing a non-speaking order which is against the law even as well as the action of the Id. AO based upon surmises and conjecture without there being any evidence contrary to contention of assessee which duly supported by documents.
7. That the Ld. ADDL/ICTT(A) has erred in deciding appeal without following as per Rule 46 A of Income Tax Rule 1962, during appellate proceeding a notice was issued to AO calling for remand report, thereafter a notice was issued by Id. AO to assessee for verification of facts and the preparation of Remand Report A.Y. 2017-2018. In compliance of first notice of dated 03/04/2024, appellant AR appeared in person before Ld. DCIT/ACIT of Income Tax, Range-1(1), Gwalior for preparation of Remand-Report on several date. Appellant A.R. submitted written-submission alongwith all relevant documents before you as required by you for preparation of Remand Report. Appellant Authorized representative appeared in person on several date and produced/exhibited Cash-Book, Ledger, Cash-memo, Patient-Register, OPD receipt, Patient Discharge Summary Report for verification of appellant claim.
8. That It is very surprises that Ld. ADDL/JCIT(A) mentioned in his appellate order that Ld. ADDL/JCIT(A) received the remand- report on 18/01/2022 while ld. AO issued the first notice of preparation of remand-report to the appellant on 03/04/2024, it is a rigorous violation of the Income Tax Act 1961 and 46A Rules of income Tax Rule 1962. Neither Ld. ADDL/JCIT(A)has issued copy of remand-report to appellant and Nor uploaded on income tax portal and due to this appellant could not even file rejoinder against remand-report, also violation of time limitation for calling remand-report. It means that the Ld. ADDL/ICIT(A) has neither used his discretion nor has honestly examined the materials on record. It is serious matter and erred in eye of law.
9. That the Ld. ADDL/ICTT(A) has erred in confirming the action of the Id. AO, not considered and followed various judgments of Hon'ble Supreme Court, High Court, Tribunal that violation of law was made under article of 141 of Constitution of India.
10. That the appellate order dated 05/03/2025 is against law and nature of justice, by brushing aside the facts and ground of appellant's case, evidence/material placed on record by misapplying of his discretion and provision under income tax act 1961, thus the addition u/s 68 of IT Act 1961 is unsustainable and be kindly be deleted, my appeal is deserved to be allow. The appellant seeks permission to modify, add, delete, any other grounds of appeal as the circumstances of the case might require or justified.”
Learned AR of the assessee brought to our notice relevant facts on record and also brought to our notice page 214 and 215 of the paper book and submitted that the assessee has filed all the relevant information including the cash book, OPD cash memo, patient register and other information asked for by the Assessing Officer. He drew our attention towards acknowledgement of submissions of above said information through e-portal dated 13.05.2024. He submitted that the assessee has demonstrated that during the year under consideration, the assessee has source of cash through the patient register and all relevant information is submitted that the assessee has proper source of income, which is only through cash receipts from patients and same was deposited in his bank account, which is supported by relevant cash book.
Merely because in the previous year, cash collection was less, the Assessing Officer presumed that the cash deposited by assessee is undisclosed income. He also brought to our notice page 98 of the paper book, wherein assessee had cash balance of Rs.32,38,393/- on 7 | P a g e 01.10.2016 and after further collection, assessee deposited the same during demonetization period. Further, he submitted that based on the above information submitted by the assessee before the learned CIT(Appeals), the CIT(Appeals) has called for remand report from the Assessing Officer, but not shared with the assessee. The additions were proposed in the back of the assessee without asking for any explanation from the assessee, which is bad in law and he prayed that the addition made by the Assessing Officer is not justified.
On the other hand, learned DR relied on the findings of lower authorities.
Considered the rival submissions and the material placed on record.
We observe that during the assessment proceedings, the assessee has filed detailed cash book, OPD cash memos, patient register etc. before the Assessing Officer. We observe that the Assessing Officer has not referred to any of these materials and he analyzed the cash deposits made by the assessee during the previous year and current impugned year and came to the conclusion that the assessee is dealing normally in cash and since the assessee has deposited lesser amount on the same period of time in the previous year, he has given certain concession of Rs.5,86,500/- and balance of Rs.30,00,000/- was added u/s. 68 of the 8 | P a g e Act. In our considered view, the assessee deposited only Rs.4,49,000/- during the same period in the previous year and this year in the same period, the assessee had cash deposit of Rs.16,70,000/- and further receipts in the month of November in 2015 is Rs.1,70,000/-. However, he proceeded to give allowance of Rs.5,86,500/- only. On careful consideration, we observe that during 01.04.2015 to 31.10.2015, the assessee has cash deposit of Rs.4,49,000/-, whereas in the same period, assessee had cash deposit of Rs.16,70,000/- in the current year.
When compared to previous year, there is substantial increase in the collection. It is not necessary that the medical fees should remain same relevant to previous year. There is chance of increase and assessee being medical professional, there is chance of substantial increase in the revenue. It is further observed that the assessee had submitted cash book maintained legitimately before the lower authorities and also the lower authority has not shared the reasons why the relevant remand report was not shared with the assessee. Considering the peculiar facts on record, in our considered view, the source of making deposit during the current year is proved and the Assessing Officer himself observed that there is substantial increase in the fees collection. Therefore, we are inclined to allow the detailed submission of the assessee and it is needless to remand this issue back to the file of lower authorities. 9 | P a g e Considering the amount involved, we are inclined to allow the grounds raised by the assessee.
In the result, assessee’s appeal is allowed.
Order pronounced in the open court on 18.12.2025.