SHRI TEJAS MAHENDRA SANGHAVI,JAMNAGAR vs. THE ITO, WARD-3 (1), JAMNAGAR

This appeal has been filed by the assessee against order passed by the ld.Commissioner of Income-Tax (Appeals), Jamnagar[hereinafter referred to as “ld.CIT(A)”] dated 27.6.2019 under section 250(6) of the Income Tax Act, 1961 ("the Act" for short)pertaining to Asst.Year 2016-17.

The grounds raised

The Income Tax officer has erred on facts and in law in making addition of Rs.1,43,040/- u/s 68 of the Income Tax Act, 1961. 4. The Commissioner of Income Tax (Appeals) has erred on facts and in laws in confirming action of the AO to verify transactions beyond the scope of limited scrutiny. 5. The Commissioner of Income Tax (Appeals) has erred on facts and in laws in confirming the addition of Rs. 1,43,040/- u/s 68 of the Income Tax Act, 1961.” 3. The issue in appeal before us relates to the addition made of Rs.1,43,040/- on account of cash deposits in the bank account of the assessee remained unexplained. The contention of the ld.counsel for the assessee before us was that the case was limited scrutiny assessment case and examination of cash deposits was not the scope of limited scrutiny; that no addition was made on account of the issues for which limited scrutiny was directed, and therefore, the addition made on account of cash deposits being beyond the scope of scrutiny of the AO, was unsustainable and ought to be deleted.

Thereafter, he pointed out from para-5 of the assessment order that the AO called for details of bank accounts by issuing notice under section 133(6) of the Act and on verification thereof found therein cash deposits of Rs.14,04,900/- which he asked the assessee to justify; that after considering the explanation of the assessee the cash deposits to the extent of Rs.1,43,040/- was – held as remaining unexplained and addition made of the same to the income of the assessee. Our attentionwas drawn to para-9 of the assessment order in this regard. It was also brought to our notice that it was only addition of this amount which was made in the case of the assessee.

The ld.DR on the other hand drew our attention to pra-10 of the assessment order pointing out that the AO had justified the examination of cash deposits in the bank account of the assessee during the assessment proceedings, though no reason for limited scrutiny, as under:

We have considered the contentions of both the parties. It is an admitted fact that the assessee’s case was selected for limited scrutiny assessment for the reason of largevalue of shares/units in STT, which is settled otherwise than the actual delivery or transfer and the investment income relating to the security transactions. It is also fact on record that the AO had examined all documents furnished by the assessee in relation to the security transactions, and found them to be in order calling for no addition/disallowance to be made. Undoubtedly, the addition in the present case of cash found deposited in the bank account of the assessee, which remained unexplained to the extent of Rs.1,43,040/-, was not thescope of limited scrutiny and was discovered by the AO on calling for bank account of the assessee under section 133(6) of the Act and verification of the same. The AO has given justification for limited scrutiny scope being extended at para-10 of his order which is reproduced above. On going through the contents of the same, we are not able to understand the justification given by the AO. The AO mentions in the first sentence that the case was not selected under CASS for the reason of security transaction. Thus, the first sentence itself is incorrect. Thereafter, he goes onto state that on verification of the bank account, cash deposits undeclared were noted. Entire paragraph does not explain or justify why the AO expanded his scope of scrutiny during the assessment to the cash deposited in the bank account, when it was to be limited only to the security transactions undertaken by the assessee which he was satisfied with on going through all details/evidence furnished by the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 28th February, 2023 at Ahmedabad.