2023 (11) TMI 1049 - AT - Income Tax

Addition made by CIT(A) on a new source - CIT(A) power to make an enhancement /addition upon an issue which does not arise from the order of assessment - Addition by the AO of undisclosed source of investment u/s 69 changed by CIT(A) to the addition u/s 68 - Addition of cash deposit in bank account used for repayment of the loan taken for purchase of property - As alleged initial addition was made under scrutiny assessment for the reason that the AO had examined large investment in property as compared to the total income and which was matter of dispute before the CIT(A) in the first round of litigation wherein the Tribunal had directed to admit the additional evidence of the assessee and to decide the issue and that the ld.CIT(A) finding a new source of addition by making allegation that when an amount was returned to loan creditor there was cash deposit HED THAT - CIT(A) being satisfied with the additional evidences filed establishing the genuine sources of investment in the hands of the assessee for purchase of property travelled beyond the mandate of the Tribunal in the first round of litigation - CIT(A) was directed to adjudicate the appeal afresh after admitting the additional evidences of the assessee. Thus the question restored to the files of the ld.CIT(A) was to examine if the additions made by the AO completing the assessment u/s 144 of the Act was not justified in the light of the evidences available with the assessee. Consequent to the filing of evidences if the CIT(A) intended to examine the issue further then at one hand same was beyond mandate of Tribunal order restoring issue to CIT(A) and otherwise that certainly required putting the assessee to notice. However CIT(A) failed to put the assessee on notice and questioned the source of cash deposits in the Axis Bank account and considered the same as unexplained cash credits in the books of account for the year under consideration. Thus addition made by Ld. CIT(A) on a new source in the form of source of sum credited in book of account is not sustainable. There is no force in the contention of Ld. DR that in any case the tax authorities were examining the source of investment in property be that by way of investment or repayment of loans and that there was no change in the source of addition. We are of considered view that in the present case examining the investment in property from known source or disclosed income was a different exercise done by AO from the exercise done by CIT(A) in examining source of cash deposits in bank account . In former the issue was to examine the source as existed on the date of investment made and in later the issue was to examine the source on the date the sum was credited in the Books of Accounts. So for all reasons discussed above the assessee was supposed to be put to notice which CIT(A) failed. Assessee appeal allowed.

Summary

Issues involved:
The cross appeals in ITA Nos.4945/Del/2019 and 4495/Del/2019 are preferred by the Assessee and the Revenue against the order dated 19.03.2019 of the Commissioner of Income Tax (Appeals)-6, Delhi, arising out of an appeal against the order dated 27.03.2015 passed by the ITO, Ward-18(1), New Delhi under section 144 of the Income Tax Act, 1961.

Details of the Judgment:

Issue 1: Addition of unexplained source of investment in property
The assessee purchased immovable property at an auction and the AO made an addition of Rs. 7,31,00,000/- on account of unexplained source of this investment. The CIT(A) partially deleted the addition, confirming Rs. 1,75,50,000/- due to failure to prove the source of cash deposit used for loan repayment.

Issue 2: Allegation of undisclosed source of investment
The assessee explained that a loan was taken for property purchase, but the CIT(A) made a new addition under section 68, alleging unexplained cash deposit. The AR argued against this, citing legal precedents.

Issue 3: Examination of source of investment
The DR argued that both the AO and CIT(A) examined the source of property investment, whether from genuine sources or the assessee's own funds.

Judgment:
The Tribunal held that the CIT(A) exceeded the Tribunal's directions by making a new addition without notifying the assessee. The CIT(A) questioned cash deposits without proper notice, leading to an unsustainable addition. The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal.

Conclusion:
The Tribunal emphasized the importance of following due process and ensuring that additions are made based on proper examination and notice to the assessee. The appeal of the assessee was allowed, and the Revenue's appeal was dismissed.