2024 (3) TMI 1152 - AT - Income Tax

Addition u/s 69A - unexplained cash deposits in the bank account - onus to prove - HELD THAT - We find that before the lower authorities the assessee had provided source of cash deposits in the bank account. Revenue has not brought any material to controvert the claim of the assessee that the assessee was having cash in hand to make the impugned deposits. Thus when the assessee has provided the source of cash deposits being cash withdrawals, AO without bringing adverse material ought not have treated the same as unexplained. Therefore, hereby direct the AO to delete the impugned addition - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 29,60,000/- u/s 69A of the Income Tax Act, 1961.
2. Legality of converting limited scrutiny proceedings into full scrutiny.
3. Jurisdiction of the Assessing Officer.

Summary:

1. Addition of Rs. 29,60,000/- u/s 69A of the Income Tax Act, 1961:
The assessee contested the addition of Rs. 29,60,000/- made by the Assessing Officer (AO) on the grounds of unexplained money u/s 69A. The assessee argued that there was a direct nexus between cash withdrawals from the bank account and subsequent cash deposits. The AO had added Rs. 16,10,000/- as cash deposits and Rs. 13,50,000/- as tax paid through cash. The assessee provided detailed evidence of cash withdrawals for medical purposes and subsequent deposits due to demonetization. The Tribunal found that the AO did not bring any adverse material to counter the assessee's claim and directed the AO to delete the addition, citing relevant case laws supporting the assessee's position.

2. Legality of converting limited scrutiny proceedings into full scrutiny:
The assessee challenged the legality of the assessment order, arguing that it was passed by converting limited scrutiny into full scrutiny without mandatory compliance with CBDT guidelines. The notice u/s 143(2) was issued for limited scrutiny to verify cash tax payments, and the issue of other cash deposits was not part of the original reasons. The assessee contended that the AO did not obtain prior approval from the Pr. CIT to convert the proceedings, making the assessment order illegal and without jurisdiction.

3. Jurisdiction of the Assessing Officer:
The assessee argued that the assessment order was passed by ITO, Ward 29(3), without a valid transfer of the case u/s 127 of the Income Tax Act, 1961, making it invalid and bad in law. The notice u/s 143(2) was issued by ACIT, Circle 32(1), New Delhi, and the assessment order was passed without issuing a valid notice, rendering it void-ab-initio.

Conclusion:
The Tribunal allowed the appeal, directing the AO to delete the impugned addition of Rs. 29,60,000/-. The Tribunal found that the assessee had provided sufficient evidence of cash withdrawals and deposits, and the AO had not brought any adverse material to justify treating the deposits as unexplained. The Tribunal also noted the procedural lapses in converting limited scrutiny into full scrutiny without proper approval, making the assessment order unsustainable. The appeal was pronounced in open court on 22nd March, 2024.