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TMI Blog2024 (8) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... hout following the procedure for conversion of limited scrutiny to the fully complete scrutiny as prescribed by CBDT is bad in law and thus the consequent addition so made deserves to be deleted. 2. On the facts and in the circumstances of the case and in law, ld.CIT(A) has grossly erred in confirming the addition of Rs. 8,50,000/- made by AO on allegation of cash deposit by assessee in bank account during the year under consideration. It is submitted that the case was selected for scrutiny in view of the fact the return was filed belated and cash was deposited during demonetization, which happened to be on 8.11.2016, i.e. after end of F.Y. 2015-16. Appellant prays that deposits made in bank account even prior to announcement of Demonetization cannot be deemed to have been a planned affair, therefore addition of Rs. 8,50,000/- being outside the scope of limited scrutiny deserves to be deleted. 3 On the facts and in the circumstances of the case and in law, the ld. CIT(A) has further erred in confirming addition of Rs. 10,48,737/- being difference between cash in hand as on 31.03.2016 and as on 31.3.2015. It is submitted that, regular books of accounts including Purchase and Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer is with regard to the issue for which the case was selected for scrutiny. The Income-tax Department has found that some of the assessees tried to build an explanation for cash deposits in their bank accounts during the demonetization period by manipulating their books of accounts and filing revised or belated ITR and in this regard, the CBDT issued various directions for scrutiny assessment in the case of an assessee who had filed belated return during post demonetization period. Therefore, the Assessing Officer was required to examine as to whether belated ITR is filed just to build an explanation for cash deposits in bank account during the demonetization period. It is a fact that in this case the appellant had deposited cash during demonetization period and the return of income of earlier assessment year was filed belatedly after demonetization period. 5.2 It is seen from the assessment order that the Assessing Officer has sought the information related to the asset side of the Balance Sheet which includes cash in hand and sundry debtors. These details were called for in order to verify whether the appellant filed the return of income belatedly to build an explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the appellant has not submitted the evidence of source of cash amounting to Rs. 8,50,000/- deposited in the bank account during the financial year relevant to the Assessment Year 2016-17. The appellant has submitted a copy of cash book and on perusal of the same it is seen that the appellant has credited every month systematically around Rs. 1 lakh and has shown narration as 'commission received without adducing any evidence in support of the same. It is also seen that the Gross commission received shown by the appellant is around Rs. 4 lakh only in two previous years. Under these circumstances it is beyond understanding that how come appellant is showing commission received in cash amounting to Rs. 10 lakh plus or so in the year under consideration. The copy of Balance sheet filed also shows that to justify the cash received the appellant has reduced Sundry Debtors balance without giving any documentary evidences in support of it. There are negligible withdrawals have been shown by the appellant against the commission received in cash which creates doubt about the genuineness of the said translation. It is seen from the Profit and Loss Account furnished by the appellant duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource of cash deposited in the bank account with supporting evidence and therefore, the Hon'ble High Court decisions relied upon by the appellant cannot be applied in this case. Therefore, the addition made on account of cash deposited in the bank account amounting to Rs. 8,50,000/- by the Assessing Officer is confirmed. 5.5 The second amount added to the total income is the difference between opening cash and closing cash appearing in the Balance Sheet. During the assessment proceedings, the Assessing Officer found that the cash in hand of the appellant as on 31.03.2015 was at Rs. 12,45,770/- as against the opening cash in hand of Rs. 23,150/-. During the assessment proceedings the Assessing Officer requested the appellant to provide the source of increase in cash in hand and as the appellant had not given any satisfactory explanation, the difference of cash in hand of Rs. 10,48,737/- after adjusting the cash income was added to the total income. During the appellate proceedings the appellant stated that the Assessing Officer has ignored the receipts from advances given to some persons during the year under consideration and therefore no no addition can be made. However no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition made on account of sundry debtors amounting to Rs. 3,75,400/- is deleted. 6. In the result, the appeal is partly allowed.'' 2.2 During the course of hearing, the ld AR of the assessee has filed the following written submission that the additions confirmed by the ld. CIT(A) are not justified which deserves to be deleted. Grounds of Appeal No.1 & 2: In ground of appeal No.1, assessee has challenged the action of ld.AO in making additions of Rs. 8,50,000/- and Rs. 10,48,737/- on account of cash deposited in bank and excess cash in hand respectively, none of which was covered by the reason for selection of Limited scrutiny. Whereas in ground of appeal No.2, assessee has challenged the action of ld.AO in making addition of Rs. 8,50,000/- being cash deposits made during the year under consideration prior to even announcement of Demonetization (which again is not in the scope of reason for limited scrutiny). Since both the grounds of appeal are interconnected, the same are canvassed together for the sake of convenience. In this regard, as stated above, reason for selection of scrutiny as stated above, is reproduced again for the sake of ready reference (APB 4-5): "C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where in E-proceeding Window (APB 39), no notice dated 18.12.2018 is seen and after notice dated 4.12.2018, assessment order is appearing. However, ld.AO has completed assessment on the basis of such additional queries stated to have been raised vide aforesaid notice dated 18.12.2018, which was not communicated and thus without providing assessee with opportunity of being heard. Therefore, addition made on account of cash deposit of Rs. 8,50,000/- and Excess Cash of Rs. 10,48,737/- vide assessment order passed without communicating show cause notice, i.e. without giving opportunity is not in accordance with law. It is further submitted that cash worth Rs. 8,50,000/- was deposited by assessee during the year under consideration in his bank account no. 2967000100284199 with PNB on following dates: Date Amount 05/02/2016 4,00,000/- 02/10/2015 1,10,000/- 06/10/2015 1,60,000/- 02/09/2015 1,80,000/- 8,50,000/- From perusal of above, it is evident that cash deposits of Rs. 8,50,000/- as have been added by ld.AO, were made by assessee even prior to demonetization and cannot be treated to have been covered by the scope of Limited Scrutiny, which was initiated solely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited Scrutiny" selected through CASS 2015 & 2016". Para 4 of such instruction clarifies that "........in cases under Limited Scrutiny, the scrutiny assessment proceedings would initially be confined to issues under Limited Scrutiny and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to Complete Scrutiny after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in Limited Scrutiny. The AO shall also expeditiously intimate the taxpayer concerned regarding conducting Complete Scrutiny in such cases." Further, para 2 of such Instruction lays down procedure for conversion of Limited Scrutiny cases in Complete Scrutiny, which reads as under: 2. In order to ensure that maximum objectivity is maintained in converting a case falling under "Limited Scrutiny" into a "Complete Scrutiny" case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up "Complete Scrutiny" in a case which was originally earmarked for "Limited Scrutiny", the Assessing Officer (AO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed cash. In this regard, it is submitted that during the course of assessment proceedings as well as in appellate proceedings before ld.CIT(A), assessee furnished copies of Commission ledger, Sales and Purchase ledger, Cash book and also explained how opening balance of Capital was arrived at. Since, closing cash in hand as shown in balance sheet as on 31.03.2016 was computed according to cash book so furnished, wherein no discrepancy whatsoever was pointed out by lower authorities, the same deserves to be accepted as such. Also, as submitted above that, since show cause notice raising queries in this regard was not communicated to the assessee, no further clarification could be given by assessee. During the course of appellate proceedings before ld.CIT(A), it was submitted that assessee had also received advances from certain parties. Also, ld. CIT(A) himself has observed that from perusal of balance sheet it is seen that debtors have reduced, which also implies that a portion of increase in cash in hand is also attributable to recovery made from debtors. It is thus submitted that assessee has duly explained the source of cash in hand available as on 31.03.2016 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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