Case Law Details
Vikrant Sandal Vs ITO (ITAT Chandigarh)
The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the appeal filed by the assessee for Assessment Year 2010-11 against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, arising from an assessment framed under Sections 143(3) read with 147 of the Income-tax Act, 1961.
The assessee’s case was reopened through a notice issued under Section 148 on 26 March 2017 to examine investments in purchase of property, cash deposits, and cash payments towards credit card dues. Since the assessee had not filed an income tax return, the Assessing Officer (AO) formed an opinion that income amounting to ₹101.91 lakh had escaped assessment. Consequently, scrutiny proceedings were undertaken.
During the assessment proceedings, it emerged that the assessee had purchased agricultural land situated at Village Randhawa, Tehsil Dasuya. The assessee submitted bank statements and the purchase deed to establish that the investment had been financed by his mother. According to the records, ₹5 lakh had been paid through cheque and ₹68.86 lakh through RTGS from the bank account of the assessee’s mother. The expenses relating to stamp duty and registration were stated to have been met from cash withdrawals made from the same account. However, as the assessee failed to produce his mother for verification, the AO treated the investment of ₹73.86 lakh as unexplained. The AO also made additions of ₹23.36 lakh towards cash deposits and ₹3.99 lakh towards credit card payments made in cash.
The Tribunal observed that the documentary evidence placed on record demonstrated that the payments towards acquisition of the property had been made through the bank account of the assessee’s mother. The bank statements reflected that the payments were sourced from credits received in that account, while the stamp duty and registration expenses corresponded with cash withdrawals from the same account. The Tribunal held that the AO had rejected the assessee’s explanation solely because the mother was not produced for verification. In the absence of any positive evidence indicating that the assessee himself had made unexplained investments, the addition of ₹73.86 lakh could not be sustained. The Tribunal further noted that the AO could not examine the “source of source” for the relevant assessment year.
With respect to the additions relating to cash deposits and cash payments towards credit card dues, the Tribunal examined the cash flow statement produced by the assessee. It found that the assessee had maintained sufficient cash balances throughout the relevant period and that the cash balance had never turned negative. Since the lower authorities had not brought any material on record to establish that the cash had been utilised for any other purpose, the assessee’s explanation regarding availability of cash in hand was accepted.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. Aforesaid appeal by assessee for Assessment Year (AY) 2010-11 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC, [CIT(A)] dated 06-06-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s. 147 of the Act on 12-12-2017. The grievance of the assessee is confirmation of three additions of Rs.73.86 Lacs, Rs.23.26 Lacs & Rs.3.99 Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
2. From case records, it emerges that the assessees’ case was reopened by Ld. AO and a notice u/s 148 was issued to the assessee on 26-03-2017 to examine the issues of investments in purchase of property, cash deposits and credit card payments in cash. The assessee did not file his Income Tax Returns. Accordingly, forming an opinion of escapement of income of Rs.101.91 Lacs, the case was reopened and these issues were subject matter of scrutiny assessment.
3. During assessment proceedings, it transpired that the assessee had purchased certain agricultural land situated at Village Randhara, Tehsil Dasuya. The assessee furnished relevant bank statements and purchase deed to state that investment was sourced by his mother. The various payments made in connection with purchase of property has been tabulated at Page-3 of the assessment order. The payment of Rs.5 Lacs was paid through Cheque No.265555 from mother’s account (Smt. Maina Sandal) whereas Rs.68.86 Lacs was paid through RTGS from the same bank account of assessee’s mother. The cost of stamp paper for Rs.3,69,300/- and registration & other expenses for Rs.12,700/- was stated to be funded out of cash withdrawals from same account on 07-10-2009. However, the assessee failed to produce her mother for verification. In the result, Ld. AO made three additions of unexplained investment In property for Rs.73.86 Lacs, addition of cash deposit for Rs.23.36 Lacs and addition of credit card payment in cash for Rs.3.99 Lacs. The Ld. CIT(A) rejected the legal grounds as urged by the assessee and confirmed the assessment on merits. Aggrieved, the assessee is in further appeal before us.
4. First, we take up the issue of investment in purchase of property for Rs.73.86 Lacs. From the tabulation made by Ld. AO at Page No.3 of the assessment order, it could be seen that substantial payment towards purchase of property has been made through banking channel from mother’s bank account. The bank statement of assessee’s mother Smt. Maina Sandal has been placed on record. Upon perusal of the same, it could be seen that the amount of Rs.5 Lacs has been paid through banking channel on 10-06-2009. Another payment of Rs.68.86 Lacs has also been paid through banking channel on 08-10-2009. These payments are duly sourced out of various bank credits received in that account. The payment of stamp paper and registration expenses are sourced out of cash withdrawals from the said bank account on 0110-2009. The Ld. AO has rejected assessee’s claim merely on the ground that the assessee did not produce her mother for verification. However, the perusal of bank transactions make it amply clear that the investments in the stated property have been funded out of the bank account of assessee’s mother only and therefore, no addition thereof could be made in the hands of the assessee. The Ld. AO could not examine the ‘source of source’ for this year. In the absence of any positive evidence indicating any unexplained investment by the assessee, the impugned addition of Rs.73.86 Lacs could not be sustained. We order so.
5. So far as the addition of cash deposit and credit card payment in cash is concerned, the assessee has placed on record his cash flow statement on Page No.21 of the paper-book. Upon perusal of the same, it could be seen that there are frequent deposits and withdrawals from assessee’s bank account from time-to-time. At no point of time, the cash balance is in negative. The assessee always has sufficient cash balance to make the impugned deposits and payments. Therefore, in the absence of any fact establishing utilization of cash for any other purpose as brought on record by lower authorities, the assessee’s claim as to availability of cash-in-hand is to be accepted. Therefore, the twin additions of Rs.23.36 Lacs & Rs.3.99 Lacs respectively could also not be sustained. We order so. No other ground has been urged in the appeal.
6. The appeal stand partly allowed.
Order pronounced on 02nd June, 2026.
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