Nanakchand Agrawal Vs ITO (Chhattisgarh High Court)
Chhattisgarh HC order on Whether the assessment in respect of the closing balance of cash-in-hand, shown in balance sheet of the preceding year which was brought down as an opening balance of the succeeding year, whether it can be an unexplained money under Section 69 A of Income Tax Act, 1961 of succeeding year and can be charged to tax under Section 115 BBE of Income Tax Act
Brief facts:
The Assessing Officer in its assessment order passed under Section 143(3) of the IT Act on 14-11-2019 made an addition of ₹ 23,00,000/- treating it as unexplained money invoking the deeming fiction engrafted under Section 69A of the IT Act charging the same to higher rate of tax as prescribed under Section 115BBE of the IT Act.
Key Issue:
Whether the assessment in respect of the closing balance of cash-in-hand, shown in balance sheet of the preceding year which was brought down as an opening balance of the succeeding year, whether it can be an unexplained money under Section 69 A of Income Tax Act, 1961 of succeeding year and can be charged to tax under Section 115 BBE of Income Tax Act.
Feeling aggrieved and dissatisfied with the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) to which the learned CIT (Appeals) primarily concurred with the findings of the Assessing Officer and dismissed the appeal by order dated 23-3-2023. Questioning the order passed by the CIT (Appeals) affirming the order passed by the Assessing Officer, the appellant herein preferred appeal before the Income Tax Appellate Tribunal (ITAT) which the ITAT by the order impugned dated 1-11-2023 partly allowed to the extent of ₹ 2,50,000/-, as per the circular of the CBDT (Central Board of Direct Taxes), holding that the assessee had regularly been assessed to tax for the last so many years, sustaining the balance cash deposit of ₹ 20,50,000/- treating it as unexplained money invoking the deeming fiction engrafted under Section 69A of the IT Act charging the same to higher rate of tax as prescribed under Section 115BBE of the IT Act.
Appellants Plea:
Section 69A of the IT Act which clearly provides that “where in any financial year the assessee is found to be owner of any money” and in the present case, the assessee was found to be owner of the money in the preceding years viz., assessment year 2016-17. He would further submit that the income, whether unexplained or undisclosed, of relevant financial year alone can be assessed to tax in the same assessment year and not of the preceding assessment year and as such, Section 69A of the IT Act is not attracted. He would rely upon the decision of the M.P. High Court in the matter of Harlal Mannulal v. Commissioner of Income-tax, M.P.
Courts Observations:
In the matter of Chintels India Limited v. Deputy Commissioner of Income-tax, it was held by the Delhi High Court that once an assessee does not receive a notice under Section 143(2) of the IT Act within the period stipulated then such an assessee can take it that the return filed by him has become final
and no scrutiny proceedings are to be started in respect of that return.
Similarly, in the matter of Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell Private Limited, on the aspect of the return attaining finality when accepted in an assessment undertaken under Section 143(1)(a) of the IT Act and mandatory scrutiny notice under Section 143(2) not issued by the stipulated time limit and the same being treated as a case of completed/unabated assessment in the context of provisions of Section 153A assessments in cases of search and seizure, it was held by their Lordships of the Supreme Court that the completed/ unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148, subject to fulfillment of the conditions as envisaged/mentioned under Sections 147/148 and those powers are saved.
Not only this, the provisions of Section 69A of the IT Act contemplate that the ‘money’ (cash deposit in the present case) could be deemed to be in the nature of income only in the financial year in respect of which the assessee is found to be the owner and in the instant case, by offering plausible explanation tracing the source of money to closing balance of preceding year, the assessee was found to be the owner of the ‘asset’/cash in the assessment year 2016-17 and hence, the explanation of nature and source of such money and invocation of deeming fiction engrafted under Section 69A could have been sought/examined by the Assessing Officer in the assessment year 2016-17 and could not have been done in the assessment year 2017-18 going by the express language contained in Section 69A and not otherwise.
It is well settled principle of law that while making an assessment under the provisions of the IT Act, the Income Tax Officer is not entitled to make a pure guess and to resort to an assessment without reference to any evidence or any material at all and that suspicion howsoever strong cannot take the place of proof beyond reasonable doubt. (See Dhakeswari Cotton Mills Limited v. Commissioner of Income Tax, West Bengal)
The Supreme Court in the matter of Lalchand Bhagat Ambica Ram v. Commissioner of Income Tax, Bihar and Orissa while dealing with an addition made by the AO in a case concerning the deposit of High Denomination Notes, sternly deprecated the practice of the Assessing Officer and the Tribunal to indulge into conjectures, suspicion and surmises and acting without any cogent evidence.
Courts Order:
The learned ITAT is absolutely unjustified in dismissing the appeal partly upholding the addition of ₹ 20,50,000/- treating it as unexplained money invoking the deeming fiction engrafted under Section 69A of the IT Act charging the same to higher rate of tax as prescribed under Section 115BBE of the IT Act. As such, the impugned order passed by the Assessing Officer affirmed by the CIT (Appeals) and further partly affirmed by the ITAT is hereby set aside. It is hereby held that ₹ 20,50,000/- cannot be said to be unexplained money under Section 69A of the IT Act. Accordingly, the substantial question of law is answered in favour of the assessee and against the Revenue.
FULL TEXT OF THE JUDGMENT/ORDER OF CHHATTISGARH HIGH COURT
