Addition of opening cash balance as undisclosed income not impermissible: ITAT Jodhpur

Naveen Bolia Vs ITO (ITAT Jodhpur)

The case of Naveen Bolia Vs ITO, adjudicated by the Income Tax Appellate Tribunal (ITAT) Jodhpur, revolves around the legality of assessment and the merits of certain additions made by the Assessing Officer (AO). This article provides an in-depth analysis of the judgment, highlighting the key aspects and legal precedents involved.

Case Background

The appellant, Naveen Bolia, challenged the assessment order on two primary grounds: the legality of the assessment process and the merits of the additions made by the AO. The AO had alleged that the appellant failed to file the Return of Income (ROI) for various assessment years, leading to the addition of Rs. 16,98,502/- as undisclosed income for the current assessment year (AY 2010-11).

Tribunal’s Observations

Upon hearing the rival contentions and examining the records, the Tribunal noted that the appellant had indeed filed ROIs for the preceding years, including AY 2007-08, 2008-09, and 2009-10, along with the necessary balance sheets and profit & loss accounts.

The Tribunal highlighted that the closing cash balance of Rs. 16,98,502/- for AY 2009-10, which became the opening cash balance for AY 2010-11, was undisputedly filed and processed under Section 143(1) of the Income Tax Act. There were no actions taken under Sections 147 or 263 to dispute this balance in the previous years.

Key Legal Precedents

The Tribunal referred to the decision in Parmeshwar Bohra Vs ITO, where it was held that the opening capital cannot be added as unexplained investment under Section 69 of the Income Tax Act for the subsequent year. This decision was affirmed by the Rajasthan High Court, establishing that carried forward amounts from the previous year do not constitute unexplained investments or cash credits for the current year.

Tribunal’s Ruling

Based on the established facts and legal precedents, the Tribunal concluded that the AO’s addition of the opening cash balance of Rs. 16,98,502/- as undisclosed income was impermissible. The Tribunal directed the deletion of this addition, allowing the appeal on merits.

Additionally, since the appeal was allowed on the merits, the legal challenges raised by the appellant became infructuous and did not require further adjudication.

Conclusion

The ITAT Jodhpur’s ruling in Naveen Bolia Vs ITO underscores the importance of following legal precedents and properly acknowledging undisputed financial records from previous assessment years. This case serves as a significant reference for similar disputes, emphasizing that carried forward balances should not be treated as unexplained income for subsequent years.

FULL TEXT OF THE ORDER OF ITAT JODHPUR

This appeal filed by assessee is arising out of the order of the Commissioner of Income Tax, Appeal, Udaipur-2 dated 26/03/2023 [here in after ‘CIT(A)’ ] for assessment year 2010-11 which in turn arise from the order dated 13.03.2015 passed under section 143(3)/147 of the Income Tax Act, by ITO, Ward-1(1), Udaipur.

2. In this appeal, the assessee has raised following grounds: –

“1.1. The Id. CIT (A) erred in law as well as on the facts of the case in confirming the action taken u / s 147 r/w 148 which is bad in law, without jurisdiction being void ab-initio in as much as the mandatory conditions provided u/s 147 r/w 148 were not complied with. Moreover, the amount of the income alleged to have had escaped income, was not added to the declared income and therefore, the additions of any other amount, are completely without jurisdiction and deserves a complete deletion. Consequently, the impugned assessment framed u/s 148 dated 13.03.2015 also kindly be quashed.

1.2. The CIT (A) also erred in law as well as on the facts of the case in rejecting the contentions raised that no notice u/s 143(2) of the Act was ever issued/served within the stipulated period as prescribed u/s 148 r/w 143(2) of the Act. Hence, the impugned assessment order dated 31.03.2015 is barred by limitation and hence, deserved to be quashed.

1.3. The impugned order u/s 148 dated 13.03.2015 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence, the same kindly be quashed.

2. 16,98,502/-: The Id. CIT (A) erred in law as well as on the facts of the case in confirming the impugned addition made of the amount of the opening cash-in-hand of Rs. 16,98,502/- alleging the same to be income from undisclosed sources of the current year, which is completely beyond jurisdiction and also contrary to the settled legal position. The Id. CIT (A) also erred in recording incorrect finding of the fact that the Appellant failed to support the opening cash-in-hand with the documentary evidences. He further erred in holding that the Appellant failed to explain the source of cash advance to his brother of Rs. 10 lacs, which was clearly made out of the opening cash-in-hand Rs. 16,98,502/-. The addition so made is contrary to the provisions of law and facts of the case and hence, the same kindly be deleted in full.

3. The ld. CIT(A) further erred in law as well as on the facts of the case in confirming the charges of interest u/s 234A, 234B & 234C of the Act. The Appellant totally denies its liability of charging of any such interest. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full.

4. The Appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.”

3. Succinctly, the fact as culled out from the records is that the assessee is an individual. A search conducted by the CBI at the office and residential premises of Shri Nitin Jain on 25.05.2010. During the course of search, the CBI seized cash amounting to Rs. 2.41 crore from the residential premises as well as bank lockers at Jaipur. The CBI lodged a written complaint against Sh. Nitin Jain and others for explaining the nature and source of acquisition of the money. Shri Nitin Jain, Shri Jitendra Singh Sanganeriya and Smt. Sushila Jain stated that they had received Rs. 97 Lakh from Shri Nitin Bolia as advance against Memorandum of Understanding dated 22.10.2009 executed among his mother Smt. Sushila Jain and Shri Nitin Bolia in respect of immovable property situated at AA-11, Anita Colony, Bajaj Nagar, Jaipur. On being asked by the CBI for the funds arranged by Shri Nitin Bolia he stated a sum of Rs. 58 lakh was arranged by him from the various persons. Thereafter, on the basis of information received and pursuant to CBI search conducted, the case of the assessee was reopened alleging that after discreet enquiries the CBI are of the opinion that the funds have been build up for explaining away the unaccounted cash found in the case of Shri Nitin Jain. Since the appellant claimed to have given the advance / loan amount of Rs. 10,00,000/- in cash to his brother therefore income to the extent of Rs.8,01,815/- (Rs. 10,00,000/- less Rs. 1,98,185/- declared) has escaped assessment. During the year under consideration the appellant filed his ROI on 24.12.2010 declaring total income of Rs. 1,74,190/- (Remuneration of Rs.2,00,000/- from M/s Nutan Deco Mark P. Ltd. and Rs.1,48,500/- from job work income less deduction under Chapter-VI of Rs.93,813/-) and Rs.24,000/- from Agriculture Income. The assessment was completed by the AO vide order dated 13.03.2015 u/s 143(3)/147 by making addition of Rs. 16,98,502/- on account of undisclosed income and disallowance of Rs. 3,00,000/- on account of household expenses.

4. Aggrieved from the order of the assessment, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:

“6.3. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order of the Income tax act, 1961 for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under-

The appellant argued that no addition of opening cash in hand is permissible. The appellant furnished a balance sheet where opening cash of Rs. 16,98,502/- was shown. So the amount is credited in the books of account of the current year. The appellant could not produce evidences to explain source of the cash availability with the appellant. The AO has discussed in detail to show that the declared income of the appellant was not sufficient to prove availability of cash with the appellant. Therefore, the appellant was not in a position to explain the source of credit entry of Rs. 16,98,502/- relevant to the current year. The source of the opening cash was not explained by the appellant therefore, the AO was justified in making the said addition.

The appellant argued that source of the opening cash was explained from the balance sheets of earlier years. The AO has examined this issue and came to the conclusion that the appellant was not having sufficient funds to explain the source of cash in hand. The AO has also noted that the appellant has taken loans also and the appellant has not disclosed bank accounts to the AO when specifically asked. The declared income of the appellant was not sufficient to prove that the appellant sourced the cash in hand from the declared sources of income. The appellant has also not made an attempt to show the source of the cash. Therefore, the conclusion drawn by the AO are found to be justified. The arguments raised by the appellant are not found to be acceptable.

This ground of appeal is treated as dismissed.”

5. As the assessee did not find any relief from the order of the ld. CIT(A) and feeling dissatisfied with the order of the ld. CIT(A) the assessee has preferred the present appeal on the grounds as raised by the assessee as reiterated here in above. To support the various grounds so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed reliance on his written submission which is reiterated here in below;

“Brief General Facts: The assessee is an individual being regularly assessed. During the year under consideration he filed his ROI on 24.12.2010 declaring total income of Rs.1,74,190/- (Remuneration of Rs.2,00,000/- from M/s Nutan Deco Mark P. Ltd. and Rs.1,48,500/- from job work income less deduction under Chapter-VI of Rs. 93,813/-) and Rs. 24,000/- from Agriculture Income.

A search was conducted by the CBI at the office and residential premises of Shri Nitin Jain on 25.05.2010. During the course of search, the CBI seized cash amounting to Rs.2.41 Crore from his residential premises as well as bank lockers at Jaipur. The CBI lodged a written complaint against Sh. Nitin Jain and others. To explain the nature and source of acquisition of the money, Sh. Nitin Jain explained that apart from receiving Rs. 97 Lakh from Shri Nitin Bolia as advance against MOU dated 22.10.2009 executed between his mother Smt Sushila Jain and Shri Nitin Bolia in respect of immovable property situated at AA-11, Anita Colony, Bajaj Nagar, Jaipur. He was also in receipt of amount from other persons.

On being asked by the CBI as regards the funds arranged by Shri Nitin Bolia, he stated that Rs.58.00 Lakhs were arranged by him from the persons tabulated at Pg-2 of the assessment order which included Rs. 10 lakhs advance given by the assessee Shri Naveen Bolia.

Thereafter, on the basis of information received and pursuant to CBI search conducted, the case of the assessee was reopened alleging that after discreet enquiries the CBI is of the opinion that the funds have been build up for explaining away the unaccounted cash found in the case of Shri Nitin Jain and no actual transaction as such took place. Since the assessee claimed to have given the advance / loan amount of Rs.10,00,000/- in cash to his brother therefore income to the extent of Rs.8,01,815/- (Rs.10,00,000/- less Rs.1,98,185/- declared) has escaped assessment. Finally, the assessment was completed vide order dated 13.03.2015 u/s 143(3)/147 by making addition of Rs.16,98,502/- on account of undisclosed income and disallowance of Rs.3,00,000/- on account of household expenses.

In the first appeal, the ld. CIT(A) also confirmed the action u/s 147 and entire addition of Rs. Rs.16,98,502/-, at Pg. 7 Pr 4.2 onwards.

Hence this appeal.

GOA 1.1 & 1.3: Invalid action u/s 147/148:

Facts: As narrated above and as noted by the AO.

Submission: The proceedings initiated u/s 147 are bad being without jurisdiction for various reasons as submitted herein below:

1. Reassessment invalid-without deciding the objections: At the outset it is submitted that the ld. AO failed to dispose of the objections raised by the assessee against the reassessment u/s 148. The assesse filed objection vide letter dated 03.02.2014 (PB 23-25) however, the same has not been disposed of by the ld. AO.

The AO instead of following the law and procedure as provided in the decision of the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 259 ITR 19 (SC) and various other decisions by different Hon’ble High courts passed the assessment order to the effect that on receipt of objection given by the assessee, to the notice u/s148, the AO is bound to dispose of the objections by passing a speaking order. The assessment completed by the AO without deciding the objections against the reasons for reopening is bad in law an illegality. Hence the impugned order dated 13.03.2015 is liable to be quashed. Also kindly refer pg.10 pr.5.4 of this WS.

2. Reason to believe and not reason to suspect:

2.1 It is submitted that even under the amended law the bedrock condition or words, which continue right since inception till date, are “reason to believe” and not “reason to suspect”. The word “believe” has to be understood in contradistinction of suspicion or opinion. Belief indicates something concrete or reliable. Kindly refer Gangasharan & Sons Pvt. Ltd. v/s ITO & Anr. (1981) 130 ITR 1 (SC) and Hon’ble Supreme Court in the case of ITO v/s Lakhmani Mewal Das (1976) 103 ITR 437 (SC) has held that:

“12. The powers of the ITO to reopen assessment, though wide, are not plenary. The words of the statute are “reason to believe” and not “reason to suspect”. The reopening to the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. ——————– The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. — ” Also refer Ajit Jain vs. Union
of India & Ors. (2000) 242 ITR 302 (Del.) affirmed in Union of India vs. Ajit Jain & Anr. (2003) 260 ITR 0080 (SC)

2.2 The belief of the officer should be as to escapement of income and the belief should not be a product of imagination or speculation as further discussed in the ensuing paras.

2.3 Further, the belief must be of an honest and reasonable person based upon reasonable grounds. The officer may act on direct or circumstantial evidence, but his/her belief must not be based on mere suspicion, gossip or rumor. The ld. AO would be acting without jurisdiction if the reason for his/her belief that the conditions fare satisfied does not exist or is not material or relevant to the belief required by the provision of law. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court Sheo Nath Singh v/s AAC (1971) 82 ITR 147 (SC). There are various facts/indicators which clearly prove that the AO proceeded on mere suspicion. There was nothing to indicate even remotely what to say of prima facie belief that subjected amount of Rs.8,01,815/- (Rs.10,00,000/- less Rs.1,98,185/- declared) was escaped assessment. On the facts, it can be proved that above judicial guideline has not been followed by the AO in this case, he did not have any reasonable ground to have based an honest belief, nor that his belief was bonafide and in good faith, if the following facts, which were undisputedly available on record, on the date of recording of the reasons and submissions, are considered:

2.3.1. Undisputedly, the appellant did file the copies of the Balance Sheets for the preceding years and in particular for AY 2009-10 and 2010-11 as admitted by AO at pg.4 of the order. He himself recorded fact finding as regards availability of cash being Rs. 16,98,502/- as on 31.03.2015 at pg. 4 which was opening cash in hand and it is only thereafter, the advance of Rs. 10,00,000/- was given to Nitin Bolia shown as advance against purchase of property in the Balance Sheet.

2.3.2 Further, simply, because ROI was filed on 24.12.2010 whereas inquiries were going on in May 2010, will not undone the cash availability supported by the Balance Sheets.

2.3.3 Mere fact of giving advance to someone does not ipso facto becomes an income much less escaped income.

2.3.4 There is no reference given of any provision of law, in the reasons to believe, which authorized the AO to consider the amount of advance of Rs. 10,00,000/-to be an income much less escaped income.

2.3.5 The reasons to believe nowhere suggest even remotely that the advance of Rs. 10,00,000/- was escaped income.

2.3.6 Unfortunately, the AO despite having the assessment record being the ITRs, Balance Sheet, etc. of preceding years choose to ignore them completely even though were most relevant.

2.3.7 On this aspect, reliance is placed in the case of Balaji Health Care (P) Ltd. Vs. ITO (2019) 199 TTJ (Jp) 966 (DPB 16-26). It was held as under;

“AO having reopened the assessment by arriving at a conclusion that the assessee-company has routed back its undisclosed income in the form of share capital/share premium solely on the basis of the report of the Director of IT, Investigation Wing, in the cases of some accommodation entry providers without carrying out his own examination in order to discover any link between the said persons and the assessee, the assumption of jurisdiction and initiation of proceedings under s. 147 by the AO does not satisfy the requirement of law and is set aside”.

2.4 The ld. CIT(A) however, rejected these contentions, saying that AO analyzed the information received from CBI but ignored that the opinion was formed by the CBI (as specifically mentioned in the reason to believe when copies of ITRs were furnished to the CBI and not by the AO).

2.5. Reasons are wholly vague and not specific:

2.5.1 The impugned reasons nowhere suggest as to under what provision of law, there was some income of the assessee which escaped assessment. From a bare perusal of the reasons recorded (PB 1-2) and what has been discussed above, several unanswered questions arise, showing a complete non-application of mind by the AO proving that the AO acted merely on suspicion, without having an honest reason to believe as to the alleged escapement. The impugned reasons are wholly vague, not specific and non­existent so as to term them “reason” as contemplated by the law.

2.5.2 In the case of Sheo Nath Singh 1973 CTR 484(SC), it was held that:

“….. There can be no manner of doubt that the words “reason to believe” suggest that the belief must be that of an honest and reasonable person based upon reasonable ground and that the ITO may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumor. The ITO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court.”

The judicial guideline provided above fully applies on the facts of present case.

2.5.3 Lastly, it may be clarified that the assessee is not asking for/alleging insufficiency of the reasons. What has been contended is that no reason at all existed and the courts have held at times and again that they can certainly examine whether relevant and bonafide reason of belief, existed or not.

3. Escapement of Income without Jurisdiction:

3.1. The pertinent aspect to be considered is that the law u/s 147 provides addition of the escaped income than only new income can be added due to use of the word “also” u/s 147.Whereas in the impugned reasons (PB 1-2), the AO has alleged the escaped income of Rs.8,01,815/- (Rs.10,00,000/-less Rs.1,98,185/- declared), only being the advance given to Sh. Nitin Bolia however, while making the assessment, this figure/addition do not at all find place anywhere in as much as there appears no specific addition of Rs.8,01,815/- or Rs.10,00,000/-. No doubt, an opening cash in hand of Rs.16,98,502/- has been made but that is something different in as much as this was the closing cash in hand as on 31.03.2009 (sourced from credit/ receipts) whereas the advance of Rs.10,00,000/- is on debit side and different provision of law deal them differently. The addition of credit appearing of Rs.16,98,502/- is not the same thing as being the addition on account of advance which are to be dealt with u/s.68 and not u/s

The nature and scope of both the additions/ disallowance is altogether different, the statutorily prescribed procedure of recording reasons and issuance of notice u/s 148 with respect to amount of Rs.6,98,502/- has not been admittedly observed. In any case, the enhancement in the figure of the initially alleged income of Rs. 10 Lakh (being Rs.6,98,502/-), was without jurisdiction.

Thus, once the addition on account of the income believed to have been escaped, has not been made, no addition of any other income could be made u/s 147, more so when prescribed legal procedure was not followed.

3.2 The ld. CIT(A) however without appreciating this legal position, simply rejected the contention and saying that Rs. 10 lakhs were part and parcel of the opening balance of Rs. 16,98,502/-without giving any justification.

3.3. Supporting Case Laws:

3.3.1.CIT vs. Shri Ram Singh (2008) 217 CTR (Raj) 345: (2008) 306 ITR 343 (Raj). The Rajasthan High Court construed the words used by Parliament in s. 147 particularly the words that the AO may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under s. 147. The Hon’ble Court held as follows:

“It is only when, in proceedings under s. 147 the AO, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had ‘reason to believe’ to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under s. 147.

To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under s. 147, the AO were to come to the conclusion, that any income chargeable to tax, which, according to his ‘reason to believe’, had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under s. 147.”

3.3.2. CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 236 (Mum) (DPB 16-26), wherein it was held as under:

“Reassessment—Scope—Income in respect of which notice issued not found to be escaped income—Once the AO accepts that the income in respect of which he entertained reason to believe to have escaped assessment, was not in fact escaped income; he has no jurisdiction to reassess other items of income—In such a situation, Expln. 3 to s.147 does not come to the reserve of AO”

3.3. This followed by Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. v/s CIT (2011) 336 ITR 136 (Del HC) wherein, it was held that the AO had jurisdiction to reassess income other than the income in respect of which proceedings u/s 147 were initiated but he was not justified in doing so when the very reasons for initiation of those proceedings ceased to survive. Legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction u/s 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiries and thereby including different items of income, not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction.

It was further held that the Tribunal was right in holding that the AO had the jurisdiction to reassess issues other than the issues in respect of which proceedings were initiated but he was not so justified when the reasons for initiation of those proceedings ceased to survive. The observations of the Hon’ble High Court on pages 147 and 148 of in 336 ITR 136 are worth noting.

3.4. Also kindly refer CIT vs Mohmed Juned Dadani (2013) 355 ITR 172 (Guj).

4. Complete non application of mind- Borrowed Satisfaction:

4.1 To assume a valid jurisdiction u/s 147 of the Act, the ld. AO must form a reason to believe on his own and such a satisfaction or belief should not / cannot be borrowed from someone else.

4.2.1. A bare perusal of the impugned reasons (PB1-2) and the objections filed before the AO vide letter dated 03.02.2014 (PB 23-25) at para (B.) and (C) onwards clearly shows that the AO has merely referred to the information received from the CBI with regards to some search conducted on Shri Nitin Jain and largely stated the information which, he received from the office of the ld. CIT(Admn) – Udaipur through the office of the JCIT, Range 1 & 2, Udaipur, who vide his letter dated 08.01.2013, importantly amongst other things, stated that “I have further directed to direct concern AO to take suitable action as deemed fit…”, which is even admitted by the AO. In fact, in para 3 of the impugned reasons, the AO has specifically indicated that the CBI people are of the opinion, which again indicates his non-application of mind. Admittedly, it was an opinion of a third party and not of the AO. The present AO, admittedly without any application of mind, initiated proceedings u/s 147 which otherwise, is a normal phenomenon. It is not the case of the AO that after the receipt of the information from the CBI through the concerned CIT & JCIT, he further proceeded to examine the concerned persons, recorded their statements or obtained the evidences with a view to form an honest belief as regards the existence of some income, in the hands of the assessee, which escaped assessment. Notably, even the CBI enquiry discussed by AO in the reasons recorded, does not suggest that the present assessee denied giving the subjected amount to Shri Nitin Bolia or that he was found having no sufficient source thereof. The AO could not have just jumped to take action u/s 147 r/w 148, merely on the direction of the higher authority or on the advice of third party, unless he could have justified his action in the light of judicial guidelines summarized above, by forming his own independent opinion based on reasonable grounds. Until then not only such information was merely hearsay (rumor) and he did not form even any prima facie belief of his own but he merely acted at behest of a higher authority.

4.2.2 The AO however, while dealing with, has merely repeated the crux of the enquiry made by the CBI and rather again confirmed that his formation of belief was based only on the CBI Information as was given by the higher authorities to him with a direction to take suitable action. The facts simpliciter that the assessee also lent Rs.10,00,000/- to Shri Nitin Bolia does not by itself show any justifiable reason that some income up to Rs.10,00,000/-existed this year much less some escaped income.

4.3. Incorrect factual allegations: His further allegation that when CBI enquires were in progress in May, 2010 no ROI was filed by that time but it was filed belatedly on 24.12.2010 showing advance of Rs.10,00,000/-, is also irrelevant being incorrect in the present context in as much as again the vital fact ignored by him, was that the assessee had already filed return for A.Y.2009-10 in due course on dated 31.07.2009 (PB 8) showing closing balance of cash in hand of Rs.16,98,502/- in his Balance Sheet which became the opening cash in hand of this year. Thus, the proved source of advance given of Rs.10,00,000/- lakhs were already available. Furthermore, the allegation that the CBI found the explanation of Nitin Jain as receipt of advance against sale of mother’s property was a concocted story, has got no relevance in the present case. Otherwise also the AO being quasi-judicial authority has to take own decision and can’t borrow a decision from others.

In other words, the ld. AO has merely borrowed satisfaction (as to escapement) from someone else, which is not permissible to confer valid power upon the ld. AO to initiate reassessment proceedings.

4.4. Supporting Case laws:

4.4.1 Balaji Health Care (P) Ltd. V. ITO (2019) 33 NYPTTJ 131 (JP) (DPB 1­15) held that:

“Reassessment—Reason to believe—Report of Investigation Wing—For assumption of jurisdiction under s. 147 the AO must form a tentative or prima facie opinion on the basis of material that there is underassessment or escapement of income—Reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the AO regarding escapement of income—It is for the AO to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons—In the instant case, the reason recorded by the AO states that during the course of search and post-search investigation in the case of S and V, it has been established that these two persons are engaged in the business of providing accommodation entries of share capital and share premium to various beneficiaries through a number of paper and dummy companies in lieu of cash and that the assessee-company has also obtained accommodation entries in the form of share capital/premium/loan for an amount of Rs. 25,00,000 with the help of the aforesaid accommodation entry providers—Based on perusal of the report of the Director of IT, Investigation Wing, the AO has formed not merely a prima facie belief but has reached a conclusion that the assessee has routed back its undisclosed income in the form of share capital—However, it is not stated in the reasons that the undisclosed income reached the investor company PEL Ltd. and thereafter, the latter has invested the amount so received in the assessees company by way of share capital—Satisfaction of the AO should be discernable from the reasons so recorded only and nothing can be added or supplemented to the reasons—Particular of the transaction doesn’t give any prima facie impression that these are transactions where the assessee’s own money has been routed back in form of share capital—Thus, the conclusion of the AO that the amount received by the assessee-company by way of share capital/premium is undisclosed income without establishing the nexus cannot be accepted—There is nothing in the reasons recorded by the AO to show that he has gone through the statements of said two persons recorded during the course of search and the seized material to indicate that assessee’s undisclosed income was routed back in the from of share capital—This shows that the AO has merely gone by the report of the Director of IT, Investigation Wing and the said report even didn’t have the statements of these persons—No further examination was carried out by the AO—Though the AO can rely on the report of Detractor of IT, Investigation Wing, where he is assuming jurisdiction under s. 147, he is required to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment—In absence thereof, the assumption of jurisdiction under s. 147 has no legal basis—Therefore, the assumption of jurisdiction and initiation of proceedings under s. 147 by the AO to reopen the assessment proceedings does not satisfy the requirement of law and is set aside.”

4.4.2 The Hon’ble ITAT Jodhpur, has also quashed the assessment made u/s 147 in the case of Surbhi Minchem P. Ltd vs. ITO in ITA No. 102 & 103/Jodh/2014 (DPB 53-65) vide order dated 16.05.2014. In para 8, it is held that:

“From the above provisions, it is clear that for taking action u/s 147 of the Act, the Assessing Officer must have reason to believe that an income chargeable to tax has escaped assessment for any assessment year. Therefore, the Assessing Officer must satisfy himself regarding the escapement of income. He should not act mechanically on the information supplied by any other person. In the present case, the Assessing Officer acted on the information supplied by the Directorate of the Income Tax (Inv.), Udaipur and Mumbai but he has not applied his independent mind and the reassessment proceedings were initiated only on the basis of information received from the investigation wing of the department. In the present case, the satisfaction regarding the escapement of income, was not of the Assessing Officer, therefore, without applying his mind, the Assessing Officer was not justified in invoking the provisions of Section 147 of the Act by issuing notice u/s 148 of the Act.”

4.4.3. Reliance is also placed on Bansiwala Iron & Steel Rolling Mills vs. DCIT (2021) 214 TTJ (Jp) 93

5. Objections of AO/ CIT(A)-Not Valid

5.1. The ROI Filed on 24.12.2010 is also a valid return u/s 139 (4) hence, no adverse inference can be drawn from this fact.

5.2. The AO made certain allegations based on the CBI report at pg.3 of the Assessment Order however, it is a fact that no copy of the CBI report was supplied to the assessee in absence of which, no allegation averse to the assessee can be made even the relevant portion from the CBI report was not reproduced in the reasons.

5.3. There is no omission or failure on the part of the assessee as alleged with respect to the alleged escaped income of Rs.10,00,000/-in as much as the same was sourced out of the opening cash in hand of Rs.16,98,502/-and same was shown in the Balance Sheet filed with the ROI for the A.Y. 2009­10. No other manner has been shown by the AO to support his contention.

5.4. Further the ld. CIT(A) was wrong in stating incorrect facts (in pr. 4.2 pg.7 of the Appellate order) that there was absence of clear facts as regard the filling of the legal objections and no disposal thereof by the AO, in as much as, the appellant vide letter dt. 03.02.2014 (PB 23-25) has clearly raised legal objections against the very initiation of the proceedings u/s 148, which was also before the CIT (A) however, the same was completely ignored.

Hence, proceedings u/s 147 and the consequent assessment please be quashed.

GOA-1.2. No Notice u/s 143(2) – Invalid proceedings: The CIT (A) rejected the ground ignoring detailed submissions without any justification at Pg. 16 Pr. 9.3. Hence this ground.

Submission:

1. On this aspect following submissions were made before the CIT (A):

“Additional GOA: Impugned assessment u/s 148/143(3) is without jurisdiction in absence of notice u/s 143(2): The admitted facts are that the assessee in this case filled ROI on 24.12.2010 manually which was processed u/s 143(1) on 23.02.2011 (Refer AO Pg-1). Thus, the assessment to this stage stood completed and only because of this a notice u/s 148 dated 05.08.2013 was issued, in response to which the assessee filed a letter dated 09.09.2013 wherein it was clearly submitted that the return of income filed originally may be treated as a return filed in response to the said notice u/s 148. Thus, a ROI again was filed

u/s 148 on 09.09.2013.

On the other hand, however, the AO had firstly issued a notice u/s 142(1). Thereafter, he issued a notice dt. 07.04.2014 (PB 26) u/s 143(2) followed by another similar notice dt. 14.07.2014 (PB 27) fixing the date of the hearing. Pertinently, in both the notices, the return of income filed originally on dt. 24.12.2010 has been referred to and not the ROI filed u/s 148 on 09.09.2013. There appears no reference to the ROI filed on 09.09.2013 u/s 148. Thus, practically and as a matter of fact, no notice u/s 143(2) was issued w.r.t. 148 proceedings/in response to the ROI filed u/s 148. The law requires the AO to have issued a notice u/s 143(2) even in the proceedings u/s 148, within the stipulated period of 12 months from the end of the month in which 148 ROI was filed. Thus, the last date by which fresh notice u/s 143(2) w.r.t. 148 proceedings could be issued, was 14.07.2014 but there being no such notice issued at all, hence the impugned assessment deserves to be quashed. Kindly refer ACIT vs. Hotel Blue Moon (2010) 321 ITR 362 (SC), followed in the cases of CIT vs Rajeev Sharma (2010) 232 CTR 303 / 336 ITR 678 (All) (DPB 28-40) and ACIT vs Greater Noida Industrial Development Authority (2015) 281 CTR 204 / 379 ITR 14 (All) (DPB 41-49) which, directly apply on the facts of this case.”

2. We place reliance on CIT vs Rajeev Sharma (2010) 232 CTR 303 / 336 ITR 678 (All) (DPB 27-39). It was held that:

“Reassessment—Validity of reassessment—Failure to issue notice under s. 143(2) after filing return—Provision contained in s. 143(2) is mandatory in nature and it shall be obligatory for the AO to apply mind to the contents of the return filed in response to notice under s. 148 and record reasons and thereafter, issue notice under s. 143(2) before proceeding to decide the controversy with regard to escaped assessment—Notice issued earlier de hors return in response to notice under s. 148 is inconsequential—Tribunal rightly held reassessment invalid”

GOA-2 Addition of Rs.16,98,502/- of opening cash as undisclosed income:

Facts: During the year under consideration the assessee was asked to furnish necessary details, evidence, books and bills and vouchers. In response thereto the assessee filed Balance Sheet for A.Y. 2010-11, showing advance against purchase of property at Jaipur of Rs.10,00,000/-(PB 5) and also filed Balance Sheets for earlier years i.e. A.Y. 2008-09 and 2009-10. After examining the same the AO concluded that the assessee has invested the entire savings earned in the NDMPL Shares, and in Nutan Elec. Deco Rs.1,52,837/-, in Nutan Deco Mark (P) Ltd. Rs. 80,000/- etc. When asked, the A/R of the assessee stated that in support of the opening cash as on 01.04.2009, the assessee filed Balance Sheets, Capital Accounts etc. of previous years. Finally, the AO assumed that the assessee was not able to have cash in hand from the past savings and that cash in the hands of the assessee was `Nil` hence, added opening cash Rs.16,98,502/- as undisclosed income of the assessee.

The CIT (A) rejected the ground ignoring detailed submissions without any justification at Pg. 13 Pr. 6.3.

Hence this ground.

Submissions:

1. Source of cash in hand fully explained and established:

1.1.1 At the outset, it is submitted that the AO has repeatedly recorded incorrect findings of facts that the appellant did not filed any ROI for A.Y. 2008-09 (AO Pg 4) and again alleged that the assessee has not filed ROI for preceding years (AO Pg-5). However, such findings of the facts are runs completely contrary to the facts available on record.

1.1.2 It is pertinent to note that the ROI for AY 2007-08 was filed on dated 31.07.2007 along with the copy of balance sheet and P&L A/c (PB 21-22) followed by the ROI for AY 2008-09 filed on dated 31.07.2008 along with the copy of balance sheet and P&L A/c (PB 6-7) and thereafter, ROI for AY 2009-10 was filed on dated 31.07.2009 declaring total income 1,47,932/- (PB 8) and notably (and admittedly), the balance sheet for AY 2009-10 was also filed along with the ROI wherein the closing balance of cash in hand of Rs. 16,98,502/- was disclosed (PB 10), which became the opening balance of cash in hand of the subjected year i.e. A.Y. 2010-11. The AO never rejected the accounts so submitted in the preceding year as also in the current year.

1.1.3 Notably, this fact was repeatedly admitted by the AO himself (Refer AO Pg-4). To this opening cash in hand, was added the income of the current year i.e. A.Y. 2009-10 of Rs.2,37,993/-. Accordingly, the closing balance of cash in hand of Rs.16,98,502/- became the opening balance of the cash in hand as on 01.04.2009. Thus, addition made of the entire cash in hand of Rs.16,98,502/-, admittedly was of the closing balance of cash in hand supported by the Balance Sheet and ROI filed for AY 2009-10. The ROI for AY 2009-10 was processed u/s 143(1) and the said assessment (or the earlier even) is not stated to have been disturbed by taking action u/s 147 or u/s 263 of the Act. Thus, the closing balance of cash in hand for AY 2009-10 stood established.

1.2 Balance Sheet of the current year and the preceding years accepted by the Department: The repeated contention of the assessee that the very source of the availability of the cash in hand of Rs.16,98,502/- was the Balance Sheet which explains everything. Notably the AO himself has taken note of the Balance Sheet, Capital Account and P & L Account of A.Y. 2009­10 and A.Y. 2010-11 at Pg. 4 to 6 and also discussed the investments, debtors, creditors, loan taken etc. but was not willing to accept the opening cash in hand. He even admitted the closing balance of cash in hand of Rs. 7,42,864/- in this year (PB 5). He even admitted the availability of closing cash in hand of Rs.16,98,502/- in A.Y. 2009-10. It is beyond one`s comprehension that when each and every entry of the Balance Sheet for the preceding year i.e. A.Y. 2009-10 and current year i.e. A.Y. 2010-11 have been accepted (and no dispute raised w.r.t. the correctness of these figures and the facts), there is no reason as to why the AO should not accepted the closing cash in hand as having been available with the assessee in A.Y. 2009-10. Also consequently therefore, again when he has admitted rather not disputed any of the entries of the Balance Sheet for the current year, the opening cash in hand of the subjected amount of Rs.16,98,502/- must have been accepted as was available with the assessee. As per the settled principle of accountancy when all the figures debit and credit are admitted except one which is under dispute, the same is only the balancing figure which, the AO was bound to accept.

1.3 No addition legally permissible unless accounts rejected:

Needless to say that the accounts so maintained in the regular course of business has a binding evidentiary value u/s 145 of the Act r/w S.34 of The Indian Evidence Act,1872. Unless the assessing officer reject the books of accounts under cogent ground provided u/s 145(3) of the Act, he does not get any jurisdiction at all to make any variation in the declared results. In other words, S. 145 mandates the AO to accept the results based on the accounts. There is a consistent view of various High Courts and Tribunals to this effect.

2. No addition of opening capital / opening cash in hand permissible u/s 68 (or u/s 69A): In the present case, the AO, referring to the balance sheet filed for the preceding year i.e. A.Y. 2009-10 (PB 10) observed that as per assessee there was balance of cash in hand as on 01.04.2009 (i.e. opening cash in hand) of Rs.16,98,502/- however, he presumed such opening cash balance as `Nil` on the suspicion that whatever the assessee had earned in the preceding years stood utilized towards expenses or in making the investments and also alleged that the assessee failed to prove the existence of cash in hand and accordingly he considered Rs.16,98,502/- as undisclosed income of the current year.

It is submitted that firstly, the admitted fact is that the subjected amount of Rs.16,98,502/- was nothing but opening cash in hand and not the cash in hand at the end of the relevant year i.e. A.Y. 2010-11, which was of Rs. 7,42,864/- (PB 5). Thus, what the AO added was the opening balance of cash in hand in this year which is legally impermissible on the face of it. Although the ld. AO has not invoked any particular provision of law yet however, assuming that it was a case of S.68 (or even u/s 69A), the provision speaks of the credit found during the previous year in the books of account maintained by the assessee. Therefore, the law is well settled that credit found on the first day or carried forward from the preceding year cannot be added in this year.

Kindly refer The Hon’ble Jodhpur Bench of ITAT in Parmeshwar Bohra v/s ITO 27 TW 55(JD). Page 61 para 22 has held that “— Therefore, we hold that the opening capital cannot be added as unexplained investment u/s 69 of the Act for the AY 1993-94.” This decision was affirmed in CIT v/s Parmeshwar Bohra (2007) 301 ITR 404 (Raj.) (DPB 50-52) holding that clear finding recorded by the Tribunal that the impugned amount was credited in the books of account of the assessee in the earlier previous year and was shown as closing capital of that year – carried forward amount of the previous year does not become an investment or cash credit of the relevant year. This decision squarely applies on fact of the present case also, hence on this plea alone the entire addition has to be deleted here itself.

3.1 Utilization of income earned not established by the AO/CIT (A): The main reason of the not considering the availability of the cash in hand was the suspicion of the AO that such amount might have been utilized by the assessee towards incurring of expenditure or in making investment. Thus, on one hand he admitted that the assessee was earning income and was in receipts of funds and the same were even available with the assessee till the A.Y. 2009-10 however, only because of suspicion he presumed non availability of the same. In fact, the AO was not justified to make any presumption ones the Balance Sheets of the current year as also the preceding years have clearly shown the outgoings / expenditure / investment etc. and the AO did not found any fault therewith.

3.2 Further with regard to the discussion that the assessee has utilized the available cash towards so many withdrawals, are mere suspicion. In fact, the assessee himself supplied these details as stated at pg. 6 by AO himself and all such withdrawals were already recorded in the accounts hence due to these withdrawals, the availability of cash couldn’t be doubted because they were already stood considered. Similarly, with regard to the law household expenditure incurred at Rs. 3,60,000/- at pg.5 of the Assessment Order, the said addition already stands deleted at pg.15 pr.7.3 of Appellate Order) hence there is no question of utilization thereof.

In any case, the AO & CIT (A) have merely suspected but completely failed to prove that the cash so admittedly available, stood utilized elsewhere. Therefore, the availability to this extent has to be accepted.

Unfortunately, however the ld. CIT(A) didn’t appreciate the legal and factual submissions with the judicial precedents cited before him. He kept on repeating that appellant failed to prove the source but ignored that the availability of opening cash in hand in the Balance Sheet is completely un denied/ undebated, even though was a binding evidence upon both the authorities. Otherwise also how the appellant could have proved keeping cash in hand when assessment proceedings were going on. There is no independent application of mind by him but merely affirmed the finding of the AO.

5.1 The declared business / other income accepted and assessed: The assessee has declared this year income of Rs.1,74,190/- (Remuneration of Rs.2,00,000/- from M/s Nutan Deco Mark P. Ltd. and Rs.1,48,500/- from job work income less House Property Income (-) Rs. 80,502/- and deduction under Chapter-VI of Rs. 93,813/-) and Rs.24000/- from Agriculture Income. Similarly, in the preceding year/s also, the assessee declared the income of Rs.1,47,932/- (Remuneration of Rs.1,20,000/- from M/s Nutan Deco Mark P. Ltd. and Rs.1,88,150/- from job work income, Interest Rs. 3,592/- less House Property Income (-) Rs. 73,749/-, and deduction under Chapter-VI of Rs. 90,061/-) and Rs. 19,500/- from Agriculture Income. Very pertinently, these facts are evidenced from the copies of the ROI filed and not only accepted but even assessed by the department. The respective assessments upto A.Y. 2009-10 stands completed and the same have not been disturbed by taking action u/s 147 or u/s 263 of the Act.

5.2 Even in the later years the assessee continued filing ROI and declaring the income similarly and was also assessed by the department. Kindly refer the copies of the ROIs filed for AY 2007-08 to 2012-13 (PB 6-22). The mere fact that the ROIs were processed u/s 143(1), cannot, in any way, reduce the evidentiary value thereof.

6. Supporting Case Laws:

6.1 Kindly refer CIT v/s P.V. Bhoopathy (2006) 205 CTR 495 (Mad) held “Appeal (High Court)—Substantial question of law—Income from undisclosed sources—AO did not accept various sources of income explained by the assessee and made additions under ss. 68 and 69 in respect of difference between the investments and the sources accepted by him—Tribunal accepted the explanation of the assessee vis-a-vis availability of funds with the assessee from the sale proceeds of jewellery belonging to his mother-in-law, receipt from a party and also the amount of opening balance and savings from earlier years and deleted all the additions—Findings recorded by the Tribunal are purely findings of fact—There is no reason to interfere with the same—No substantial question of law arises—CIT vs. Pradeep Shantaram Padgaonkar (1983) 143 ITR 785 (MP) relied on”

6.2 Also refer CIT vs Kulwant Rai (2007) 210 CTR 380 (Delhi) para 16-17 Read held “Search and seizure—Block assessment—Computation of undisclosed income—Cash found during search—Assessee had withdrawn Rs. 2 lakh from bank some time back and there is no material with the Department to show that this money had been spent and was not available with the assessee—Tribunal has found that the withdrawals shown by the assessee are far in excess of cash found during the course of search—In the absence of any material to support the view that the entire cash withdrawals must have been spent by the assessee, Tribunal was justified in holding that the addition was not sustainable—Order of the Tribunal does not give rise to a substantial question of law”

In this case, cash was found on search carried out on 04.02.2001 and was explained to be out of the cash withdrawal in Dec-2000.

6.3 Also refer Anand Prakash Soni v/s DCIT (2006) 101 TTJ 97 (Jd) para 5-6 “Search and seizure—Block assessment—Computation of undisclosed income—Cash found during search—Assessee is entitled to furnish cash flow statement to explain the transactions when no books of account are maintained—In such circumstances it becomes the duty of the AO to verify the balance sheet and cash flow statement with the necessary material including the details already filed along with the returns in the past— Assessee explained that the cash found at the time of search was withdrawn from the bank some time back which was partly used for purchasing gold and part of the amount was given by the assessee to his wife—There is nothing to suggest the utilization of the withdrawal amount elsewhere—Said withdrawal is duly reflected in the cash flow statement and closing cash balance is more than the amount found at the time of search—Thus, addition cannot be sustained”

6.4 Kindly refer SMT. Rekha Shekhawat vs. PCIT (2022) 99 ITR (Trib) 69 (JP)

“Revision—Erroneous and prejudicial order—Lack of proper enquiry vis-a-vis assessment of additional income as business income—During the course of survey under s. 133A assessee’s husband admitted unrecorded income in the case of his wife i.e., assessee which was stated to be advances made for property in the course of her real estate business—Unrecorded trade advances and cash in hand were brought in the books of accounts and formed part of business assets and thereafter used in day-to-day business activities—Questions which were raised and the answers given during the survey show that the additional income declared on account of advances and the cash found emanated from and related to the real estate business only— Even the Principal CIT has admitted in the impugned order that this income pertains to recovery of cash amounts of advances made by the assessee to the other persons for purchase of land/plots—Undisputedly the assessee is engaged in the real estate business and there is no undisclosed or unknown source of income and the source of additional income so admitted is clearly identifiable and is the regular business of real estate—Since the additional income is related to the real estate business it is certainly assessable as business income and cannot be considered as income falling under s. 68/69A—AO having applied his mind in accepting the said additional income as business income, there was no error in the assessment order—Thus, the Principal CIT was not justified in expecting the AO to apply s. 115BBE as also s. 271AAC by merely imposing and substituting his own opinion, which is not the legislative intent even behind Expln. 2(a) to s. 263—Further, merely because the assessee has taken a mistaken view of the correct legal position by wrongly showing such additional income under head income from other sources in her return, the same cannot be taken as an admission as there is no estoppel against statute—Therefore, Principal CIT was not justified in invoking the provisions of s. 263 by wrongly holding that the assessment order under s. 143(3) was passed without considering that the additional income fell under the purview of ss. 68 and 69 and that tax was chargeable under s. 115BBE as against normal rates—Hence, the proceedings initiated under s. 263 and the impugned order are quashed”

6.5 Kindly refer Rameshwar Prasad Shringi vs. PCIT (2021) 92 ITR_Trib (Trib) 652 (JP)

“Revision—Erroneous and prejudicial order—Lack of proper enquiry—AO issued successive notices under s. 142(1), where, inter alia, he asked the assessee to furnish the details of all his bank accounts explaining the credit entries and all cash deposits as well as debit entries and all cash withdrawals along with the copy of the bank statements—AO has carried out exhaustive enquiries and verifications regarding the source of cash deposits in the bank account during the relevant year—Bank statements, cash book, ledger accounts, financial statements for the year under consideration and for the earlier years were called for and examined by the AO—AO examined these documentation and raised pointed queries and sought explanation from time to time regarding each and every transaction where cash deposits have been made in the bank accounts—He also examined the transactions pertaining to cash deposits in the subsequent period i.e., financial year 2016-17 as well as earlier financial year and called for cash ledger and availability of cash in hand during the financial years 2015-16 and 2016-17 to determine the linkage thereof with the transactions undertaken and reflected during the year under consideration—In the asst. yr. 2008-09 assessee surrendered an amount of Rs. 1,96,37,930 to tax which includes an amount of Rs. 1,59,00,000 in respect of unexplained advances/investment in the name of assessee and his family members—Assessee reflected the said amount under the head “Sundry advances and investments” in his regular books of accounts for the financial year 2007-08 relevant to asst. yr. 2008-09—Said advances were thereafter regularly reflected in terms of outstanding balances net of recoveries from time to time in the financial statements and balance sheets for the subsequent financial years which were also placed on record and examined by the AO—Tax returns for all earlier assessment years including that of the subsequent asst. yr. 2017-18 have been filed by the assessee and accepted by the Revenue which is again a clear affirmation on the part of the Revenue that the financial statements represent true and fair view of assessee’s affairs—In such a scenario, it cannot be said that the AO could entertain any apprehension that the debtors and advances so reflected and accepted in the earlier years are not genuine and have to be enquired again afresh in terms of identity, creditworthiness and genuineness of individual transactions—AO has taken a prudent, judicious and reasonable view in accepting the explanation of the assessee in support of the cash deposits after considering the entire material available on record—Thus, order passed under s. 143(3) cannot be held as erroneous insofar as prejudicial to the interest of Revenue—Impugned order passed by the Principal CIT under s. 263 is accordingly set aside”

Hence, the impugned addition kindly be deleted.”

6. In this appeal the ld. AR of the assessee also placed on record a detailed paper book and index of the same is extracted here in below :

S. No.	Particulars	Pg. No.
1.	Balaji Health Care (P) Ltd. vs ITO (2019) 33 NYPTTJ 131 (Jp)	1-15
2.	CIT vs Jet Airways (I) Ltd. (2011) 52 DTR 71 / 331 ITR 236(Mum)	16-26
3.	CIT vs Rajeev Sharma (2010) 232 CTR 303 / 336 ITR 678 (All)	27-39
4.	ACIT vs Greater Noida Industrial Development Authority (2015) 281 CTR 204 / 379 ITR 14 (All)	40-48
5.	CIT v/s Parmeshwar Bohra (2007) 301 ITR 404 (Raj.)	49-52
6.	M/s Surbhi Minchem (P) Ltd. vs ITO in ITA No. 102 86 103/Jodh/2014 dated 16.05.2014.	53-65
7.	UOI vs. Ajit Jain 86 Anr.(2003) 181 CTR 2002	66-67
8.	Ajit Jain vs. UOI 86 Ors. (2000) 159 CTR 0204	68-77

–

S. No.	Particulars	Pg. No.
10.	CIT vs. Mohmed Juned Dadani (2013) 258 CTR (Guj) 168	78-87
11.	CIT 86 Anr. vs. Aslam Ulla Khan (2010) 321 ITR 150 (Kar)	88-90
12.	Jayanthi Natarajan vs. ACIT (2018) 300 CTR (Mad) 225	91-96

–

S. No.	Particulars	Pg. No.
1.	Copy of reasons recorded u/s 147/148.	1-2
2.	Copy of ITR, computation and financial statements for AY 2010-11.	3-5
3.	Copy of ITR, computation and financial statements for AY 2008-09, 2009-10, 2011-12 and 2012-13.	6-20
4.	Copy of ITR, and Computation for AY2007-08	21-22
5.	Copy of letter to AO dated 03.02.2014	23-25
6.	Copies of Notices u/s 143(3) dated 07/04/2014 and 14/07/2014	26

7. The ld. AR of the assessee vehemently argued that the source of the cash with the assessee is arability of opening cash. The reasons recorded for re-opening were different with that of the addition made so the reasons to believe and reasons to suspect and the ld. AO has not reasons to believe to he is suspecting. Thus, the ld. AR of the assessee relying on the written submission and supported case laws prayed that the assessment order is bad in law. The assessee has filed the return of income and therefore, the assessee has already explained the source of cash and therefore, even on merits the addition is not sustainable. The ld. AR of the assessee relying on the decision of the jurisdictional high court judgment submitted that once the revenue accepted the opening balance which is supported with earlier year no addition can be made.

8. The ld DR is heard who has relied on the findings of the lower authorities has raised similar contentions that has been recorded in the order of the ld. AO and that of the ld. CIT(A).

9. We have heard the rival contentions and perused the material placed on record and have also gone through the various judicial precedent cited to drive home to the respective contentions raised by both the parties. The bench noted that in this case there were two type of grounds one challenging the legality of the assessment and other on the merits of the case. On merits of the case the addition the bench noted that the ld. AO has repeatedly recorded findings that the assessee did not filed any ROI for A.Y. 2008-09 (AO Pg 4) and again alleged that the assessee has not filed ROI for preceding years (AO Pg-5). Against this set of facts it is evident that the return of income for AY 2007-08 was filed on dated 31.07.2007 along with the copy of balance sheet and P&L A/c (PB 21-22) followed by the ROI for AY 2008-09 filed on dated 31.07.2008 along with the copy of balance sheet and P&L A/c (PB 6-7). Thereafter, ROI for AY 2009-10 was filed on dated 31.07.2009 declaring total income 1,47,932/- (PB 8) and notably (and admittedly), the balance sheet for AY 2009-10 was also filed along with the ROI wherein the closing balance of cash in hand of Rs. 16,98,502/- was disclosed (PB 10), which became the opening balance of cash in hand of the subjected year i.e. A.Y. 2010-11. This contention raised before us and before the lower authority were never challenged. Even the ld. AO himself (Refer AO Pg-4), to this opening cash in hand, added the income of the current year i.e. A.Y. 2009-10 of Rs.2,37,993/-. Accordingly, the closing balance of cash in hand of Rs.16,98,502/- became the opening balance of the cash in hand as on 01.04.2009. Thus, addition made of the entire cash in hand of Rs.16,98,502/-, admittedly was of the closing balance of cash in hand supported by the Balance Sheet and ROI filed for AY 2009-10. The ROI for AY 2009-10 was processed u/s 143(1) and the said assessment (or the earlier even) is not stated to have been disturbed by taking any action u/s 147 or u/s 263 of the Act. Thus, the closing balance of cash in hand for AY 2009-10 stood established or not disputed. Thus, once the Balance Sheet of the current year and the preceding years accepted by the Department, the repeated contention of the assessee that the very source of the availability of the cash in hand of Rs.16,98,502/- was the Balance Sheet which explains the source. Notably the ld. AO himself has taken note of the Balance Sheet, Capital Account and P & L Account of A.Y. 2009-10 and A.Y. 2010-11 at Pg. 4 to 6 and also discussed the investments, debtors, creditors, loan taken etc. but has not appreciated the opening cash in hand. He even admitted the closing balance of cash in hand of Rs. 7,42,864/- in this year (PB 5). He even admitted the availability of closing cash in hand of Rs.16,98,502/- in A.Y. 2009-10. It is beyond one`s comprehension that when each and every entry of the Balance Sheet for the preceding year i.e. A.Y. 2009-10 and current year i.e. A.Y. 2010-11 have been accepted (and no dispute raised w.r.t. the correctness of these figures and the facts), there is no reason as to why the ld. AO not accepted the closing cash in hand as having been available with the assessee in A.Y. 2009­10. Also consequently therefore, again when he has admitted rather not disputed any of the entries of the Balance Sheet for the current year, the opening cash in hand of the subjected amount of Rs.16,98,502/- should have been accepted as available balance with the assessee. Thus, once the assessee based on the all the evidence which are not under dispute submit that the same is out of the opening cash in hand no addition can be made in the year under consideration. The ld. AO assumed opening cash balance as `Nil` on the suspicion that whatever the assessee had earned in the preceding years stood utilized towards expenses or in making the investments and also alleged that the assessee failed to prove the existence of cash in hand and accordingly he considered Rs.16,98,502/- as undisclosed income of the current year. Thus, what the ld. AO added was the opening balance of cash in hand in this year which is legally impermissible on the face of it. Although the ld. AO has not invoked any particular provision of law yet however, assuming that it was a case of S.68 (or even u/s 69A), the provision speaks of the credit found during the previous year in the books of account maintained by the assessee. Therefore, the law is well settled that credit found on the first day or carried forward from the preceding year cannot be added in this year. The ld. AR of the assessee on these aspect of the matter has relied upon the decision of the decision of this co-ordinate bench decision in Parmeshwar Bohra v/s ITO 27 TW 55(JD). Page 61 para 22 has held that “— Therefore, we hold that the opening capital cannot be added as unexplained investment u/s 69 of the Act for the AY 1993-94.” This decision was affirmed in CIT v/s Parmeshwar Bohra (2007) 301 ITR 404 (Raj.) (DPB 50-52) holding that clear finding recorded by the Tribunal that the impugned amount was credited in the books of account of the assessee in the earlier previous year and was shown as closing capital of that year – carried forward amount of the previous year does not become an investment or cash credit of the relevant year. Respectfully following the finding of the co-ordinate bench and affirmed by the jurisdictional high court we direct to delete the addition of Rs. 16,98,502/-. In terms of these observation ground no. 2 raised by the assessee is allowed. Ground no. 3 being consequential in nature does not require our adjudication.

10. Ground no. 1.1, 1,2 & 1.3 challenging the order on various legal aspects. Since, the appeal of the assessee is allowed in ground no. 2 on merits the grounds raised by the assessee on technical grounds becomes infructuous and the same are not required to be adjudicated.

11. In the result, the appeal of the assessee is allowed.

Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.