Case Law Details
Vijay Kumar Jaiswal Vs ITO (ITAT Raipur)
The Raipur ITAT allowed the assessee’s appeal arising from the order of the CIT(A)/NFAC for AY 2014-15, holding that the appellate authority could not substitute Section 68 of the Income Tax Act for Section 69A without issuing statutory notice or providing an opportunity of hearing to the assessee.
The Assessing Officer had made an addition of ₹17,76,480 under Section 69A as unexplained money in relation to cash deposits. The Tribunal noted that while the assessment proceedings and the enquiry conducted by the Department were entirely directed towards explaining the source and nature of the cash deposits, the CIT(A), in the appellate order, altered the charging provision from Section 69A to Section 68 relating to unexplained cash credits. The Tribunal found that the CIT(A) neither demonstrated how Section 68 applied to the facts of the case nor issued any statutory notice or granted the assessee an opportunity of hearing before changing the charging provision. It held that such action violated the principles of natural justice and reflected complete non-application of mind.
The Tribunal relied on its earlier decisions, including Suman Poptani, where it had held that additions relating to unexplained cash deposits could not be sustained under an incorrect charging provision. It observed that there was no evidence of unexplained investment attracting Section 69, nor was there any enquiry relating to unexplained cash credits under Section 68. The entire investigation concerned the source of cash deposits, making Section 69A the relevant charging provision where applicable. Invoking an incorrect provision without examining the facts amounted to mechanical exercise of power and lack of application of mind by the Revenue authorities.
The Tribunal also referred to judicial precedents emphasizing that quasi-judicial authorities must independently apply their mind before invoking statutory provisions and cannot mechanically adopt an incorrect charging section. It noted that where the charging provision itself is wrongly invoked, the assessment becomes legally unsustainable. Further, it referred to the decision of the Allahabad High Court in Smt. Sarika Jain, which held that an appellate authority cannot travel beyond the subject matter of the appeal by substituting one charging provision for another. The Tribunal also relied on its own earlier decision in Prakash Chand Agrawal, reiterating that where the Department proceeds under a wrong charging provision without independent application of mind, the addition cannot be sustained.
Applying the rule of consistency and following its earlier decisions, the Tribunal held that the CIT(A) had wrongly invoked Section 68 to tax cash deposits that had originally been examined under Section 69A. It concluded that the appellate order was vitiated by complete non-application of mind and violation of natural justice. Even without examining the merits of the addition, the Tribunal held that the assessment framed under Section 143(3) was arbitrary and bad in law. Accordingly, the impugned order was quashed and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)/NFAC, dated 22.03.2026 for the assessment year 2014-15 as per the grounds of appeal on record.
2. In this case the addition has been made by the A.O. invoking Section 69A for unexplained money in the hands of the assessee whereby addition has been made of Rs. 17,76,480/-. The Ld. CIT(A) in his findings suddenly changed the charging Section from Section 69A to Section 68 of the Act which pertains to unexplained cash credits. That though the findings emanating from the assessment order is with regard to the additions on account of cash deposits treating the same as undisclosed income, however, the CIT(A) while invoking Section 68 of the Act failed to demonstrate how it pertained to the facts of the assessee’s case. Firstly, the CIT(A) while changing the section has not provided any statutory notices nor has provided any opportunity to the assessee of hearing which is against the principles of natural justice. Secondly, the entire trail of investigation was with regard to ascertaining the source and nature of the cash deposits. There is nothing on record in relation to the unexplained cash credit pertaining to Section 68 of the Act. In view thereof the CIT(A) while passing the order had failed to come to a correct reasoning since there was absolute non-application of mind rendering the order as arbitrary bad in law, hence, quashed. Similar view has been taken by the ITAT, Raipur in the case of Suman Poptani Vs. ITO-1(3), Raipur (C.G.), ITA No.302/RPR/2026, dated 25.05.2026, wherein it was held as follows:
“4. I have carefully considered the submissions of the parties herein, analyzed the facts and circumstances in this case. That from trail of enquiries as conducted by the both the authorities below and as evident from assessment order, the addition has been made u/s.69 of the Income Tax Act, 1961 (for short ‘the Act’) as unexplained investment whereas the issue was that the assessee had deposited cash of Rs.12 lakhs during demonetization period and whether the nature and source of such cash deposits were proved by the assessee or not. In the case of the assessee there is no evidence to suggest that any investment is made by the assessee outside the books of account and in fact, the purpose of ground verification by deputing Inspector to verify whether the assessee was earning through boutique business or not, was to examine the nature and source of such cash deposits only and there is nothing with regard to the applicability of Section 69 of the Act in the case of the assessee. The assesse had made cash deposits during demonetization period and she was required to explain the nature and source of such cash deposits. There is no trail of enquiry by the Department regarding any unexplained investment made during the year by the assesse. It is not the case of the Department that some investment has been made by the assessee which is not explained or outside the books of account of the assessee. Therefore, even without going into the merits of the addition, both A.O as well as Ld. CIT(Appeals)/NFAC has erred in invoking incorrect provision for making addition in the hands of the assessee.
5. There is absolutely non application of mind by the A.O in the case of the assessee. The wrong charging provision to the facts and circumstances of the case regarding the assessee is the result of non-application of mind by the Assessing Officer. That as per the Department when the source of cash deposits have remained unexplained by the assessee the correct provision for charging should have been Section 69A of the Act and not u/s. 69 of the Act. The fact of non-application of mind and mechanical exercise of power by the Revenue Authorities have been heavily condemned by the various Courts and Tribunals. The decision of the Co-ordinate Bench, Mumbai in the case of Shrilekha Damani Vs. DCIT, 173 TTJ 332 (Mumbai) which was approved by the Hon’ble High Court of Bombay in the decision reported in 307 CTR 218 (Bom.) wherein the question of law before the Court was whether the Tribunal was justified in holding that there was non-application of mind on the part of the Revenue authorities while granting approval and the decision of the Tribunal was upheld that the approval granted by the ACIT was without application of mind, therefore, not a valid approval in the eyes of law. In the case of ACIT, Circle-1(2) Vs. Serajuddin & Co., the Hon’ble Supreme Court vide order in SLP (C) Diary No.44989/2023, dated 28.11.2023 dismissed the appeal filed by the Revenue against the order passed by the Hon’ble High Court of Orissa, wherein the Hon’ble High Court had quashed the assessment order on the ground of inadequacy in procedure adopted for granting approval u/s.153D of the Act by expressing dis-coherent note of such mechanical exercise and ritualistic approval processes vitiate the entire assessment proceedings. There are plethora of judgments in which it has been held that quasi-judicial authority has to specially apply mind to the facts of the assessee’s case as well as enquiry conducted and justify the reasoning through which the tax liability is imposed on the assessee. That in absence of proper application of mind or when there is mechanical exercise of power, in such scenario, the Courts have always struck down the order of the Revenue authorities. In the recent decision of the Hon’ble Supreme Court in the case of Adani Power Rajasthan Limited Vs. Assistant Commissioner of Income Tax, (SLP Diary No.27752/2024) has held that the A. O cannot Act mechanically or merely echo audit parties objection or higher authorities directions. The A.O must conduct independent enquiry and independently frame reasons to believe that income has escaped assessment. Reassessment and assessment order requires statutory approval. The Hon’ble Supreme Court mandates that sanctioning authority must apply its mind rather granting approval as empty ritual when the assessment was initiated and finalized by the assessing authority without application of mind, hence, the said order is liable to be struck down.
6.Reverting to the facts of the present case, the trail of enquires conducted by the Revenue authorities as evident from the assessment order as well as from the impugned order that though the additions has been made u/s.69 of the Act as unexplained investment whereas, the issue was regarding explaining of the source of cash deposits by the assessee of Rs.12 lacs during demonetization period. The unexplained cash deposits had to be charged u/s.69A of the Act and not u/s.69 of the Act. There is complete non-application of mind by the A.O regarding the enquiry that had been made before finalizing the assessment order and finally the charging section that is invoked against the assessee. In other words, the A.O had framed assessment against the assessee without recording valid satisfaction and reasoning regarding provisions of law, in which, he had proceeded against the assessee.
7. I find that it has been held by the Co-ordinate Bench of the Tribunal, Delhi in the case of Bhawani Castings P. Ltd. Vs. DCIT ITA No.1362/Del/2024, dated 19.11.2024 that when there is no coherence in the reasons recorded for reopening and additions made in the assessment, it is utter non application of mind by the A.O while recording reasons for reopening.
8. In the decision of the Co-ordinate Bench of Delhi in the case of Sanjeev Kumar c/o M/s Raj Kumar & Associates vs. ITO Ward 2(3)(2), Bulandshahr, reported in 2023(10) TMI 1027-ITAT Delhi on the same issue of non-application of mind, it was observed and held as follows:
“14. In view of foregoing discussion, I reach to a logical conclusion that the complete cash book statement clearly explains the source of cash deposit to the bank account of assessee, wherein the assessee has not only included cash receipts as salary and capital withdrawal from two partnership firms M/s Umang Beverages and M/s Mohan Oil & Cattle Feed and a cash salary from Bihar Milk Foods Pvt. Ltd. and has also reduced the amount of drawings for household expenses. The copy of return of income of wife of assessee Smt. Shalini and father of assessee Shri Kalu Mal co-jointly established that the other family members of assessee are also earning and contributing towards household expenses. Therefore, in my humble understanding the source of cash deposit during demonetization to the bank account of assesses is properly explained by the assessee by way of self speaking documentary evidence and explanation. Secondly, the AO has made addition u/s 69 of the Act which pertains to unexplained investments, whereas the assessee has not made any investment either in movable or any immovable property during the relevant period by way of using cash amount. The Ld.CIT(A) though has given credit of 25% of Impugned cash deposit confirming the remaining part of addition but there is no logic of this segregation. From the relevant operative part of first appellate order, I also note that the Ld.CIT(A) has upheld the part addition without mentioning any charging section and impliedly adopting section 69 of the Act in the line of assessment order. Therefore, respectfully following the proposition rendered by the Hon’ble Jurisdictional High Court of Allahabad in the case of Sarika Jain (supra). I have no hesitation to hold that the addition made by the AO by mentioning incorrect and irrelevant charging section is not sustainable and valid being bad in law. Accordingly, grounds of assessee are allowed and AO is directed to delete the entire addition.
15. In the result, appeal of the assessee is allowed.”
9. Similarly, in the decision of Hon’ble High Court of Allahabad in the case of Smt. Sarika Jain Vs. The Commissioner of Income Tax, Bareilly and Another, reported in (2018) 407 ITR 254 (All) which decision was referred to and applied in the earlier decision of the Co-ordinate Bench of Delhi (supra), the Hon’ble High Court of Allahabad held as follows:
“In the present case, it is apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the addition of alleged amount of the gift received by the appellant-assessee as his personal income under Section 68 of the Act and not whether such an addition can be made under Section 69A of the Act.
In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that “it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act.
In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law.
Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and against the Revenue and hold that the Tribunal was not competent to make any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.”
10. This Bench in the case of Prakash Chand Agrawal Vs. ITO, Ward-2, Raigarh (C.G.), ITA No.205/RPR/2026, dated 22.05.2026, has held that when charging section itself is wrong and misplaced and that the Department had proceeded against the assessee without independent application of mind, in such a case, the addition cannot be made in the hands of the assessee based on such wrong provision of law. The relevant observations of the Tribunal are extracted as follows:
“…………… I further observe that the additions have been made u/s. 68 of the Act which pertains to unexplained cash credit. But in this case, regarding both the additions, there is no trail of any evidence or enquiry by the Department regarding any loan transaction so to justify addition u/s. 68 of the Act as unexplained cash credit. The entire trail of examination is regarding the nature and source of cash deposits and since the addition has been made by the Department stating the said cash deposits were unexplained then the relevant charging section should have been Section 69A and not Section 68 of the Act. Therefore, charging provision itself has been wrongly invoked by the Department which is clearly non application of mind by the quasi judicial authority. I find that it has been held by the Co-ordinate Bench of the Tribunal, Delhi in the case of Bhawani Castings P. Ltd. Vs. DCIT (supra) that when there is no coherence in the reasons recorded for reopening and additions made in the assessment, it is utter non application of mind by the A.O while recording reasons for reopening.
16. In the decision of the Co-ordinate Bench of o Delhi in the case of Sanjeev Kumar c/o M/s Raj Kumar & Associates vs. ITO Ward 2(3)(2), Bulandshahr, reported in 2023 (10) TMI 1027-ITAT Delhi on the same issue of non-application of mind, it was observed and held as follows:
“14. In view of foregoing discussion, I reach to a logical conclusion that the complete cash book statement clearly explains the source of cash deposit to the bank account of assessee, wherein the assessee has not only included cash receipts as salary and capital withdrawal from two partnership firms M/s Umang Beverages and M/s Mohan Oil & Cattle Feed and a cash salary from Bihar Milk Foods Pvt. Ltd. and has also reduced the amount of drawings for household expenses. The copy of return of income of wife of assessee Smt. Shalini and father of assessee Shri Kalu Mal co-jointly established that the other family members of assessee are also earning and contributing towards household expenses. Therefore, in my humble understanding the source of cash deposit during demonetization to the bank account of assesses is properly explained by the assessee by way of self speaking documentary evidence and explanation. Secondly, the AO has made addition u/s 69 of the Act which pertains to unexplained investments, whereas the assessee has not made any investment either in movable or any immovable property during the relevant period by way of using cash amount. The Ld.CIT(A) though has given credit of 25% of Impugned cash deposit confirming the remaining part of addition but there is no logic of this segregation. From the relevant operative part of first appellate order, I also note that the Ld.CIT(A) has upheld the part addition without mentioning any charging section and impliedly adopting section 69 of the Act in the line of assessment order. Therefore, respectfully following the proposition rendered by the Hon’ble Jurisdictional High Court of Allahabad in the case of Sarika Jain (supra). I have no hesitation to hold that the addition made by the AO by mentioning incorrect and irrelevant charging section is not sustainable and valid being bad in law. Accordingly, grounds of assessee are allowed and AO is directed to delete the entire addition.
15. In the result, appeal of the assessee is allowed.”
17. Similarly, in the decision of Hon’ble High Court of Allahabad in the case of Smt. Sarika Jain Vs. The Commissioner of Income Tax, Bareilly and Another, reported in (2018) 407 ITR 254 (All) which decision was referred to and applied in the earlier decision of the Co-ordinate Bench of Delhi (supra), the Hon’ble High Court of Allahabad held as follows:
“In the present case, it is apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the addition of alleged amount of the gift received by the appellant-assessee as his personal income under Section 68 of the Act and not whether such an addition can be made under Section 69A of the Act.
In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that “it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act.
In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law.
Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and against the Revenue and hold that the Tribunal was not competent to make any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.”
18. Therefore, on both these counts, additions made by the A. O and sustained by the Ld. CIT(Appeals)/NFAC is unjustified, arbitrary and bad in law.
11. In the facts and circumstances and as per applicability of judicial pronouncements as afore-stated even without going into the merits of the matter, I am of the considered view that there is no case brought out by the Department against the assessee to tax u/s.69 of the Act. Charging section itself is wrong and misplaced and as evident, there is utter non application of mind by the Revenue authorities. The assessment has been framed in a mechanical manner without judicious reasoning. In view thereof, the assessment framed u/s.143(3) of the Act is held as arbitrary, bad in law, hence, quashed.”
3. Therefore, on the same parity of the reasoning respectfully following the aforesaid decision as per rule of consistency since the CIT(A) had invoked wrong provisions of law for bringing to tax the cash deposits made by the assessee and since there has been complete non-application of mind the impugned order is vitiated and is held bad in law, hence quashed.
4. That as per the above terms, the appeal of the assessee is allowed.
Order pronounced in open court on 19th day of June, 2026.
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