Preeti Bhardwaj Vs ITO (ITAT Delhi)
ITAT Delhi in Preeti Bhardwaj Vs ITO held that AO cannot treat cash deposits as unexplained when assessee has provided the source of cash deposits being cash withdrawals without bringing adverse material.
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Delhi provided relief to Preeti Bhardwaj against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The case pertained to the assessment year 2017-18, wherein the assessing officer (AO) made an addition of Rs. 29,60,000 under section 69A of the Income Tax Act, 1961. The grounds of appeal raised various issues regarding the legality and jurisdiction of the assessment order.
Key Points of the Case:
- Unjustified Addition: The main contention of the appellant was the unjustified addition made by the AO under section 69A without proper consideration of the submissions and facts provided by the assessee. It was argued that there was a direct correlation between the cash withdrawals and subsequent deposits in the bank account.
- Limited Scrutiny Issue: Another important aspect raised was the conversion of limited scrutiny proceedings into full scrutiny without following the mandatory guidelines issued by the Central Board of Direct Taxes (CBDT). The appellant highlighted the procedural irregularities in the assessment process.
- Legal and Factual Support: The appellant, Preeti Bhardwaj, supported her case with documentary evidence, including bank statements and self-cheques, to substantiate the cash withdrawals and deposits. Moreover, relevant case laws were cited to strengthen the argument against treating the cash deposits as unexplained income.
ITAT’s Verdict: After considering the arguments presented by both parties and examining the available material, the ITAT ruled in favor of the appellant. It emphasized that when the assessee provides a credible source for cash deposits, the AO should not treat them as unexplained without sufficient adverse material. Therefore, the ITAT directed the AO to delete the impugned addition.
FULL TEXT OF THE ORDER OF ITAT DEL-HI
This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 15.12.2023, pertaining to the assessment year 2017-18. The assessee has raised following grounds of appeal:
“1.1 That on the facts and circumstances of the case, the CIT(A) was not justified in upholding the addition of Rs. 29,60,000/- made u/s 69A of the Income Tax Act, 1961 without appreciating the submissions filed and the facts of the case.
1.2 That there is direct nexus between cash withdrawals from bank account and subsequent cash deposits therein, the impugned addition made by the Assessing officer is arbitrary and without any basis.
2.1 That on the facts and circumstances of the case and in law, the Assessment order passed by converting limited scrutiny proceedings into full scrutiny without mandatory compliance of guidelines issued by CBDT is illegal and without jurisdiction.
2.2 That notice u/s 143(2) was issued for the purpose of limited scrutiny of verification of cash tax payments and the issue of other cash deposits being not part of reasons for issuing limited scrutiny notice, the impugned Assessment order passed without converting limited scrutiny into regular/full scrutiny by obtaining prior approval of Pr. CIT is not in accordance with mandatory CASS guidelines issued by CBDT.
2.3 That the Assessing Officer having not followed the proper procedure to convert the limited scrutiny proceedings into complete scrutiny proceedings, the Assessment Order is illegal and is liable to be quashed for disregarding the compulsory CBDT Instruction No. 5/2016
3. That the orders passed by the lower authorities are not sustainable on facts and same are bad in law.
4. That the appellant craves leaves to add, alter, amend, forgot any of the grounds of appeal at the time of hearing.”
2. Apropos to the grounds of appeal, learned counsel for the assessee has filed a brief synopsis and reiterated the contents of the same. For the sake of clarity, the submissions of the assessee are reproduced as under:
“1.1 The Appellant is a senior citizen and has filed the ITR declaring an income of Rs. 20, 1, 640 / (- u) / h Capital gains and Other sources. Subsequently, the case of the appellant was selected for limited scrutiny for verification of payment of tax in cash and thereafter, an assessment order dated / 12/2019 u/s 143(3) of the Act was passed after making the aggregate addition of Rs. 29, 60000 / (- o) * n the alleged ground of unexplained money u / s 69A of the Income Tax Act, 1961 being Rs. 16,10,000/-as cash deposits in the bank account and Rs. 13,50,000/- as tax paid through cash.
1.2 The Appellant against the said Assess-ment Order filed an appeal before the CIT(A), New Delhi who vide order dated 15/12 / 2023 has up-held the addition made in the Assessment order.
1.3 The Appellant against the CIT(A) Order has filed an appeal before the Hon’ble ITAT, New Delhi and raised following grounds:
1.1 That on the facts and circumstances of the case, the Assessment Order passed by ITO, Ward 29(3) is illegal and without jurisdiction as the same is total disregard to the provisions of section 120 r.w.s. 127 of the Income Tax Act, 1961.
1.2 That the Notice u/s 143(2) having been issued by the ACIT, Circle 32(1), New Delhi, the passing of assessment order by m 0- Ward 29(3) in absence of valid transfer of case u/s 127 of the Income Tax Act, 1961 is invalid and bad in law.
1.3 That the Assessment order passed with-out issue of valid notice u/s 143(2) of the Act is illegal and void-ab-initio.
2.1 That on the facts and circumstances of the case, the CIT(A) was not justified in upholding the addition of Rs. 29,60,000/ made u/s 69A of the Income Tax Act, 1961 without appreciating the submissions filed and the facts of the case.
2.2 That there is direct nexus between cash withdrawals from bank account and subsequent cash deposits therein, the impugned addition made by the Assessing officer is arbitrary and without any basis.
3.1 That on the facts and circumstances of the case and in law, the Assessment order passed by converting limited scrutiny proceedings into full scrutiny without mandatory compliance of guidelines issued by CBDT is illegal and without jurisdiction.
3.2 That notice u/s 143(2) was issued for the purpose of limited scrutiny of verification of cash tax payments and the issue of other cash deposits being not part of reasons for issuing limited scrutiny notice, the impugned Assessment order passed without converting limited scrutiny into regular/full scrutiny by obtaining prior approval of Pr. CIT is not in accordance with mandatory CASS guidelines issued by CBDT.
3.3 That the Assessing Officer having not followed the proper procedure to convert the limited scrutiny proceedings into complete scrutiny proceedings, the Assessment Order is illegal and is liable to be quashed for disregarding the compulsory CBDT Instruction No. 5/2016.
4 That the orders passed by the lower authorities are not sustainable on facts and same are bad in law.
2.1 The first ground raised by the Appellant is regarding the impugned addition of Rs. 29,60,000/- made by the Assessing Officer on the alleged ground of unexplained money u/s 69A of the Income Tax Act, 1961 without considering the explanation and documentary evidences furnished during the course of assessment proceedings.
2.2 At the outset, it is submitted that the Appellant is an old lady aged around 72 years and have multiple health issues. Moreover, the Appellant’s husband is bed ridden for quite some time and as such both the Appellant and her husband need regular medical assistance. The Appellant for the purposes of medical treatment and support has withdrawn the cash from time to time aggregating to Rs. 54,50,000/- from her personal bank account. However, due to demonetization, subsequently deposited Rs. 16,10,000/- in her SBI bank account and has also paid self-assessment tax amounting to Rs. 13,50,000/- in cash. The details of date-wise cash withdrawn and cash deposits/tax payment by the Appellant are as under:
