KANCHAN LALWANI,VIZIANAGARAM V. INCOME TAX OFFICER, WARD-1, VIZIANAGARAM

ITA 484/VIZ/2025

AI Insights

The case involves an appeal by Kanchan Lalwani against the order of the Commissioner of Income Tax (Appeals), which confirmed additions made by the Assessing Officer under sections 68 and 56(2)(x)(B) of the Income Tax Act, 1961, for the assessment year 2021-22. The additions were related to unexplained cash deposits and discrepancies in property valuation. The Tribunal examined the legal definitions of 'books of account' and the applicability of section 68 to bank deposits, concluding that the additions were improperly made as the necessary evidences and opportunities were not provided to the assessee. The Tribunal also considered the principles of natural justice and the proper application of section 56(2)(x)(B), leading to the decision to allow the appeal and delete the additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786037 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2021-2022
• Appeal Filed On: 16-08-2025
• Other Referred Cases: CIT Vs. Bhaichand N Gandhi, CIT Vs. Parameswar Bohra, Mehul V Vyas Vs. ITO, Vishal Jhajharia Vs. Assessment Unit, A.K. Metals Products Vs. Assessment Unit
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Unexplained cash credit; Sale consideration of property below Jantri Value; Fair market value; Capital Gains; Principle of natural justice; Valuation report
• Section: 143(3); 56; 68; 56(2); 234B; 145

Judgement Text

" आयकर अपीलीय अधिकरण, विशाखापटणम पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL Visakhapatnam Bench श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER आयकरअपीलसं./I.T.A.No.484/Viz/2025 (निर्धारण वर्ा/ Assessment Year: 2021-22) Kanchan Lalwani, R/o.Vizianagaram. PAN : ABEPL375Q Vs. The Income Tax Officer, Ward-1, Vizianagaram. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri Manoj G. Moryani, Advocate. (HYBRID) राजस्व का प्रतततितित्व/ Department Represented by : Dr. Aparna Villuri, Sr.AR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 16.10.2025 घोर्णध की तधरीख/ Date of Pronouncement : 31.10.2025 O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), Printed from counselvise.com 2 ITA No.484/VIZ/2025 National Faceless Appeal Centre [in short “NFAC”], Delhi, relating to the assessment year 2021-22. 2. The assessee has pleaded the following grounds in the instant appeal : “1. The learned Commissioner of Income Tax Appeal, National Faceless Appeal Centre erred in confirming the order passed & addition made at Rs.1,10,40,750/- by assessment unit U/s. 143(3) r.w.s. 144B of the I.T. Act, therefore order passed is illegal, invalid and bad in law; 2. The learned Commissioner of Income Tax Appeal, National Faceless Appeal Centre erred in considering that notice U/s. 143(2) was not valid notice, therefore order passed is illegal, invalid and bad in law; The learned Commissioner of Income Tax Appeal, National Faceless Appeal Centre failed to consider that books of account were duly accepted in previous year and source were accepted in earlier year by the department, therefore confirming the addition made by CIT(A) NFAC U/s. 68 is illegal, invalid and bad in law; The Commissioner of Income Tax Appeal, National Faceless Appeal Centre ought to have appreciated the fact that the addition of Rs. 65,00,000/- made towards explained cash deposits were supported by bank statement, books of account and return of income, capital position, therefore confirming the addition of Rs. 65,00,000/- U/s. 68 is illegal, invalid and bad in law; 5. The learned Commissioner of Income Tax Appeal, National Faceless Appeal Centre erred in confirming addition without considering opening cash balance available with the assessee, therefore addition confirmed by NFAC appeal at Rs. 65,00,000/- made U/s. 68 is illegal, invalid and bad in law; 6. The learned Commissioner of Income Tax Appeal, National Faceless Appeal Centre erred in not considering that assessee has specifically objected the stamp duty value, therefore confirming addition made U/s. 56(2)(x)(b) * B of Rs. 45,40,70/- without referring matter to DVO on assumption and presumption basis is illegal, invalid and bad in law; 7. The learned Commissioner of Income Tax Appeal, National Faceless Appeal Centre failed to consider assessee has not paid any amount Printed from counselvise.com 3 ITA No.484/VIZ/2025 except the sale consideration, therefore without appreciating the facts & without considering the valuation report submitted by the assessee was prepared by registered valuer; addition confirmed by CIT(A) NFAC U/s. 56(2)(x)(b) * B is unjustified, unwarranted and excessive; 8. The learned Commissioner of Income Tax Appeal, National Faceless Appeal Centre ought to have afforded sufficient opportunity to the appellant before passing the assessment order and confirmed the addition without considering the submission of the assessee, therefore order passed is unjustified, unwarranted and excessive. 9. The assessee is denied the liability of interest charges U/s. 234A, 234B and 234C of the Income Tax Act, the same may kindly be deleted. 10. The appellant seeks permission to add any other ground of appeal or amend or alter the aforesaid ground of appeal.” 3. The brief facts of the case are that, the assessee is an individual and filed her return of income declaring total income at Rs.10,19,929/- for the assessment year 2021-2022. The case of the assessee has been selected for scrutiny under CASS on the ground that, assessee has deposited large cash in bank accounts and also purchased/sold properties during the year. The Assessing Officer has issued notice u/sec.143(2) of the Act on 28.06.2022 and notices u/sec.142(1) of the Act on 10.08.2022 and 08.12.2022 and show cause notice dated 19.12.2022 calling the assessee to furnish her explanation with supporting documentary evidences. In response to the said notices, the assessee has submitted details of properties purchased in Printed from counselvise.com 4 ITA No.484/VIZ/2025 financial year 2020-21 relevant to assessment year 2021-2022 under consideration, copy of returns, sale and purchase deed and assessee’s share in properties and the break-up details, source of investment used for purchasing the said immovable properties, copy of bank accounts and other relevant details which are tabulated by the Assessing Officer in the assessment order at pages 2 and 3 of the order. During the course of assessment proceedings, on perusal of the bank statements furnished by the assessee, the Assessing Officer noted that, the assessee has deposited cash in his Canara Bank account of Rs.1,05,000/-, Karur Vysya Bank Ltd., of Rs.77,50,000/-, Punjab National Bank of Rs.1,30,000/- and the assessee was asked to furnish details of source of cash deposits in bank accounts. In response, the assessee has furnished her share in purchased property and also the break-up details of investment, according to which, the assessee has received overdraft from Canara Bank amounting to Rs.70,46,875/-, amount received from sale consideration of Rs.39,73,500/- as per her share in the said property and declared source of investment amounting to Rs.1,10,20,375/- [i.e., Rs.70,46,875/- + Rs.39,73,500/-]. Further, the Assessing Officer Printed from counselvise.com 5 ITA No.484/VIZ/2025 noted in the assessment order the income tax returns filed by the assessee from the financial year 2001-2002 to 2006-2007, 2008- 2009 to 2020-2021 and her admitted income totalling to Rs.79,88,483/- which was tabulated by the Assessing Officer at pages 7 and 8 of the assessment order. During the course of assessment proceedings, the assessee has submitted the transaction details paid by her husband (Shri Suresh Lalwani) & her father-in-law (Shri Dholumal Lalwani). However, the Assessing Officer noted that, although, the said details are seems to be acceptable, but, regarding source of cash deposits, the Assessing Officer noted that, no documentary evidences such as confirmation from persons who received advances from the assessee, mode of transaction, genuineness and creditworthiness of those persons etc. are furnished. Therefore, the Assessing Officer made addition of Rs.65 lakhs in the hands of assessee u/sec.68 r.w.s.115BBE of the Act. Further, the Assessing Officer made addition of Rs.45,40,750/- on account of difference in the market value of property and sale consideration which has been tabulated by the Assessing Officer at page-10 of the assessment order and treated the said sum as income from other sources Printed from counselvise.com 6 ITA No.484/VIZ/2025 u/sec.56(2)(x)(b)(B) of the Income Tax Act, 1961. Accordingly, the Assessing Officer assessed the total income of the assessee at Rs.1,20,60,680/- by making addition on account of variation in respect of issues amounting to Rs.1,10,40,750/- as against the returned income of the assessee at Rs.10,19,930/- vide order dated 27.12.2022 passed u/sec.143(3) r.w.s.144B of the Income Tax Act, 1961. 4. Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), the assessee submitted that, although, the assessee has sufficient cash deposit in her bank account, the Assessing Officer made the impugned addition u/sec.68 of the Act which is not as per law. He submitted that invocation of sec.68 is meant for unexplained cash credits, but, not for cash deposits. Further, the Assessing Officer made addition u/sec.56(2)(x)(b)(B) of the Act which is not operative for the assessment year 2021-2022 and in fact, ceased to operate from 01.04.2017. Further, the assessee has made all the purchase considerations through banking channels like cheques/RTGS/DDs/NEFT etc., which are also confirmed through registered documents and sellers. Therefore, the Printed from counselvise.com 7 ITA No.484/VIZ/2025 impugned additions made by the Assessing Officer are not warranted. However, the learned CIT(A) without appreciating the submissions of the assessee sustained the additions made by the Assessing Officer and dismissed the appeal of the assessee. 5. Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal. 6. Shri Manoj G Moryani, Advocate-Learned Counsel for the Assessee [through Hybrid Mode] reiterated the submissions made before the lower authorities and submitted that, during the course of assessment proceedings, sufficient opportunity was not provided by the Assessing Officer to furnish books of accounts on tally maintained by the assessee to prove it’s case that the assessee has got abundant and sufficient sources to meet the impugned cash deposits addition made by the Assessing Officer amounting to Rs.65 lakhs. Similarly, although, addition of Rs.45,40,750/- made by the Assessing Officer u/sec.56(2)(x)(b)(B) of the Act which is not operative for the assessment year 2021- 2022 and in fact, ceased to operate from 01.04.2017 and thus, the addition made by the Assessing Officer under the Head ‘Variation Printed from counselvise.com 8 ITA No.484/VIZ/2025 in respect of issues’ amounting to Rs.1,10,40,750/- [i.e., Rs.65,00,000/- + Rs. 45,40,750/-] is not sustainable and needs to be deleted. During the course of appellate proceedings before the learned CIT(A), although, the assessee has submitted that the cash deposits were sourced from past accumulated income duly reflected in the appellant's capital account and cash book; recoveries of personal advances made in earlier years, and general savings from prior years. Further, it was the submission of the assessee before the learned CIT(A) that, she belongs to a traditional business family and has been filing returns for the past 20 years, to substantiate her claim of accumulation of funds over time. Further, it was submitted that, section 68 is applicable to unexplained credits in the books of account and not to bank deposits per se, and, therefore, should not be applied u/sec.68 mechanically in her case. The Learned Counsel for the Assessee submitted before the learned CIT(A) that, Assessing Officer made addition u/sec.56(2)(x)(b)(B) of the Act which is not operative for the assessment year 2021-2022 and in fact, ceased to operate from 01.04.2017. However, the learned CIT(A) without considering any of the submissions and supporting documentary evidences Printed from counselvise.com 9 ITA No.484/VIZ/2025 filed by the assessee, has simply sustained the additions made by the Assessing Officer and upheld the assessment order. In support of the contentions, the Learned Counsel for the Assessee has relied upon various decisions of Coordinate Benches of the Tribunal and the Judgment of Hon’ble Supreme Court which are placed on record at pages 1 to 176 of the paper book. He, accordingly pleaded that, the order of the learned CIT(A) should be set aside in the interest of justice. 7. Dr. Aparna Villuri, Sr. AR for the Revenue, on the other hand, relied on the orders of the authorities below. She submitted that, although, the assessee contended that she is maintaining books of accounts on tally, but, she could not produce the same before the Assessing Officer during the course of assessment proceedings as she could not get sufficient opportunity is contrary to the facts available on record as the Assessing Officer has provided opportunities on 04 occasions and the assessee has furnished only part information and, therefore, the Assessing Officer has rightly made the additions on account of ‘Variation in respect of issues’ . Further, even during the course of appellate proceedings before the learned CIT(A), the assessee could not Printed from counselvise.com 10 ITA No.484/VIZ/2025 produce the ledger extract/books of accounts on tally which he could not produce before the Assessing Officer. Further, the assessee has also failed to furnish cash book, supporting vouchers, confirmations or third-party evidence either during the course of assessment proceedings or appellate proceedings to substantiate the alleged cash inflow or availability. The other contention of assessee that, making addition u/sec.56(2)(x) is allegedly ceased to operate from 01.04.2017 is factually incorrect and legally untenable, as sec.56(2)(x) was introduced by the Finance Act, 2017 w.e.f. 01.04.2017 and is very much applicable for the assessment year 2021-2022 under consideration. Therefore, the learned CIT(A) after considering relevant submissions of the assessee and the assessment order, has rightly upheld the order of the Assessing Officer. Therefore, she pleaded that the Order of the learned CIT(A) should be upheld in the interest of justice. 8. We have heard both the parties, perused the material on record and the orders of the authorities below. The Assessing Officer made addition based on bank account of the assessee u/s.68 of the Act as unexplained cash credit on the ground that Printed from counselvise.com 11 ITA No.484/VIZ/2025 the explanation offered by the assessee towards source of cash deposit is not supported by necessary evidences. It was the argument of the learned counsel for the assessee that the cash deposited into bank account cannot be treated as unexplained cash credit in the books of account of the assessee which can be considered as addition u/s.68 of the Act. The bank pass book supplied by the bank to the assessee cannot be regarded as the books of account of the assessee. We find that the assessee is an individual and derived income from house property, income from capital gains and income from other sources for the previous year relevant to the A.Y. 2021-22. In other words, the assessee does not have income from business or profession. If an assessee does not have income from business, the assessee does not require to maintain books of account for computation of income in terms of section 145 or 145A of the Act. Further, section 2(12A) of the Act defines books of account which includes ledger, day book, cash book, account books and other books were kept in written form, electronic form or any digital form, but books of account does not include pass book supplied by a banker. Therefore, the additions made by the Assessing Officer towards cash deposit in the bank Printed from counselvise.com 12 ITA No.484/VIZ/2025 account u/s.68 of the Act has to be examined in the above factual and legal position. 9. Admittedly, the assessee derives income, other than income from business or profession for the assessment year under consideration. The provisions of section 68 deals with cash credits. As per the provisions of section 68 of the Act, where any sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory, the sum so credited may be charged to income tax as income of the assessee of that previous year. In other words, to invoke the provisions of section 68 of the Act, there should be books of account and in the said books of account there shall be cash credit and the same has not been explained by the assessee to the satisfaction of the Assessing Officer. In the present case, the Assessing Officer made addition towards cash deposits on the basis of bank pass book which is not a books of account as defined u/s.2 (12A) of the Act or maintained by the assessee in the normal course of his business. Once the Printed from counselvise.com 13 ITA No.484/VIZ/2025 credit in the bank pass book is not found in the books of account maintained by the assessee, then additions cannot be made towards the said credit u/s.68 of the Act. This legal position is supported by the decision of Hon’ble Bombay High Court in the case of CIT Vs. Bhaichand N Gandhi (1983) 141 ITR 67, where the Hon’ble High Court held that the pass book supplied by the bank to the assessee cannot be regarded as the books of account of the assessee. In other words, a cash credit of previous year shown in the bank pass book is not found in the cash book maintained by the assessee for that year does not fall u/s.68 of the Act and the Assessing Officer is not satisfied with explanation of the assessee, he can treat it as unexplained money u/s.69A of the Act. A similar view has been taken by Hon’ble Rajasthan High Court in the case of CIT Vs. Parameswar Bohra (2004) 267 ITR 619 (Raj). The ITAT, Mumbai Bench, in the case of Mehul V Vyas Vs. ITO reported in 164 ITD 296 had taken a similar view and held that passbook supplied by a bank is not a books of account maintained by the assessee and thus the addition cannot be made as unexplained cash credit u/s.68 of the Act. Since the Assessing Officer has made addition towards cash deposit u/s.68 of the Act, Printed from counselvise.com 14 ITA No.484/VIZ/2025 on the basis of bank passbook in our considered view, the additions made by the Assessing Officer cannot be sustained. The Ld. CIT(A) without considering relevant facts simply sustained the additions. Thus, we set aside the order of Ld. CIT(A) on this issue and direct the Assessing Officer to delete the addition of Rs.65 lakhs made u/s.68 of the Act. 10. As far as the addition made towards difference in sale consideration paid for purchase of property as per registered sale deed and fair market value of the property as per the stamp duty authority, the Assessing Officer made addition of Rs.45,40,750/- towards difference in value as per registered sale deed and fair market value of the property as per the registered sale deed as income from other sources u/s.56(2)(x)(B) of the Act on the ground that the explanation offered by the assessee towards difference in valuation of the property is not acceptable. It was the argument of the assessee before the Assessing Officer that, the fair market value of the property as per the stamp duty authority is although higher than the sale consideration paid by the assessee as per the registered sale deed, but the present market value of the property as determined by the registered valuer is less than the amount of Printed from counselvise.com 15 ITA No.484/VIZ/2025 consideration shown as per registered sale deed and accordingly the Assessing Officer ought not to have made addition u/s.56(2)(x)(B) of the Act. To this effect, the assessee has furnished a copy of the approved government valuer report dated 26.08.2024. The assessee had also challenged the additions made by the Assessing Officer in the light of show cause notice dated 19.12.2022, where the Assessing Officer proposed addition u/s.56(2)(vii)(b)(ii) of the Act whereas in the final assessment order, the Assessing Officer made addition u/s.56(2)(x)(B) of the Act. We find that the Assessing Officer issued a show cause notice and proposed addition u/s.56(2)(vii)(b)(ii) of the Act for which the assessee has furnished details and argued that the said provisions have no application. However, the Assessing Officer in the final assessment order has made additions u/s.56(2)(x)(B) of the Act without giving further opportunity to the assessee to explain its case. Once the Assessing Officer makes additions without giving an opportunity to the assessee for its explanation, then the additions made by the Assessing Officer violates the principle of natural justice and consequently cannot be upheld, as held by the Hon’ble Kolkata High Court in the case of Vishal Jhajharia Vs. Printed from counselvise.com 16 ITA No.484/VIZ/2025 Assessment Unit (2025) 343 ITR 478 (Kol). A similar view has been taken by Hon’ble Gujarat High Court in the case of A.K. Metals Products Vs. Assessment Unit (2025) 478 ITR 504 (Guj). Since the Assessing Officer made additions contrary to his own show cause notice without giving proper opportunity to the assessee, in our considered opinion, the additions made by the Assessing Officer violates the principle of natural justice and thus cannot be upheld. Thus, on this ground itself, the additions made by the Assessing Officer needs to be deleted. 11. Coming back to the explanation of the assessee with regard to difference in sale consideration as per registered sale deed and fair market value of the property as determined by the stamp duty authority. There is no dispute with regard to the fact that there is a difference between the fair market value and sale consideration as per registered sale deed as on the date of registration of the property. The assessee has explained that the property purchased by the assessee is adjacent to the other property without there being any proper accessible roads and because of this, the present market value of the property as on the date of purchase was less than the rate fixed by the state government for payment of stamp Printed from counselvise.com 17 ITA No.484/VIZ/2025 duty. In this regard, the assessee has furnished relevant details and also a valuation report from the approved government valuer dated 26.08.2024. We find that the assessee has furnished relevant details of property along with valuation report where the valuer has provided the description of the property along with photo copy of the property to arrive at a value which is less than the sale value of the property as per the registered sale deed and accordingly, stated the provision of section 56 of the Act is not applicable. We find that, as per the valuation report submitted by the assessee, the value of property is less than the sale consideration paid for purchase of property and therefore in our considered opinion, the Assessing Officer ought to have accepted the explanation offered by the assessee. Further, when the assessee has disputed the value determined by the Assessing Officer for the purpose of section 56(2) of the Act, then the Assessing Officer ought to have referred to the valuation of the property to the registered valuer before making the addition. Since the Assessing Officer made addition without considering the explanation of the assessee, even though the said explanation is supported by necessary evidences and also without referring the Printed from counselvise.com 18 ITA No.484/VIZ/2025 matter to the DVO, in our considered view the additions made by the Assessing Officer towards difference in value of the property cannot be sustained. The Ld. CIT(A) without appreciating the relevant facts, simply sustained the addition made by the Assessing Officer. Thus, we set aside the order of Ld. CIT(A) and direct the Assessing Officer to delete the addition made u/s.56(2)(x)(B) of the Act. 11. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Open Court on 31st Oct., 2025. Sd/- Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- S SSd/-d/- (मंजूिधथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, Dt. 31.10.2025. * Reddy gp / TYNM/sps Printed from counselvise.com 19 ITA No.484/VIZ/2025 आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Kanchan Lalwani, 22-1-22, PHHO Baugh Road, Ambati Satram Junction, Khadarnagar, Vizianagaram – 535002. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward-1, Vizianagaram. 3. The Principal Commissioner of Income Tax, Vijayawada. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, / DR, ITAT, Visakhapatnam. 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad Printed from counselvise.com "