PRIYANKA BAHETI,HYDERABAD V. INCOME TAX OFFICER, WARD-7(1), HYDERABAD

ITA 444/HYD/2024

AI Insights

The case involves Smt. Priyanka Baheti, who appealed against the order of the Pr. CIT under section 263 of the Income Tax Act, 1961, concerning unexplained cash deposits in her bank account. Initially, the assessee's return was processed under section 143(1), and later reassessed under section 147 read with section 144, leading to the addition of a substantial short-term capital gain. The Pr. CIT later found unexplained cash deposits in the assessee's account and directed their addition as unexplained income under section 69A and taxed under section 115BBE. The Tribunal examined the merits of the case, including the procedural validity of the Pr. CIT's order and the substantive explanation provided by the assessee for the cash deposits.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473236 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 14-11-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 24-04-2024
• Other Referred Cases: CIT vs. Lark Chemicals Ltd, Golden Vats Private Limited vs. CIT, CIT vs. IDBI, CIT vs. Alagendra Finance Ltd, Pr. CIT vs. K Khadim & Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SIDDHARTH TOSHNIVAL
• Keywords: Set aside; Period of limitation; Assessment record; Revision of order
• Section: 147; 148; 144; 143(1); 263; 69; 69A

Judgement Text

" ITA No 444 of 2024 Priyanka Baheti Page 1 of 12 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Shri Vijay Pal Rao, Vice-President A N D Shri Manjunatha, G. Accountant Member and आ.अपी.सं /ITA No.444/Hyd/2024 (िनधाŊरण वषŊ/Assessment Year: 2014-15) Smt. Priyanka Baheti Hyderabad PAN: AMSPB86983E Vs. Income Tax Officer Ward 7 (1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Advocate Siddharth Toshnival राज̾ व Ȫारा/Revenue by:: Shri B Bala Krishna, DR सुनवाई की तारीख/Date of hearing: 14/11/2024 घोषणा की तारीख/Pronouncement: 21/11/2024 आदेश/ORDER Per Vijay Pal Rao, Vice President: This appeal by the assessee is directed against the revision order dated 29/02/2024 passed by the Pr. CIT u/s 263 of the I.T. Act, 1961 for the A.Y 2014-15. 2. The assessee has raised the following grounds of appeal: ITA No 444 of 2024 Priyanka Baheti Page 2 of 12 ITA No 444 of 2024 Priyanka Baheti Page 3 of 12 ITA No 444 of 2024 Priyanka Baheti Page 4 of 12 3. The brief facts of the case are that the assessee is an individual and filed her return of income for the year under consideration declared total income of Rs.2,52,300/-. Initially, the return was processed u/s 143(1) of the Act. Thereafter, the Assessing Officer noted from information flagged by the Directorate of IT (Systems) for the financial year 2013-14 that the assessee has earned Short-Term Capital Gain of Rs.1,02,60,000/- but has failed to disclose the same. The Assessing Officer reopened the assessment by issuing notice u/s 148 of the Act, on 31/03/2021 and passed the re-assessment order u/s 147 r.w.s. 144 of the I.T. Act, 1961 dated 25/03/2022 whereby an addition of Short-Term Capital Gain of Rs.1,02,60,000/- was made to the total income of the assessee. Subsequently, the Pr. CIT, on perusal of the assessment record found that, the assessee has deposited cash amounting to Rs.10,28,000/- in her bank Account maintained with Tamil Nadu Mercantile Bank, but there was no explanation or evidence filed by the assessee for the source of the said cash deposits. The Pr. CIT observed that the Assessing Officer should have treated the cash deposits as unexplained u/s 69A of the Act, and brought to tax u/s 115BBE of the Act. The omission to do so on the part of the Assessing Officer while framing the re-assessment u/s 147 r.w.s. 144 renders the assessment order erroneous in so far as it is prejudicial to the interest of the Revenue. Accordingly, a show-cause notice u/s 263 of the I.T. Act, 1961 was issued on 31/12/2023 on the issue of unexplained cash deposits of Rs.10,28,000/- in the Bank Account of the assessee. The assessee replied to the show cause notice and ITA No 444 of 2024 Priyanka Baheti Page 5 of 12 explained the source of deposits as prior withdrawal from the bank account. The Pr. CIT did not accept the reply and explanation of the assessee and passed the impugned order whereby the Assessing Officer was directed to pass suitable order disallowing cash deposits of Rs.10,28,000/- treating the same as unexplained cash deposits u/s 69A of the Act and also brought to tax u/s 115BBE of the Act. 4. Being aggrieved by the impugned order, the assessee is in appeal before the Tribunal. 5. Before the Tribunal, the learned AR of the assessee assailed the impugned order on various grounds being the order is barred by limitation as the issue of cash deposits does not emanate from the re-assessment order passed by the Assessing Officer u/s 147 r.w.s. 144 of the Act and therefore, the impugned order passed by the Pr. CIT is beyond the period of limitation reckoned from the date of order passed u/s 143(1) of the Act. In support of his contention, he has relied upon the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Lark Chemicals Ltd (2014) 368 ITR 655. Thus, the learned AR has submitted that the impugned order is not sustainable and liable to be quashed being barred by limitation. The 2nd leg of argument of the learned AR is that the learned Pr. CIT has no jurisdiction to invoke the provisions of section 263 when the assessee already challenged the assessment order before the learned CIT (A) and also raised the ground of validity of the reopening of the ITA No 444 of 2024 Priyanka Baheti Page 6 of 12 assessment in appeal before the learned CIT (A) which was pending adjudication. He has contended that when larger issue was pending for adjudication before the learned CIT (A), then the learned Pr. CIT was not supposed to invoke the provisions of section 263 of the I.T. Act, 1961 on the issue of cash deposits in the Bank Account. In support of his contention, he has relied upon the decision of the Chennai Bench of the Tribunal in the case of Golden Vats Private Limited vs. CIT in ITA No.416/Chny/2023. The next contention of the learned AR is that when the assessee has challenged the validity of reopening of the assessment, then the learned Pr. CIT ought not to have passed the impugned order before the outcome of the appeal filed before the learned CIT (A). In support of his contention, he has also relied upon the following decisions: 1. CIT vs. IDBI (454 ITR 811 S.C) 2. CIT vs. Alagendra Finance Ltd (293 ITR 1 (S.C) 3. Pr. CIT vs. K Khadim & Co.(2023) 157 Tadmann.com 491 (Calcutta). 6. On merits, the learned AR has submitted that the assessee has duly explained the source of cash deposits in the Bank Account as prior withdrawal of the cash of Rs.9,95,000/- on 27/07/2013 which has not been disputed by the learned Pr. CIT but it was rejected only on the ground of suspicion that there is a gap of more than 2 months between the withdrawal and the subsequent deposits in the Bank Account. Thus, the learned AR has submitted that once the assessee has explained the source of deposits as prior withdrawal, then in the absence of any contrary ITA No 444 of 2024 Priyanka Baheti Page 7 of 12 facts or material brought on record, the rejection of the explanation by the Pr. CIT is not justified. Hence, the learned AR has prayed that the impugned order of the learned Pr. CIT passed u/s 263 is not sustainable in law and liable to be quashed. 7. The learned DR, on the other hand, submitted that the learned Pr.CIT initiated proceedings u/s 263 to revise the re- assessment order passed by the Assessing Officer on 25/03/.2022 and therefore, the order passed by the learned Pr. CIT is well within the period of limitation. He further contended that the processing of the return of income u/s 143(1) is not an assessment order as held by the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers (291 ITR 500). Thus, the learned DR has contended that this issue has emanated from the re-assessment order passed by the Assessing Officer and there is a complete lack of inquiry on the part of the Assessing Officer on this issue which is also against the provisions of section 147 of the I.T. Act, 1961 and therefore, the order passed by the Assessing Officer is erroneous in so far it is prejudicial to the interest of the Revenue. On merit, the learned DR has submitted that the learned Pr. CIT has considered all relevant facts as well as reply of the assessee and then given a finding that no prudent business person keep such huge amount of cash with himself/herself idle for such a long time. Therefore, the assessee has failed to explain the source of cash deposits to the satisfaction of the learned Pr. CIT. He has relied upon the impugned order of the learned Pr. CIT. ITA No 444 of 2024 Priyanka Baheti Page 8 of 12 8. We have considered the rival submissions as well as the relevant material available on record. The brief facts leading to the controversy are that the assessee filed her return of income for the year under consideration on 30/07/2014 which was processed u/s 143(1) of the Act. Thereafter, based on the information highlighted by the Directorate of IT Systems regarding Short-Term Capital Gain earned by the assessee under year consideration, the Assessing Officer reopened the assessment by issuance of notice u/s 148 dated 31/03/2021. The re-assessment was completed on 25/03/2022 on a total income of Rs.1,05,12,302/- after addition of Short-Term Capital Gain of Rs.1,02,60,000/-. The said order passed by the Assessing Officer was challenged by the assessee before the learned CIT (A). However, the only issue before the learned CIT (A) was regarding the addition made by the Assessing Officer apart from the validity of the reopening of the assessment. In the meantime, the learned Pr. CIT initiated the proceedings u/s 263 on the issue of cash deposits of Rs.10,28,000/- in the Bank Account of the assessee on two occasions being Rs.8 lakhs on 21/09/2013 and Rs.2,28,000/- on 26/11/2013. The assessee in the reply to show- cause notice u/s 263 has explained the source of the deposits as per the withdrawal, particularly, the withdrawal made by the assessee on 27/07/2013 of Rs.9,95,000/-. However, the said source of deposits as explained by the assessee was not accepted by the learned Pr. CIT and consequently, the Assessing Officer was directed to make an addition by treating the said amount of ITA No 444 of 2024 Priyanka Baheti Page 9 of 12 Rs.10,28,000/- as unexplained cash deposits u/s 69 of the Act applying higher tax u/s 115BBE of the Act while passing the impugned order. The learned Pr. CIT has rejected the explanation of the source of deposits in Para 8 of the impugned order as under: “8. On going through the copy of the relevant Bank account statement furnished by the assessee, it is seen that whatever the amounts that are received in assessee's account were being transferred, as it is on the same day or on the next day to somebody or other leaving a meagre balance in assessee's account.. In this process, the assessee issued a cheque in the name of Mahender Singh amounting to Rs.9,95,000/- on 27-07-2013. Assessee claims that Mr. Mahender Singh is one of the staff members of M/s Aryan Sales Corporation, a Partnership Firm in which she is a partner. Further, she claims that on her behalf the said amount was withdrawn by the above said person. Assessee's explanation for the sources that she withdrew Rs.9,95,000/- in cash from her Bank Account on 27-07-2013 cannot be considered as a valid source because there was a gap of about two months for the first deposit and four months gap for the second deposit in the absence of any valid documentary proof of evidence. No prudent business person keeps such huge amount of cash with him/her idle for such a long time. It can be seen from the copy of the Bank A/c that whatever amounts that are received in her Bank Account are being transferred either the same day or on the next immediate day. In this process, the assessee was to pay Rs.8,00,000/- on 21-09-2013. As such the assessee deposited the cash, earned from unexplained sources, into her Bank Account and immediately transferred the said amount to M/s Aryan Infa through Cheque. As narrated above, the assessee does have any other source of earning amounts in cash. From the Bank Account it is very clear that the balances in assessee's Bank AG are below Rs.5,0001-. As discussed above, so as to transfer Rs.2,27,300/- on 29- 11-2013 to M/s Legend Estates Pri, the assessee deposited an amount of Rs.2,28,000/- on 26-11-2013, earned from unknown sources, and transferred the said amount to the above party. For which the assessee explains that she deposited Rs.2,28,000/- from out of the withdrawal made on 27-07-2013 along with cash available with her. The Bank Account itself clearly shows that with a view to transfer the said amount to Legend Estates, the assessee deposited cash ITA No 444 of 2024 Priyanka Baheti Page 10 of 12 into her Bank Account. When the assessee does not have any other source of income as narrated in the previous paras, availability of the balance cash with assessee from out of the earlier single withdrawal. that too after a gap of four months, is nothing but a fabricated explanation”. 9. Thus, it is clear that the factum of withdrawal of Rs.9,95,000/- on 27/07/2013 has not been disputed by the learned Pr. CIT after examination of the Bank Account statement of the assessee. However, the same was disallowed only on the premise that no prudent business person keep such huge amount of cash for such a long time of more than 2 months. This reason of rejecting the explanation without conducting further inquiry or bringing any material on record to show that the cash withdrawal by the assessee on 27/07/2013 was not available with the assessee for re-depositing the same on 21/09/2013 of Rs.8 lakhs and Rs.2,28,000/- on 26/11/2013 is highly arbitrary. When this issue was not a reason for reopening of the assessment, then non- consideration of the issue by the Assessing Officer while framing the re-assessment leads to only inference that the Assessing Officer did not take up this issue for inquiry or verification, though the bank account statement was duly produced by the assessee before the Assessing Officer. The learned Pr.CIT has also acknowledged this fact that the Bank account statement was furnished before the Assessing Officer during the course of the assessement proceedings. Therefore, the learned Pr.CIT ought to have decided the issue after conducting a proper inquiry or to remand the issue to the record of the Assessing Officer for conducting a proper inquiry on the source of deposits in the Bank ITA No 444 of 2024 Priyanka Baheti Page 11 of 12 Account. Merely rejecting the explanation which is supported by the undisputed evidence of bank account statement is not justified on the part of the learned Pr. CIT in the absence of any contrary material or facts brought on record to disprove the claim of the assessee. Accordingly, in the facts and circumstances of the case, we find that once the assessee has explained the source of deposit with supporting undisputed evidence of withdrawal of Rs.9,95,000/- prior to the deposits, then the assessee has discharged her onus to explain the source and in the absence of any contrary material or facts, the addition proposed by the learned Pr. CIT is highly arbitrary and unjustified. Hence, the impugned order of the learned Pr. CIT is set aside. Since we have decided the issue on merits and set aside the order of the learned Pr. CIT, therefore, we do not propose to go into the other legal issues raised by the assessee. 10. In the result, appeal filed by the assessee is allowed. Order pronounced in the Open Court on 21st November, 2024. Sd/- Sd/- (MANJUNATHA, G.) ACCOUNTANT MEMBER (VIJAY PAL RAO) VICE-PRESIDENT Hyderabad, dated 21st November, 2024 Vinodan/sps ITA No 444 of 2024 Priyanka Baheti Page 12 of 12 Copy to: S.No Addresses 1 Smt. Priyanka Baheti, 15-9-59 Maharajgunj, Telangana 500012 2 Income Tax Officer Ward 7(1) Signature Towers, SY No.6(P) of Kondapur, Sy.37(P) of Kothaguda, Opp: Botanical Gardens, Serilingampally (M)( R.R. Dist. 3 Pr. CIT – Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "