Rajendra J vs Income Tax Officer

PER AMITABH SHUKLA, AM

This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)/NFAC, Delhi, dated 28.11.2025 arising out of assessment order dated 16.03.2023 passed under section 147 r.w.s. 144B of the Act for the Assessment Year 2015-16. The word ‘Act’ herein this order would mean Income Tax Act, 1961.

The assessee has raised following grounds of appeal:-

learned CIT(A) failed to properly consider the explanations and evidences already available on record.

Brief factual matrix of the case as culled out from the orders of the lower authorities is that no Return of Income was filed by the assessee for the year under consideration. Revenue was in possession of information that the appellant had made cash deposits of Rs.43,50,000/- in Indian Bank. Accordingly, Notice u/s 148 dated 28.03.2022 was issued to the assessee. The assessee filed Return of Income on 08.02.2023 declaring income of Rs.3,30,730/- along with agricultural income of Rs.6,50,000/-. During the course of assessment proceedings, the ld. Assessing Officer queried assessee about the sources of deposits. Before the ld. Assessing Officer, the assessee submitted that it had entered into agreement to buy a property and had paid some amount to the seller. Subsequently, the agreement did not materialize and accordingly the amount of Rs.29 lakhs represented return of amount from the seller. The ld. Assessing Officer however premised that the cancelled agreement was a mere notarized agreement and not registered agreement and therefore proceeded to add the cash as unexplained cash deposit. Similarly, as regards another amount of cash deposit of Rs.14,50,000/-made in October, 2014 with Indian Bank, the assessee had submitted that the impugned deposit represented unutilized cash withdrawals earlier made in August, 2014 from Union Bank of India. The ld. Assessing Officer postulated that the assessee failed to produce any evidence of a direct connection between the deposit and withdrawal and therefore applying the human probability theory proceeded to add the same. The ld. CIT(A) concurred with the findings of the ld. Assessing Officer in toto and sustained the addition.

The only issue raised by the assessee through its grounds of appeal is regarding the impugned addition of Rs.43,50,000/- on account of unexplained cash deposits. The ld. Counsel for the assessee vehemently argued against the order of ld. Assessing Officer and ld. CIT(A). On the issue of amount of Rs.29 lakhs, it was stated that the same was return of amount of advance money paid by the assessee for a property deal, which did not materialize. It was argued that merely because the cancellation agreement was a notarized document would not make amounts received through the agreement as unaccounted amounts. In support of its contentions, the ld. Counsel has placed on record, copies of the notarized agreement, details of cancellation of transactions, bank statements, reflecting the receipt and deposit of the amount, explanation of sources of funds, etc. The assessee submitted that the addition was made u/s 69A which itself was impermissible as the source of the deposit was totally explained. As regards the issue of cash deposit of Rs.14,50,000/-, the appellant has argued that the Assessing Officer has not been able to prove that the earlier cash withdrawals, to which these deposits had direct linkages, were used for some other purpose. In support of its contentions, the ld. Counsel for the assessee has filed a paper book, inter alia, containing copies of bank statement of the assessee maintained with Union Bank of India and Indian Bank, copy of notarized agreement between the assessee and Shri Dhoom Singh, the seller of immovable property for which the agreement was cancelled, details of compensation received from Noida Authority, confirmation of Shri Dhoom Singh, etc. It was accordingly requested that the impugned addition be directed to be deleted.

The ld. DR placed reliance upon the order of the lower authority.

We have heard rival submissions in the light of material placed on records. We have noted that there is no controversy regarding the source of receipt of cash amounting to Rs.29 lakhs. The revenue is not disputing that it was not received from Shri Dhoom Singh but merely that the cancellation agreement was only a notarized agreement. The argument of the Revenue is untenable. To treat an amount of cash deposit as unexplained, its source has to be verified. In the instant case, the source of Rs.29 lakhs when viewed from agreements, copies of bank statements, etc. is well established. Further, as regards the amount of Rs.14,50,000/- being the cash deposit, which in the opinion of the assessee is related to the past withdrawals, we have noted that the revenue has not been able to place on records any cogent documented evidence to prove otherwise. We have also noted that the time gap between the withdrawal and deposits is merely about two months and hence lending credence to the theory postulated by the appellant assessee. Accordingly, we are of the considered view that no case of any addition is made out in the hands of the assessee by treating the impugned amount of cash deposit of Rs.43,50,000/- as unexplained. We therefore in the interest of justice, set-aside the order of the lower authorities and direct the ld. Assessing Officer to delete the impugned addition of Rs.43,50,000/- (Rs.29 lakhs + Rs.14,50,000/-). The appeal of the assessee is therefore allowed.

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