CIT(A) exceeded mandate by adding cash deposits under section 68 without proper notice to assessee

ITAT Delhi allowed the assessee's appeal against CIT(A)'s addition under section 68. The CIT(A) had initially been directed by the Tribunal to examine the AO's addition under section 69 regarding undisclosed investment sources after admitting additional evidence. However, CIT(A) exceeded the Tribunal's mandate by making a new addition concerning cash deposits in bank account without providing proper notice to the assessee. The Tribunal held that examining investment sources versus examining cash deposit sources were different exercises requiring separate notice, making the CIT(A)'s addition unsustainable.

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Issues involved:
The cross appeals in ITA Nos.4945/Del/2019 and 4495/Del/2019 are preferred by the Assessee and the Revenue against the order dated 19.03.2019 of the Commissioner of Income Tax (Appeals)-6, Delhi, arising out of an appeal against the order dated 27.03.2015 passed by the ITO, Ward-18(1), New Delhi under section 144 of the Income Tax Act, 1961.

Details of the Judgment:

Issue 1: Addition of unexplained source of investment in property
The assessee purchased immovable property at an auction and the AO made an addition of Rs. 7,31,00,000/- on account of unexplained source of this investment. The CIT(A) partially deleted the addition, confirming Rs. 1,75,50,000/- due to failure to prove the source of cash deposit used for loan repayment.

Issue 2: Allegation of undisclosed source of investment
The assessee explained that a loan was taken for property purchase, but the CIT(A) made a new addition under section 68, alleging unexplained cash deposit. The AR argued against this, citing legal precedents.

Issue 3: Examination of source of investment
The DR argued that both the AO and CIT(A) examined the source of property investment, whether from genuine sources or the assessee's own funds.

Judgment:
The Tribunal held that the CIT(A) exceeded the Tribunal's directions by making a new addition without notifying the assessee. The CIT(A) questioned cash deposits without proper notice, leading to an unsustainable addition. The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal.

Conclusion:
The Tribunal emphasized the importance of following due process and ensuring that additions are made based on proper examination and notice to the assessee. The appeal of the assessee was allowed, and the Revenue's appeal was dismissed.

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