2025 (2) TMI 234 - AT - Income Tax

AO's additions upheld after assessee failed to prove cash/credit entries; CIT(A)'s reverification directions set aside

ITAT Nagpur set aside CIT(A) orders that had directed AO to reverify cash/credit entries in assessee's bank account. The tribunal held CIT(A)'s directions ... CIT(A) setting aside the assessment orders u/s 251(1)(a) when the assessee was responsive during assessment proceedings - AO directed to verify the cash/credit entries made in bank account of the appellant and directed to verify the credits made into the bank account by cash or otherwise and also verify the withdrawals made by the appellant and the destination of the same HELD THAT:- The direction of the learned CIT(A) are flawed and superfluous, because the Assessing Officer has made the addition as the assessee failed to discharge its onus. The assessee cannot be permitted to improve his cases by permitting a second innings. Moreover, the assessment orders having not been revised under section 263 of the Act cannot be held to be lacking on the aspect of enquiry. The impugned orders passed by the learned CIT(A) for both the years under consideration are set aside and the assessment orders passed by the Assessing Officer for A.Y. 2015–16 and 2018–19 are hereby restored. Accordingly, all the grounds raised by the Revenue in the years under consideration are allowed. ISSUES PRESENTED and CONSIDEREDThe core issues considered in this judgment involve the legality and appropriateness of the orders passed by the Commissioner of Income Tax (Appeals) [CIT(A)] regarding the assessment years 2015-16 and 2018-19. Specifically, the issues are: Whether the CIT(A) erred in setting aside the assessment orders under section 251(1)(a) of the Income Tax Act, 1961, when the assessee was responsive during assessment proceedings. The appropriateness of CIT(A)'s directions for further investigation and verification by the Assessing Officer (AO) regarding the cash deposits and withdrawals made by the assessee. Whether the CIT(A) was justified in allowing the appeals for statistical purposes and directing a de-novo consideration by the AO.ISSUE-WISE DETAILED ANALYSIS1. Legality of Setting Aside Assessment OrdersRelevant Legal Framework and Precedents: The CIT(A) has the power under section 251(1)(a) of the Income Tax Act to confirm, reduce, enhance, or annul the assessment order. The Tribunal examined whether the CIT(A) exercised this power appropriately.Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) set aside the assessment orders to allow the AO to conduct further investigations. However, it emphasized that the CIT(A)'s directions were flawed as they allowed the assessee to improve its case without substantial justification.Key Evidence and Findings: The CIT(A) had directed the AO to verify various aspects of the cash deposits and withdrawals, including the nature of business operations, KYC documents, and potential benami transactions.Application of Law to Facts: The Tribunal found that the CIT(A) did not provide sufficient grounds to justify setting aside the assessment orders, particularly when the assessee failed to discharge its onus during the original proceedings.Treatment of Competing Arguments: The Revenue argued that the CIT(A)'s directions were unnecessary and that the assessee should not be given another opportunity to present its case. The Tribunal agreed with this argument.Conclusions: The Tribunal concluded that the CIT(A) erred in setting aside the assessment orders and allowing the assessee a second chance to present evidence.2. Directions for Further Investigation by the AORelevant Legal Framework and Precedents: The CIT(A) directed the AO to conduct extensive investigations into the cash transactions of the assessee, including verifying the sources of cash deposits and the nature of business operations.Court's Interpretation and Reasoning: The Tribunal found these directions to be superfluous, as the AO had already conducted sufficient inquiries during the original assessment proceedings.Key Evidence and Findings: The CIT(A) had suggested multiple avenues for investigation, including verifying bank account details, KYC documents, and potential benami transactions.Application of Law to Facts: The Tribunal determined that the CIT(A)'s directions were unnecessary because the AO had already made the addition based on the assessee's failure to provide satisfactory explanations.Treatment of Competing Arguments: The Revenue contended that the CIT(A)'s directions were redundant and that the original assessment orders should be upheld. The Tribunal agreed with this position.Conclusions: The Tribunal concluded that the CIT(A)'s directions for further investigation were unwarranted and that the original assessment orders should be restored.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal noted, 'The direction of the learned CIT(A) are flawed and superfluous, because the Assessing Officer has made the addition as the assessee failed to discharge its onus.'Core Principles Established: The judgment reinforces the principle that the burden of proof lies with the assessee to substantiate claims made during assessment proceedings. It also emphasizes that appellate authorities should not allow assessees to improve their cases without substantial justification.Final Determinations on Each Issue: The Tribunal set aside the orders of the CIT(A) for both assessment years under consideration and restored the original assessment orders passed by the AO. The appeals by the Revenue were allowed, and the directions for further investigation were deemed unnecessary.