Wrong charging provision and mechanical assessment made cash-deposit addition unsustainable for non-application of mind.

Cash-deposit additions were found unsustainable where the authorities invoked an inapplicable charging provision and failed to match the factual enquiry with the statutory ingredients. The assessment focused on the source and nature of cash deposits, which on the recorded facts attracted consideration of unexplained money, yet the first appellate authority proceeded under unexplained cash credit without showing how the facts satisfied that provision. The shift in the charging section was made without notice, opportunity, or a reasoned basis, reflecting mechanical assessment and non-application of mind. The impugned addition and the appellate order sustaining it were quashed.

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Issues: Whether the addition made in respect of cash deposits could be sustained when the Assessing Officer and the first appellate authority invoked the wrong charging provision and the order was alleged to suffer from non-application of mind.

Analysis: The assessment proceedings focused on the source and nature of cash deposits, which, on the facts recorded, attracted consideration under Section 69A of the Income-tax Act, 1961. The first appellate authority, however, proceeded on Section 68 of the Income-tax Act, 1961 without demonstrating how the facts answered the ingredients of unexplained cash credits. The change in the charging section was made without notice or opportunity and without a reasoned basis. The Tribunal held that where the enquiry and the factual foundation do not match the provision invoked, the resulting addition is arbitrary and reflects non-application of mind. The assessment was thus treated as having been framed mechanically and without valid legal reasoning.

Conclusion: The impugned addition and the appellate order sustaining it were held unsustainable in law and were quashed.

Ratio Decidendi: An addition cannot be sustained where the revenue authorities invoke an inapplicable charging provision and proceed mechanically without applying their mind to the actual nature of the transaction and the statutory ingredients of the provision invoked.

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