TaxTMI 
TaxTMI 
2026 (5) TMI 1830
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons filed during the course of assessment proceedings, along with computation of income, capital account for the year and preceding two years were furnished. It was stated that assessee derives income from Other sources and also Income from Boutique Income. Income from other sources included Income from Rajesh Traders and Vijay Traders and Interest income at Rs. 90800/- was shown from petty advances to the tailors and employees of Boutique. Vide notice issued u/s 142(1), assessee was asked to file the evidence in regard to the boutique income carried out by her and also regarding the petty interest earned from petty advances. Vide submission dated 19th August 2019, it was stated that assessee is not engaged in trading activity and that the income is derived mainly from designing and stitching work. In regard to the Interest income earned at Rs.90,800/- it was stated that the interest is earned from small lending which lends on various occasions to tailors, her employees and other related persons. No any fixed interest rate is charged. In order to verify the contentions put forth during the course of assessment proceedings, Inspector of this office was deputed to c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny boutique work is being carried out by you. Further, it has been stated by you that interest income of Rs. 90,800/- has been earned by you on petty advances made to tailors, your employees and other related persons. When no business is being carried out by you, tailors and employees have no existence and hence your interest shown at Rs. 90,800/- is also not acceptable since no evidences of advance or interest received by you has been filed during the course of assessment proceedings. In view of the above, the income shown by you from boutique and interest at Rs. 1,56,300/- and Rs. 90,800/- is rejected in view of the enquiry made by this office which revealed that no such petty business is being carried out by you. The interest income earned by you at Rs. 1,17,125/- is found acceptable from M/s Rajesh Traders and M/s Vijay Traders. As can be seen from the bank statement and the capital account furnished by you that the interest income of Rs. 1,28,125/- from Rajesh Traders have been earned for the first time during the A.Y. 2016-17 and not before. Likewise interest of Rs.43,125/- have been earned by you during the year from M/s Vijay Traders. Therefore, the capita....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d always to conduct filed enquiries and to bring in the actual fact what is happening, to that what is brought on books by the assessee. In this case also assessee was contacted and she had herself denied having doing any kind of job work/ boutique .. She made it clear that she is only a Home maker. For conducting filed enquiries Inspector are not required to give any opportunity or clarification. They go and conduct field enquiries by directly contacting the assessee and collecting information. The contention of the assessee is baseless and requires to be rejected. The accumulated capital shown by the assessee is thus proved to be bogus in absence of any known income till A.Y. 2016-17. The assessee in her submission has accepted that she had paid taxes of Rs. 14,490/- and Rs. 17,123/- in A.Y. 2016-17 and 2017-18 only, which is infact nothing but the TDS deducted on interest paid to her by Vijaya Traders and Rajesh Traders. And refund has been claimed. In view of the above, the cash deposit made during the period of demonetization amounting to Rs. 12,00,000/- is thus treated to be the unexplained investment u/s 69 of the I.T. Act for the relevant year und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nspector's report and other material gathered, the AO issued a detailed show cause notice dated 06/12/2019 confronting the appellant with the findings that (i) no boutique activity was found to be in existence, (ii) no evidence of petty advances or receipt of interest had been furnished, and (iii) the capital claimed to have been accumulated in earlier years lacked credible source. In response, the appellant merely reiterated that she was doing such work out of personal interest and not as a regular business, and that income was offered under the head "Income from Other Sources." However, no supporting documentary evidence such as bills, vouchers, customer confirmations, details of job work undertaken, list of customers, details of advances given, confirmations from borrowers, repayment details, or evidence of receipt of stitching charges was produced either before the Assessing Officer or during appellate proceedings. The AO has specifically observed that in the computation of income the appellant herself had described the income as "Income from Boutique business", which contradicted her later claim mat no regular business was carried on. The Assessing Officer further....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... circumstances in this case. That from trail of enquiries as conducted by the both the authorities below and as evident from assessment order, the addition has been made u/s.69 of the Income Tax Act, 1961 (for short 'the Act') as unexplained investment whereas the issue was that the assessee had deposited cash of Rs.12 lakhs during demonetization period and whether the nature and source of such cash deposits were proved by the assessee or not. In the case of the assessee there is no evidence to suggest that any investment is made by the assessee outside the books of account and in fact, the purpose of ground verification by deputing Inspector to verify whether the assessee was earning through boutique business or not, was to examine the nature and source of such cash deposits only and there is nothing with regard to the applicability of Section 69 of the Act in the case of the assessee. The assessee had made cash deposits during demonetization period and she was required to explain the nature and source of such cash deposits. There is no trail of enquiry by the Department regarding any unexplained investment made during the year by the assessee. It is not the case of the De....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n there is mechanical exercise of power, in such scenario, the Courts have always struck down the order of the Revenue authorities. In the recent decision of the Hon'ble Supreme Court in the case of Adani Power Rajasthan Limited Vs. Assistant Commissioner of Income Tax, (SLP Diary No.27752/2024) has held that the A.O cannot Act mechanically or merely echo audit parties objection or higher authorities directions. The A.O must conduct independent enquiry and independently frame reasons to believe that income has escaped assessment. Reassessment and assessment order requires statutory approval. The Hon'ble Supreme Court mandates that sanctioning authority must apply its mind rather granting approval as empty ritual when the assessment was initiated and finalized by the assessing authority without application of mind, hence, the said order is liable to be struck down. 6. Reverting to the facts of the present case, the trail of enquires conducted by the Revenue authorities as evident from the assessment order as well as from the impugned order that though the additions has been made u/s.69 of the Act as unexplained investment whereas, the issue was regarding explaining of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T(A) though has given credit of 25% of Impugned cash deposit confirming the remaining part of addition but there is no logic of this segregation. From the relevant operative part of first appellate order, I also note that the Ld. CIT(A) has upheld the part addition without mentioning any charging section and impliedly adopting section 69 of the Act in the line of assessment order. Therefore, respectfully following the proposition rendered by the Hon'ble Jurisdictional High Court of Allahabad in the case of Sarika Jain (supra). I have no hesitation to hold that the addition made by the AO by mentioning incorrect and irrelevant charging section is not sustainable and valid being bad in law. Accordingly, grounds of assessee are allowed and AO is directed to delete the entire addition. 15. In the result, appeal of the assessee is allowed." 9. Similarly, in the decision of Hon'ble High Court of Allahabad in the case of Smt. Sarika Jain Vs. The Commissioner of Income Tax, Bareilly and Another, reported in (2018) 407 ITR 254 (All) which decision was referred to and applied in the earlier decision of the Co- ordinate Bench of Delhi (supra), the Hon'ble High Court of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... examination is regarding the nature and source of cash deposits and since the addition has been made by the Department stating the said cash deposits were unexplained then the relevant charging section should have been Section 69A and not Section 68 of the Act. Therefore, charging provision itself has been wrongly invoked by the Department which is clearly non application of mind by the quasi judicial authority. I find that it has been held by the Co-ordinate Bench of the Tribunal, Delhi in the case of Bhawani Castings P. Ltd. Vs. DCIT (supra) that when there is no coherence in the reasons recorded for reopening and additions made in the assessment, it is utter non application of mind by the A.O while recording reasons for reopening. 16. In the decision of the Co-ordinate Bench of o Delhi in the case of Sanjeev Kumar c/o M/s Raj Kumar & Associates vs. ITO Ward 2(3)(2), Bulandshahr, reported in 2023(10) TMI 1027-ITAT Delhi on the same issue of non- application of mind, it was observed and held as follows: "14. In view of foregoing discussion, I reach to a logical conclusion that the complete cash book statement clearly explains the source of cash deposit to the ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....addition of alleged amount of the gift received by the appellant-assessee as his personal income under Section 68 of the Act and not whether such an addition can be made under Section 69-A of the Act. In view of the above, it can safely be said that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It may be worth noting that the Tribunal has recorded a categorical finding that "it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained, meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act. In view of the above, when the said income cannot be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stand vitiated in law. Accordingly, we answer the question of law, as framed above, in favour of the appellant-assessee and again....