TaxTMI 
TaxTMI 
2026 (7) TMI 444
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....w it pertained to the facts of the assessee's case. Firstly, the CIT(A) while changing the section has not provided any statutory notices nor has provided any opportunity to the assessee of hearing which is against the principles of natural justice. Secondly, the entire trail of investigation was with regard to ascertaining the source and nature of the cash deposits. There is nothing on record in relation to the unexplained cash credit pertaining to Section 68 of the Act. In view thereof the CIT(A) while passing the order had failed to come to a correct reasoning since there was absolute non-application of mind rendering the order as arbitrary bad in law, hence, quashed. Similar view has been taken by the ITAT, Raipur in the case of Suman Poptani Vs. ITO-1(3), Raipur (C.G.), ITA No. 302/RPR/2026, dated 25.05.2026, wherein it was held as follows: "4. I have carefully considered the submissions of the parties herein, analyzed the facts and 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 unexplaine....
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....ithout application of mind, therefore, not a valid approval in the eyes of law. In the case of ACIT, Circle-1(2) Vs. Serajuddin & Co., the Hon'ble Supreme Court vide order in SLP (C) Diary No.44989/2023, dated 28.11.2023 dismissed the appeal filed by the Revenue against the order passed by the Hon'ble High Court of Orissa, wherein the Hon'ble High Court had quashed the assessment order on the ground of inadequacy in procedure adopted for granting approval u/s.153D of the Act by expressing dis-coherent note of such mechanical exercise and ritualistic approval processes vitiate the entire assessment proceedings. There are plethora of judgments in which it has been held that quasi-judicial authority has to specially apply mind to the facts of the assessee's case as well as enquiry conducted and justify the reasoning through which the tax liability is imposed on the assessee. That in absence of proper application of mind or when 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 Inco....
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....ncluded cash receipts as salary and capital withdrawal from two partnership firms M/s Umang Beverages and M/s Mohan Oil & Cattle Feed and a cash salary from Bihar Milk Foods Pvt. Ltd. and has also reduced the amount of drawings for household expenses. The copy of return of income of wife of assessee Smt. Shalini and father of assessee Shri Kalu Mal co-jointly established that the other family members of assessee are also earning and contributing towards household expenses. Therefore, in my humble understanding the source of cash deposit during demonetization to the bank account of assesses is properly explained by the assessee by way of self speaking documentary evidence and explanation. Secondly, the AO has made addition u/s 69 of the Act which pertains to unexplained investments, whereas the assessee has not made any investment either in movable or any immovable property during the relevant period by way of using cash amount. The Ld. CIT(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 ....
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....any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it." 10. This Bench in the case of Prakash Chand Agrawal Vs. ITO, Ward 2, Raigarh (C.G.), ITA No.205/RPR/2026, dated 22.05.2026, has held that when charging section itself is wrong and misplaced and that the Department had proceeded against the assessee without independent application of mind, in such a case, the addition cannot be made in the hands of the assessee based on such wrong provision of law. The relevant observations of the Tribunal are extracted as follows: "..........I further observe that the additions have been made u/s. 68 of the Act which pertains to unexplained cash credit. But in this case, regarding both the additions, there is no trail of any evidence or enquiry by the Department regarding any loan transaction so to justify addition u/s. 68 of the Act as unexplained cash credit. The entire trail of 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....
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....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." 17. 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 Allahabad held as follows: "In the present case, it is apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the 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....