2022 (2) TMI 592 - AT - Income Tax

Unexplained investments - Addition on the basis of a new ground - Contention of the assessee that investment was made out of cash deposits in HDFC bank account of the assessee - investment relating to security transactions - Contention of the assessee that investment was made out of cash deposits in HDFC bank account of the assessee - no doubt was raised and Assessing Officer duly verified the same.no doubt was raised and Assessing Officer duly verified the same - HELD THAT - CIT (Appeals) sustained the addition altogether on different ground. We find merit into the contention of the assessee. It is seen that the Assessing Officer did not doubt about the cash flow submitted by assessee. He made addition on the basis of unexplained peak purchases. However, this action of Assessing Officer was found not in accordance with law by the learned CIT(Appeals). Learned CIT(Appeals) proceeded to sustain the addition on the ground of unexplained source of investment. CIT(Appeals) did not confront the assessee regarding cash flow submitted by him. Under these facts when there is nothing on record to rebut the correctness of cash deposited in the bank account held with HDFC bank, the addition sustained by the learned CIT(Appeals) cannot be confirmed. Therefore, I hereby direct the Assessing Officer to delete the addition. - Decided in favour of assessee.

Issues Involved:
1. Whether the order of the CIT(A) was arbitrary, biased, and legally flawed.
2. Whether the CIT(A) erred in raising new grounds without proper notice.
3. Whether the CIT(A) exceeded the scope of the proceedings before the AO.
4. Whether the CIT(A) erred in treating a sum of ?584,093/- as unexplained.
5. Whether the CIT(A) failed to consider the cash flow chart and other evidence.
6. Whether the addition of ?584,093/- should be deleted.

Issue-wise Detailed Analysis:

1. Arbitrary and Biased Order by CIT(A):
The appellant contended that the order of the CIT(A) was arbitrary, biased, and flawed both in law and facts. The Tribunal examined the process and found that the CIT(A) had indeed raised new grounds without proper notice, which contributed to the perception of bias and arbitrariness.

2. Raising New Grounds Without Proper Notice:
The appellant argued that the CIT(A) raised new grounds of objection without giving proper notice, merely mentioning it in an order sheet entry dated 18.06.2019. The Tribunal noted that the CIT(A) should have given the appellant an opportunity to respond to these new grounds, thus supporting the appellant's contention of procedural unfairness.

3. Exceeding Scope of Proceedings:
The appellant cited judgments from the Apex Court and Delhi High Court to argue that the CIT(A) cannot go beyond matters that arose from the proceedings before the AO. The Tribunal found merit in this argument, noting that the CIT(A) had indeed considered new grounds that were not part of the original assessment, thus exceeding the scope of the proceedings.

4. Treating ?584,093/- as Unexplained:
The CIT(A) treated ?584,093/- out of the total payment of ?975,000/- made to the broker as unexplained. The appellant argued that the source of this amount was from cash deposits in the HDFC bank account, which were not disputed by the AO. The Tribunal found that the CIT(A) did not properly consider the cash flow chart and other evidence provided by the appellant, which explained the source of the deposits.

5. Consideration of Cash Flow Chart:
The appellant provided a cash flow chart showing the deposit of ?800,000/- in the HDFC account, which was used to make the payment to the broker. The CIT(A) only considered the opening and closing balances of cash in hand, ignoring the detailed cash flow chart. The Tribunal agreed with the appellant that the CIT(A) failed to properly consider this evidence, which was crucial for explaining the source of the funds.

6. Deletion of Addition of ?584,093/-:
The Tribunal found that the AO did not question the cash flow chart and that the CIT(A) sustained the addition on a different ground without confronting the appellant. The Tribunal concluded that there was no basis to sustain the addition of ?584,093/- as unexplained, directing the AO to delete the addition.

Conclusion:
The Tribunal allowed the appeal, agreeing with the appellant on all grounds. It directed the deletion of the addition of ?584,093/-, finding that the CIT(A) had erred in raising new grounds without proper notice, exceeding the scope of the proceedings, and failing to consider the cash flow chart and other evidence provided by the appellant.

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