2022 (11) TMI 730 - AT - Income Tax

Addition u/s 68 or 69A - Addition representing cash deposits made in the bank account - cash deposits in the bank account as unexplained cash credit under section 68 - Commissioner (Appeals) while deciding the appeal has unilaterally changed the provision to section 69A of the Act while confirming the addition - HELD THAT - The conditions and situations for applicability of section 68 and section 69A of the Act are different. Therefore, unless the conditions of the specific provision are fulfilled, no addition can be made. In the facts of the present appeal, the first appellate authority has accepted that conditions of section 68 of the Act are not fulfilled. That being the position, he should have deleted the addition. Instead of doing so, he has confirmed the addition under section 69A of the Act without providing an opportunity to the assessee to explain whether the conditions of section 69A are attracted or not. As per the decision of Aar Pee Apartments (P.) Ltd. 2009 (8) TMI 256 - DELHI HIGH COURT when the scope and ambit of the two separate provisions are altogether different, the addition cannot be changed to another provision. Following the aforesaid decision of the Hon ble Jurisdictional High Court, the coordinate bench in the case of Toffee Agricultural farms Pvt. Ltd. 2022 (4) TMI 869 - ITAT DELHI had expressed the view that the first appellate authority unilaterally has no power to change the section under which the Assessing Officer has assessed an item of income. Thus, respectfully following the ratio laid down in these decisions,hold that the addition made confirmed under section 69A of the Act deserves to be deleted. - Decided in favour of assessee.

Summary

Issues:
1. Addition of Rs. 9,00,000 representing cash deposits in the bank account.
2. Validity of reopening of assessment under section 147 of the Act.

Analysis:

Issue 1: Addition of Cash Deposits
The dispute revolved around the addition of Rs. 9,00,000 as cash deposits in the bank account of the assessee for the assessment year 2010-11. The Assessing Officer reopened the assessment under section 147 of the Act due to information suggesting unexplained cash deposits. The Assessing Officer treated the cash deposits as unexplained cash credit under section 68 of the Act and taxed it at 30% under section 115BBE. The assessee challenged this addition, arguing that the first appellate authority wrongly applied section 69A instead of section 68. The tribunal noted that the conditions for applying section 68 and section 69A are distinct, and the first appellate authority erred in changing the provision without allowing the assessee to explain. Citing legal precedents, the tribunal held that the addition under section 69A was unjustified as the conditions were not met, and thus, the addition was deleted.

Issue 2: Validity of Reopening Assessment
The assessee initially contested the validity of reopening the assessment under section 147 of the Act. However, during the appeal, the assessee decided not to press this issue and focused on challenging the addition on its merits. Consequently, the tribunal dismissed the grounds challenging the validity of reopening the assessment as they were not pressed by the assessee.

In conclusion, the tribunal allowed the appeal of the assessee, emphasizing the incorrect application of section 69A instead of section 68 for the addition of cash deposits. The tribunal highlighted the importance of adhering to the specific provisions of the Act and providing the assessee with an opportunity to explain before making additions.