2024 (7) TMI 498 - AT - Income Tax

AO jurisdiction over the case of the assessee for cash deposit up to Rs. 2.5 lakhs - assessee contended that in CBDT Instruction No.3 of 2017 dated 21/02/2017, CBDT has debarred the revenue officers to conduct any enquiry in those cases, where the cash deposit is up to Rs. 2.5 lakhs - HELD THAT - As per Source Specific General Verification Guidelines it would be amply clearly that this instruction has been issued by Ministry of Finance immediately after demonetization and hence binding on the department. The title of the instruction is Standard Operating Procedure to be followed by the AOs in verification of cash transaction during demonetization period. Certain paras of this instruction are very crucial for cases like this. For instance in para 5.6, it has been mentioned that the AO should follow the sources specific verification guidelines as given in annexure. On perusal of clause 1.1 annexed to the instruction, as extracted herein above, would reveal that in case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is up to Rs. 2.5 lakhs. When we apply the instruction of CBDT to the facts of present case it is abundantly clear that the AO has framed the impugned assessment in utter disregard of the CBDT guidelines, which is not permissible in law. There are so many decisions of the coordinate Benches wherein it has been held that the no addition can be made in such cases which are covered by the CBDT instruction, granting exemption of Rs. 2,50,000/-. Reference can be made to the judgment of coordinate Bench in ITA Number in the case of Amar Singh Vs ACIT International Taxation 2022 (9) TMI 1599 - ITAT DELHI Therefore, we hold that the AO has erred in investigating the matter further and hence, exceeded his jurisdiction; therefore, we allow the appeal of the assessee.

Summary

Issues:
Jurisdiction of Assessing Officer over cash deposits below a certain threshold as per CBDT guidelines.

Analysis:
The appeal before the Appellate Tribunal ITAT Bangalore arose from an order by the Addl/JCIT (A), Gwalior concerning the assessment year 2017-18. The assessee, a lady, failed to file her income tax return but deposited Rs. 1,73,985 in her bank accounts. The Assessing Officer (AO) added this amount as unexplained cash during an ex-parte assessment. The assessee, aggrieved by the AO's order, appealed before the NFAC. The NFAC dismissed the appeal ex-parte without addressing the merits. Subsequently, the assessee appealed to the Tribunal with a slight delay of 27 days, which was condoned due to valid reasons.

The crux of the matter revolved around the CBDT Instruction No.3 of 2017, which restricted revenue officers from conducting inquiries where cash deposits were up to Rs. 2.5 lakhs. The assessee's counsel argued that the AO wrongly assumed jurisdiction over the case, contrary to the CBDT guidelines. The Tribunal examined the CBDT instruction, emphasizing that it was issued post-demonetization and binding on the department. Notably, the instruction exempted individuals without business income from further verification for cash deposits up to Rs. 2.5 lakhs. Referring to precedent, the Tribunal held that the AO erred by disregarding the CBDT guidelines, exceeding his jurisdiction. Citing a relevant case, the Tribunal allowed the appeal, concluding that no addition could be made in cases covered by the CBDT exemption.

Ultimately, the Tribunal allowed the appeal, finding in favor of the assessee based on the AO's failure to adhere to the CBDT guidelines. The judgment highlighted the importance of following specific verification guidelines, especially in cases involving cash transactions post-demonetization. The decision underscored the binding nature of CBDT instructions on revenue officers and the necessity to comply with such directives to avoid exceeding jurisdiction.