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TMI Blog2022 (12) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... h deposit during the demonetization period (i.e., from 09/11/2016 to 31/12/2016), at Rs. 98 lacs, was explained with reference to the income of Rs. 109.70 lacs declared under Income Declaration Scheme, 2016 (IDS), comprising Rs. 100 lacs by way of cash and the balance Rs. 9.70 lacs as immovable property, being land. The income was, accordingly, assessed by the Assessing Officer (AO) at the returned income. Subsequently, the assessment record was examined by the Principal Commissioner of Income Tax-1, Jabalpur (for short, 'Pr. CIT'), i.e., the revisionary authority, who held as under:- '8. It is noteworthy to mention here that the entire e-submissions of the assessee dated 27/07/2021 & 25/11/2021 were made available to the respective AO for re-examination of the subject matter in the light of said reply of the assessee with a direction to draw and communicate satisfaction along with specific comments in the matter through their respective range heads vide this office communication letter dated 16/02/2022. The AO vide his report dated 23/02/2022 has stated that "On verification of Form-1 of IDS scheme furnished by the assessee during assessment proceeding and which is placed on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e." (emphasis, ours) He, accordingly, relying on the decisions in CIT vs. Deepak Kumar Garg [2008] 299 ITR 435 (MP); Consolidated Photo and Finvest v. Asst. CIT [2006] 281 ITR 394 (Del.); CIT v. Himachal Pradesh Financial Corporation [2010] 186 taxman 105 (HP) and Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), set aside the impugned assessment for de novo consideration, to be made after making proper investigation and enquiries and applying the correct provisions of the Act and upon allowing adequate opportunity of being heard to the assessee. Aggrieved, the assessee is in appeal. 3.1 Before us, the main plank of the assessee's submissions, through his counsel, Shri Jain, was that the income of Rs. 98 lacs, deposited cash in bank in November and December, 2016, was out of Rs. 100 lacs declared cash under IDS, for which Shri Jain would take us through Form-1 filed by the assessee for the purpose on 26/9/2016 (PB pgs. 69-74), as well as its acceptance by the Revenue by the issue of Form-2 on 13/10/2016 (PB pg.75), validating the tax (including surcharge) and penalty to be deposited toward the sum declared under IDS. The cash, he claimed, was duly entered by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndated letter indicating furnishing of the cash-book, the same was, as admitted by him, furnished after 15/10/2019. 4. We have heard the parties, and perused the material on record, and given our careful consideration to the matter. 4.1 In our considered view, the assessment under reference is wholly without application of mind. The first and the foremost query in the matter would be with regard to the completion of the process initiated under IDS. It is only when a final certificate is issued in respect of income declared and accepted under IDS, could the same possibly be considered as so in law, while the same is admittedly not available with the assessee even at this stage. No inquiry in the matter was made by the AO, ascertaining its status as the final acceptance of the assessee's application, other things aside, is of vital significance to it's explanation as to the nature and source of the cash deposited in his bank account during the relevant previous year w.r.t. the income declared under IDS. 4.2 The second query that would naturally arise in the matter is the basis on which the assessee claims to have declared Rs. 100 lacs under IDS by way of cash. This is as there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would retain cash and, as stated, for years (2009 to 2015), rather than ploughing it back in his businesses or otherwise for any other productive purpose, even if personal, he would submit that there is no bar in law for a person to hold cash, even if for years together. Clearly, there is thus no answer to the question posed inasmuch as it does not explain the reason for cash retention for years. The question posed is not one of law, but of fact, which calls for explanation inasmuch as the stated behaviour, apart from being inconsistent with the assessee's reply dated 14/10/2019, i.e., years after the date of cash deposit in bank in Nov/Dec, 2016, furnished in assessment proceedings, also does not stand the test of preponderance of human probabilities or of reasonableness. Further, on being further asked as to why, then, i.e., assuming the reporting of cash balance on 09/11/2016 as a 'mistake', the assessee did not deposit the cash in bank upon declaring 'it' on 26/9/2016 (as entered in it's cash-book), or soon thereafter, Shri Jain would state that the same was on account of the same having been deployed in business, though had to be deposited in bank due to demonetization. This, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontradictions afore-stated, and which would have surfaced had he questioned the assessee with reference to the material on record and the explanations furnished before him. Why, the mention of an asset - of which the assessee cannot but be aware of, the asset (in the form of cash) in Form-1 would have quelled all such queries, as that would have explained the source of the cash deposit subsequently during the demonetization period, which followed soon after the issue of Form 2 on 13/10/2016. The only question that would have in that case survived is the completion of the declaration process, as, surely, the stated explanation would not hold unless the said process is formally closed; the assessee admitting to the source of the impugned cash deposit as being the past undisclosed income of his business, so that the only issue (in that case) that obtains is as to whether the same stands disclosed under IDS, or is to be, in the given facts and circumstances of the case, deemed as his income for the current year u/s. 69A. Why, the AO did not make any effort to enquire about Forms 3 & 4 (under IDS) which, as explained to us by Shri Jain, are in respect of communication by the assessee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istake' by him is a tacit admission of an absence of any explanation to the most basic questions that ought to have been, but were not, raised by the AO during the assessment proceedings, inflicting his order with non-application of mind. Now, surely, a mistake, which though cannot be lightly inferred, where indeed so, should not foreclose anybody's case. It is this that led to the hearing in the manner afore stated, with it being apparent, and no case to the contrary made out, that no inquiry was made by the AO in assessment despite non-mention of any asset, much less cash, against the declaration for rs. 100 lacs, with, rather, the assessee reporting a cash balance of rs. 2.09 lacs as on 09/11/2016, despite which the AO records of the assessee having declared cash of rs. 100 lacs under IDS. The matter had, accordingly, to be per force examined from the stand-point of the stated case of a 'mistake', and qua which it shall also have to be in the set aside proceedings. The other of course is the investment in the sundry assets of the business, which appears to be of job work. Reference in this context is made to the decision by the Hon'ble jurisdictional High Court in CIT v. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant year (Govindarajalu Mudaliar v. CIT [1958] 34 ITR 807 (SC), Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC), CIT v. Ganpathi Mudaliar [1964] 53 ITR 623 (SC)). More recently, the Hon'ble Apex Court in Dy. CIT v. M.R. Logistics (P.) Ltd. held that merely because there has been a declaration under IDS, 2016, which in that case was of a related party, the same, unless linked with the impugned receipt, would not prove the same, again emphasizing that the matter, as clarified earlier, is primarily factual, and would therefore stand to be determined on the basis of firm factual findings, found absent in the instant case. 5.3 We, for the reasons afore-stated, find no reason to interfere. We may also add that our findings may not be, apart from bearing a general character clarifying on the legal as well as the factual aspects, regarded as final, foreclosing the assessee's case as the same stands set aside for a de novo consideration to the AO, who shall decide the same per a speaking order having regard to the entirety of the facts and circumstances of the case, and the evidences that may be led or explanations furnished before him. We may before parting with this order also clari ..... 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