Date of Order: 17th February 2023
Appellant: Kapil Kharbanda, Delhi
Respondent: ITO, Ward-55(5), New Delhi
This appeal by Kapil Kharbanda challenges the National Faceless Appeal Centre’s decision from 28th October 2022, for the assessment year 2011-12, which involved an addition of Rs. 2,68,819 attributed to unexplained cash deposits in the appellant’s bank account.
The case originates from an assessment under Section 147/143(3) of the Income Tax Act, 1961, where the Assessing Officer initially scrutinized payments towards a property in Maharashtra. Although initially concerned with the genuineness of loan transactions related to the property purchase, the focus shifted to cash deposits in the appellant’s account. Despite claims of loans from M/s. Balajee Infrashine Pvt. Ltd. and M/s. Mukesh Kumar & Sons, HUF, and no conclusive evidence from the lenders, the focus moved to unexplained cash deposits in a bank account.
The appellant contested this in appeals, arguing that the cash deposits were unrelated to the reasons for which the assessment was reopened, relying on legal precedents that stipulate such additions are invalid if they do not pertain directly to the items causing the assessment to be reopened. The Tribunal, recognizing the inconsistency in the Assessing Officer’s approach, ruled that without a direct addition of the escaped loan amount, the additional cash deposit could not stand as unexplained.
The Tribunal ordered the deletion of the addition, clarifying that the Assessing Officer’s actions were beyond the scope of the original intent of the reassessment, thereby allowing the appeal.
This decision underscores the precise adherence required under tax law, ensuring that the reasons for reopening an assessment are directly linked to the additions made, thereby safeguarding taxpayer rights against unwarranted tax claims.
The ruling in this case serves as a vital precedent for handling similar cases where the rationale for tax reassessment must be strictly followed, emphasizing the need for clear, consistent, and lawful approaches in tax assessments.
Kapil Kharbanda vs. ITO, Ward-55(5), Delhi – Unexplained Cash Deposit Appeal for AY 2011-12
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