₹22.09 Lakh Cash Deposit Inquiry: ITAT Quashes PCIT’s Revision Order, Finds AO’s Verification Sufficient [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)  quashed the Principal Commissioner of Income Tax(PCIT)’s revision order, ruling that the Assessing Officer(AO) conducted sufficient inquiry into the ₹22.09 lakh cash deposit.

Mohmedyusufkhan Gulabkhan Farmwala, appellant-assessee, challenged the order passed by the PCIT. The PCIT, after reviewing the assessment records, found that the AO had determined the assessed income at ₹5,50,600 but failed to verify certain cash deposits with Social Cooperative Bank Ltd.

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The PCIT noted that the assessee had deposited ₹10,00,000 in cash with the bank on July 23, 2011, claiming it was from the sale of an immovable property. However, the sale document dated September 8, 2011, mentioned that ₹22,09,250 was received in cash on July 7, 2011. Another version of the document, uploaded by the assessee on August 8, 2019, stated that the same amount was received in cash on September 8, 2011.

To address this discrepancy, the PCIT issued a show-cause notice on February 28, 2022, asking the appellant to reconcile the conflicting details.

The assessee, in response to the show-cause notice dated February 28, 2022, informed the PCIT that ₹22,09,250 was received in cash from the sale of an immovable property on July 7, 2011, and deposited in the bank on July 23, 2011. The assessee claimed there was no discrepancy and argued that the assessment order was valid.

However, the PCIT set aside the assessment order, stating that the assessee failed to respond to the final show-cause notice dated March 11, 2022, regarding the date mismatch in the sale documents. The PCIT noted that the AO had not properly verified the source of cash deposits during reassessment and accepted them without further inquiry, despite the unproven opening cash balance of ₹98,62,500 as of April 1, 2011.

The PCIT directed the AO to conduct a fresh assessment with proper verification and take necessary action if the unproven cash balance was deposited in later years.

The assessee appealed against this order before the tribunal.

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The two member bench comprising Siddhartha Nautiyal(Judicial Member) and Dr.BRR Kumar(Vice President) observed that the show-cause notice dated February 23, 2022, had asked the assessee to explain the cash deposit of ₹22,09,250 with Social Cooperative Bank Ltd. on July 23, 2011. The assessee’s counsel stated that the cash was received from the sale of an immovable property on July 7, 2011, and then deposited in the bank. This cash amount was mentioned in the sale agreement, which was jointly executed by the assessee and a co-owner.

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The appellate tribunal noted that no evidence was presented to dispute the assessee’s claim. It also found that the 263 order did not specify any defect in the assessment order or explain how it harmed the Revenue’s interest. The assessee had submitted the sale deed, along with its English translation, to the Assessing Officer (AO) on July 26, 2019, and the AO had properly considered it while passing the assessment order.

The ITAT concluded that there was no lack of inquiry by the AO and set aside the revision order. In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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