ANURAG KUSHWAHA,VARANASI v. DCIT, CIRCLE - 2, VARANASI

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merits addition on account of cash deposits in the bank account to the extent of Rs.41,97,000/- out of cash deposits of Rs.55,49,000/-.

3. The brief facts are that assessee is an individual and has filed his return of income for the A.Y.2009-10 at Rs.18,89,350/-. Later on assessee's case was reopened u/s.148 on 29/03/2016. Nowhere in the assessment order ld. AO has mentioned the reasons, however, it appears that reopening has been done on account of cash deposit by the assessee for sums aggregating to Rs.55,49,000/- in the saving bank account during the A.Y.2009- 10 and to verify the source of deposits, notice u/s.133(6) was issued to the assessee and since assessee could not explain the source of cash deposits, therefore, there AO entertain reason to belief that income of Rs.55,49,000/- chargeable to tax has escaped assessment.

4. In response to notice u/s 148, assessee has filed detailed objections before the ld. AO which has been disposed of by the ld. AO vide order dated 02/11/2016. The ld. AO noted that assessee had deposited following cash during the F.Y.2008-09 in following bank account.

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5. Thus, in response assessee had stated source of deposits in the following manner:-

6. The ld. AO had discussed in detail the discrepancies in so far as withdrawal from capital account from partnership firm which has been highlighted from pages 5-9 of his order. However, out of cash withdrawal of Rs.33,59,000, he has given benefit of Rs.13.52 lakhs which was proximate to the date of deposits and accordingly, addition of Rs.41,97,000/- has been made.

7. Before the ld. CIT (A) assessee had challenged the validity of reopening u/s.147/148 and also on merits. However, the ld. CIT(A) in a very detailed order has rejected and dismissed the assessee's legal ground and various grounds challenging the validity of notice u/s.148 and even held that assessee has misrepresented the facts and has mislead with various

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assertions and therefore, assessee does not deserve to be heard on merits. His relevant observation reads as under:-

26. In view of the above facts, it is clear that the appellant has compromised with the truth in 'Statement of Facts and Grounds of Appeal' filed alongwith Form 35 before the CIT(Appeals). As discussed already in para-11 above, there was motive with the appellant for giving false statement and mischievous allegations regarding reasons for issue of notice u/s 148 by the A.O. as unsigned. It is clear that the reasons were properly recorded and signed and also necessary approval of appropriate authority was obtained before the issue of notice u/s 148 of the IT Act. Thus it is clear that the appellant has not come before the CIT(A) with clean hands but has come with compromised truth alongwith false claims. Thus the appeal filed by the appellant does not fulfill the test of 'doctrine of clean hands' and as discussed in preceding paras and respectfully following the decision of Hon'ble Supreme Court, High Courts and ITAT, the appellant is not entitled to be heard on merits and the appeal filed by the appellant is dismissed for not following the Principle of Clean Hands.

27. In view of the above, the other grounds are not liable to be adjudicated upon and are accordingly, dismissed.

8. Thus, the ld. CIT (A) has refused to hear the appeal on merits on the ground that assessee has not come with clean hands and he applied some test of 'doctrine of clean hands'.

9. We have heard both the parties and also perused the relevant material placed on record. Apart from legal issues, the main contention of the assessee before us has been that assessee is an individual who had been showing salary income from Anurag Architectureal Associates Pvt. Ltd. and also contract receipts. Apart from that he has claimed that he has made withdrawals from the partnership firm Balaji Construction. The summary of

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cash flow has been placed before us at pages 61-62 of the paper book. Thus, it was submitted that in view of the availability of so much of cash, the source of cash deposits in the bank account stands explained. Therefore, no addition should have been made.

10. On the other hand, ld. DR strongly relying upon the observation made by the ld. AO and submitted that in so far as cash withdrawals from capital account of partnership firm, ld. AO has given details as to why such a plea taken by the assessee is not accepted.

11. We find that, this cash flow chart and the source of cash was also given before the ld. AO which is evident from reply of the assessee incorporated at pages 4 & 5 of the assessment order. The ld. AO has tried to demolish the source of cash withdrawal from partnership firm after giving various reasons. On going through these reasons prima facie we agree with such a finding of the ld. AO that there are discrepancies with regard to source of withdrawals in the partnership firm. However, the fact of the matter is that even if the cash withdrawals from the partnership firm is not acceptable to the extent of Rs.10,00,000/- but still assessee had shown return of income of more than Rs.18.89 lakhs and cash withdrawal of Rs.33,59,000/- and also some small amount of opening cash of Rs.96,825/-. Ld. AO has only given benefit of part of the cash withdrawal of Rs.13.52 lakhs. For the sake of ready reference the summary of cash flow is reproduced hereunder:-

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11. Thus, in the bank account, the source of availability of cash has been shown to the extent of Rs.66,30,825/-. Even if cash is withdrawn from the partnership firm for Rs.10,00,000/- is not accepted and also looking to the other facts, it cannot be said that entire amount deposited in the bank account remains unexplained and there is no source to explain cash deposit. Ld.

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AO has not pointed out any other discrepancy apart from cash withdrawals from the partnership firm, therefore, the summary of cash flow cannot be rejected. Accordingly, we hold that since assessee had more than return income of Rs.18.89 lakhs and also there are huge withdrawals from bank account and also funds available from opening cash in hand of Rs.96,825/-, we are of the opinion that the benefit of Rs.13.52 lakhs given by the ld. AO is too less. Looking to the overall availability of cash we hold that out of Rs.55.49 lakhs, amount of Rs.45,00,000/- cash deposited is to be treated as explianed out of various streams of income of the assessee and also cash withdrawals from the bank account. The balance amount of Rs.10,49,000/- is confirmed.

12. In so far as various legal grounds which have been raised before us, we find that ld. CIT (A) has countred each and every point raised by the assessee and we do not find any strength in the arguments of the ld. Counsel to overrule the finding of the ld. CIT(A) in so far as validity of reopening u/s.147 and notice u/s.148 is concerned. Thus, grounds raised before us challenging the validity of notice u/s 148iare dismissed.

12. In the result, appeal of the assessee is partly allowed.

Order pronounced on 02/12/2024.

Sd/- Sd/-

(B.R. BASKARAN) (AMIT SHUKLA)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Varanasi; Dated 02/12/2024 KARUNA, sr.ps

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Copy of the Order forwarded to :

1. The Appellant

2. The Respondent.

3. The CIT(A), Varanasi.

4. CIT

5. DR, ITAT, Varanasi

6. Guard file. //True Copy//

BY ORDER,

(Asstt.Registrar)

ITAT, Varanasi