The Commissioner (Appeals) accepted my explanation for the investment but then made a fresh addition for cash deposits he spotted in my bank statement, without telling me. Can he do that?
No. The Delhi Tribunal held that the Commissioner (Appeals) cannot determine taxability from a new source, and cannot enhance without show-causing the assessee. The Assessing Officer had added the investment in property as unexplained under section 69. Having accepted the evidence and deleted most of it, the Commissioner (Appeals) went on to tax cash deposits in the bank account used to repay the bridging loan, treating them as unexplained cash credits under section 68. That was a different exercise from the one the officer had done, it went beyond the Tribunal's earlier remand, and no notice was given. The addition of Rs 1,75,50,000 was deleted.
Decided by the ITAT (Income Tax Appellate Tribunal, Delhi Benches 'E', New Delhi; Narendra Kumar Billaiya, Accountant Member, and Anubhav Sharma, Judicial Member) on 2023-11-24, reported as ITA Nos. 4945/Del/2019 and 4495/Del/2019, ITAT Delhi 'E' Bench, assessment year 2012-13. It bears on section 68, section 69, section 144, section 251 of the Income Tax Act 1961, in Cash Credits & Unexplained Money and Appeals matters.
First appellate authorities routinely convert one addition into another while the file is before them, and the taxpayer discovers it only when the order arrives. This decision draws the line by reference to the exercise being performed rather than the label on the section: examining the source of an investment on the date it was made is not the same as examining the source of a sum credited to a bank account on the date of the credit, so moving from section 69 to section 68 is a move to a new source, not a change of nomenclature. It also holds that where the Tribunal has remanded on a defined question, the appellate authority's mandate is confined to that question, and that even a permissible further enquiry requires the assessee to be put on notice. It applies the rule in CIT v Sardari Lal & Co, and it is a practical answer to the argument that the department was in any event looking at the same money.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For assessment year 2012-13 the assessee company bought immovable property at auction from Kotak Mahindra Bank for Rs 7,31,00,000 plus stamp charges of Rs 43,86,000. The Assessing Officer, examining a large investment in property against the total income returned, passed an ex parte order under section 144 on 27 March 2015 adding Rs 7,31,00,000 as an unexplained source of investment. The assessee's case was that it did not have the funds at the time, that a loan of Rs 6,19,00,000 had been sanctioned by Development Credit Bank but was slow to be disbursed, that an unsecured loan was therefore taken from M/s LMJ Logistics Ltd to bridge the gap, and that when the bank loan was disbursed into its Axis Bank account the money was used to repay the unsecured loan. In the first round the Commissioner (Appeals) did not consider the evidence filed, and the Tribunal by order dated 27 February 2018 set aside that order with a direction to admit the additional evidence and decide the appeal afresh after hearing the assessee. On remand the assessee filed the registered sale deed, the loan sanction letter, account statements and confirmations of the unsecured loan from LMJ Logistics. By order dated 19 March 2019 the Commissioner (Appeals) deleted Rs 5,55,50,000, being satisfied that the investment was not from an undisclosed source, but confirmed Rs 1,75,50,000 on a new ground: the Axis Bank statement showed that the repayments to LMJ Logistics and the loan instalments were preceded by cash deposits whose source was unexplained. He treated those as unexplained cash credits under section 68. Both sides appealed.
The assessee's appeal was allowed on grounds 3 to 6 and the Revenue's appeal was dismissed. The Tribunal held that the Commissioner (Appeals), having been satisfied by the additional evidence that the sources of the investment in the property were genuine, travelled beyond the mandate of the Tribunal's remand order of 27 February 2018, which had restored only the question whether the additions made in the section 144 assessment were justified in the light of the assessee's evidence. If, after the evidence was filed, he intended to examine the matter further, that was outside the remand and in any event required the assessee to be put on notice, which he failed to do before questioning the source of the cash deposits in the Axis Bank account and treating them as unexplained cash credits in the books for the year. The addition made on a new source, in the form of the source of a sum credited in the books of account, was therefore not sustainable. The Tribunal also upheld the deletion of Rs 5,55,50,000, finding no reason to interfere with the finding that the investment was not from an undisclosed source.
The Tribunal began from two settled propositions: that the Commissioner (Appeals) may make an enhancement only after show-causing the assessee, and that the question of taxability from a new source cannot be determined by him as the first appellate authority, for which it relied on CIT v Sardari Lal & Co. It then asked what the assessment order had actually been about. The officer had questioned the source of the investment in the property. Before the Commissioner (Appeals) the assessee produced the sale deed, the sanction letter, the account statements and the lender's confirmations, and the Commissioner was satisfied on that material that the investment was not from an undisclosed source. That should have concluded the matter restored to him. Instead, being intrigued by the Axis Bank statement, he moved to the repayments made to LMJ Logistics and the loan instalments, found cash deposits preceding them, and taxed those. The Tribunal rejected the Departmental Representative's contention that this was the same enquiry in another form, that in either case the authorities were examining the source of the investment in the property, whether by way of investment or of repayment of loans. The two exercises are distinct: examining an investment in property from a known source or disclosed income requires the source to be tested as it existed on the date the investment was made, whereas examining cash deposits in a bank account requires the source to be tested on the date the sum was credited in the books of account. Because they are different exercises, the second was a new source, and for that reason, quite apart from the limits of the remand, the assessee had to be put to notice. He was not, and the addition failed.
In former the issue was to examine the source as existed on the date of investment made and in later the issue was to examine the source on the date the sum was credited in the Books of Accounts
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi Tribunal held that the Commissioner (Appeals) cannot determine taxability from a new source, and cannot enhance without show-causing the assessee. The Assessing Officer had added the investment in property as unexplained under section 69. Having accepted the evidence and deleted most of it, the Commissioner (Appeals) went on to tax cash deposits in the bank account used to repay the bridging loan, treating them as unexplained cash credits under section 68. That was a different exercise from the one the officer had done, it went beyond the Tribunal's earlier remand, and no notice was given. The addition of Rs 1,75,50,000 was deleted. This was decided by the ITAT (Income Tax Appellate Tribunal, Delhi Benches 'E', New Delhi; Narendra Kumar Billaiya, Accountant Member, and Anubhav Sharma, Judicial Member) and bears on section 68, section 69, section 144, section 251 of the Income Tax Act 1961. It is reported as ITA Nos. 4945/Del/2019 and 4495/Del/2019, ITAT Delhi 'E' Bench, assessment year 2012-13. First appellate authorities routinely convert one addition into another while the file is before them, and the taxpayer discovers it only when the order arrives. This decision draws the line by reference to the exercise being performed rather than the label on the section: examining the source of an investment on the date it was made is not the same as examining the source of a sum credited to a bank account on the date of the credit, so moving from section 69 to section 68 is a move to a new source, not a change of nomenclature. It also holds that where the Tribunal has remanded on a defined question, the appellate authority's mandate is confined to that question, and that even a permissible further enquiry requires the assessee to be put on notice. It applies the rule in CIT v Sardari Lal & Co, and it is a practical answer to the argument that the department was in any event looking at the same money. If it applies to you, the first step is this: Compare the exercise the officer performed with the one the appellate authority performed; if the date and the transaction being explained differ, argue that it is a new source and not the same addition relabelled.
For assessment year 2012-13 the assessee company bought immovable property at auction from Kotak Mahindra Bank for Rs 7,31,00,000 plus stamp charges of Rs 43,86,000. The Assessing Officer, examining a large investment in property against the total income returned, passed an ex parte order under section 144 on 27 March 2015 adding Rs 7,31,00,000 as an unexplained source of investment. The assessee's case was that it did not have the funds at the time, that a loan of Rs 6,19,00,000 had been sanctioned by Development Credit Bank but was slow to be disbursed, that an unsecured loan was therefore taken from M/s LMJ Logistics Ltd to bridge the gap, and that when the bank loan was disbursed into its Axis Bank account the money was used to repay the unsecured loan. In the first round the Commissioner (Appeals) did not consider the evidence filed, and the Tribunal by order dated 27 February 2018 set aside that order with a direction to admit the additional evidence and decide the appeal afresh after hearing the assessee. On remand the assessee filed the registered sale deed, the loan sanction letter, account statements and confirmations of the unsecured loan from LMJ Logistics. By order dated 19 March 2019 the Commissioner (Appeals) deleted Rs 5,55,50,000, being satisfied that the investment was not from an undisclosed source, but confirmed Rs 1,75,50,000 on a new ground: the Axis Bank statement showed that the repayments to LMJ Logistics and the loan instalments were preceded by cash deposits whose source was unexplained. He treated those as unexplained cash credits under section 68. Both sides appealed. The matter was decided on 2023-11-24 by the ITAT (Income Tax Appellate Tribunal, Delhi Benches 'E', New Delhi; Narendra Kumar Billaiya, Accountant Member, and Anubhav Sharma, Judicial Member). On those facts the ITAT held as follows. The assessee's appeal was allowed on grounds 3 to 6 and the Revenue's appeal was dismissed. The Tribunal held that the Commissioner (Appeals), having been satisfied by the additional evidence that the sources of the investment in the property were genuine, travelled beyond the mandate of the Tribunal's remand order of 27 February 2018, which had restored only the question whether the additions made in the section 144 assessment were justified in the light of the assessee's evidence. If, after the evidence was filed, he intended to examine the matter further, that was outside the remand and in any event required the assessee to be put on notice, which he failed to do before questioning the source of the cash deposits in the Axis Bank account and treating them as unexplained cash credits in the books for the year. The addition made on a new source, in the form of the source of a sum credited in the books of account, was therefore not sustainable. The Tribunal also upheld the deletion of Rs 5,55,50,000, finding no reason to interfere with the finding that the investment was not from an undisclosed source.
The Tribunal began from two settled propositions: that the Commissioner (Appeals) may make an enhancement only after show-causing the assessee, and that the question of taxability from a new source cannot be determined by him as the first appellate authority, for which it relied on CIT v Sardari Lal & Co. It then asked what the assessment order had actually been about. The officer had questioned the source of the investment in the property. Before the Commissioner (Appeals) the assessee produced the sale deed, the sanction letter, the account statements and the lender's confirmations, and the Commissioner was satisfied on that material that the investment was not from an undisclosed source. That should have concluded the matter restored to him. Instead, being intrigued by the Axis Bank statement, he moved to the repayments made to LMJ Logistics and the loan instalments, found cash deposits preceding them, and taxed those. The Tribunal rejected the Departmental Representative's contention that this was the same enquiry in another form, that in either case the authorities were examining the source of the investment in the property, whether by way of investment or of repayment of loans. The two exercises are distinct: examining an investment in property from a known source or disclosed income requires the source to be tested as it existed on the date the investment was made, whereas examining cash deposits in a bank account requires the source to be tested on the date the sum was credited in the books of account. Because they are different exercises, the second was a new source, and for that reason, quite apart from the limits of the remand, the assessee had to be put to notice. He was not, and the addition failed. In the words reproduced by the source cited on this page: "In former the issue was to examine the source as existed on the date of investment made and in later the issue was to examine the source on the date the sum was credited in the Books of Accounts"
It was decided by the ITAT on 2023-11-24 and is reported as ITA Nos. 4945/Del/2019 and 4495/Del/2019, ITAT Delhi 'E' Bench, assessment year 2012-13. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 68, section 69, section 144, section 251, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The assessee's appeal was allowed on grounds 3 to 6 and the Revenue's appeal was dismissed. The Tribunal held that the Commissioner (Appeals), having been satisfied by the additional evidence that the sources of the investment in the property were genuine, travelled beyond the mandate of the Tribunal's remand order of 27 February 2018, which had restored only the question whether the additions made in the section 144 assessment were justified in the light of the assessee's evidence. If, after the evidence was filed, he intended to examine the matter further, that was outside the remand and in any event required the assessee to be put on notice, which he failed to do before questioning the source of the cash deposits in the Axis Bank account and treating them as unexplained cash credits in the books for the year. The addition made on a new source, in the form of the source of a sum credited in the books of account, was therefore not sustainable. The Tribunal also upheld the deletion of Rs 5,55,50,000, finding no reason to interfere with the finding that the investment was not from an undisclosed source. It arises in Cash Credits & Unexplained Money and Appeals matters, on section 68, section 69, section 144, section 251 of the Income Tax Act 1961, and was decided by Income Tax Appellate Tribunal, Delhi Benches 'E', New Delhi; Narendra Kumar Billaiya, Accountant Member, and Anubhav Sharma, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where a remand order defines the question, quote its terms and show that the appellate authority went outside them. Insist on the notice requirement: an enhancement or a new addition made without show cause is bad regardless of the merits, and take the point as a ground of appeal in its own right. Do not let the argument that the department was examining the same money in either form pass unanswered; the Tribunal rejected it here.
Still good law. A Tribunal order of 24 November 2023 applying the settled rule against the first appellate authority determining taxability from a new source, as laid down in CIT v Sardari Lal & Co. The source page records no case citing it. Whether the Revenue has appealed to the Delhi High Court was not checked in this session. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order cites CIT v Sardari Lal & Co inconsistently, describing it in paragraph 3.1 as a judgment of the Full Bench of the jurisdictional High Court in IT Reference No. 227 of 1979 and in paragraph 5 as a judgment of the Supreme Court; it is the former citation that the assessee's counsel gave. The order does not expressly refer to section 251, which is where the power of enhancement and the requirement of a reasonable opportunity are found, so the batch line's inclusion of that section reflects the substance rather than the text. Because the addition was struck down on the new-source and notice grounds, the Tribunal did not decide whether the cash deposits were in fact explained, so the merits of that Rs 1,75,50,000 remain open in principle, and the order does not say whether the department may now take the point in a properly initiated proceeding. It also does not record the total income returned, or what became of the balance between the Rs 7,31,00,000 added and the two figures of Rs 5,55,50,000 deleted and Rs 1,75,50,000 confirmed, which together account for the whole. The Commissioner (Appeals)' order of 19 March 2019 and the Tribunal's first-round order of 27 February 2018 were not read in this session. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The assessee's appeal was allowed on grounds 3 to 6 and the Revenue's appeal was dismissed. The Tribunal held that the Commissioner (Appeals), having been satisfied by the additional evidence that the sources of the investment in the property were genuine, travelled beyond the mandate of the Tribunal's remand order of 27 February 2018, which had restored only the question whether the additions made in the section 144 assessment were justified in the light of the assessee's evidence. If, after the evidence was filed, he intended to examine the matter further, that was outside the remand and in any event required the assessee to be put on notice, which he failed to do before questioning the source of the cash deposits in the Axis Bank account and treating them as unexplained cash credits in the books for the year. The addition made on a new source, in the form of the source of a sum credited in the books of account, was therefore not sustainable. The Tribunal also upheld the deletion of Rs 5,55,50,000, finding no reason to interfere with the finding that the investment was not from an undisclosed source.
TaxSphere, “Net Agri Company Pvt Ltd v ITO”, https://taxnotice.vittsphere.com/caselaw/case/net-agri-co-v-ito-cita-new-source-69-to-68/ (validity last checked 2026-08-29)
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