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Facts
The assessee's appeal was dismissed by the CIT(A) NFAC without affording proper opportunity of hearing. The addition of Rs. 40,41,500/- was confirmed under Section 69A based on cash deposits made during the demonetization period.
Held
The Tribunal held that the CIT(A) failed to provide adequate opportunity of hearing to the assessee, violating the principles of natural justice. The matter was remanded back to the CIT(A) for fresh adjudication.
Key Issues
Whether the CIT(A) properly afforded opportunity of hearing to the assessee before dismissing the appeal. Whether the addition under Section 69A was justified based on demonetized currency deposits.
Sections Cited
69A, 143(3)
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Income Tax Appellate Tribunal, MUMBAI BENCH “J(SMC
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
ORDER
PER OM PRAKASH KANT, AM
This appeal has been preferred by the assessee against order dated 11.04.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, raising grounds as reproduced as under:
Ground No 1: Opportunity of Hearing : The Ld. CIT(A) not given proper opportunity of hearing before dismissing the said appeal. Only 1 notice given by the LD.
CIT(A) that after 5 years and 2 months on the IT portal in the CIT(A) that after 5 years and 2 months on the IT portal in the CIT(A) that after 5 years and 2 months on the IT portal in the busy month of March. No Physical notice given by the Ld. busy month of March. No Physical notice given by the Ld. busy month of March. No Physical notice given by the Ld. CIT(A), NFAC. CIT(A), NFAC. No second opportunity given by the Ld. CIT(A) and simply o second opportunity given by the Ld. CIT(A) and simply o second opportunity given by the Ld. CIT(A) and simply dismissed the appeal which is unjustified and unwarranted. dismissed the appeal which is unjustified and unwarranted. dismissed the appeal which is unjustified and unwarranted. Ground No 2: Addition u/s 69A for cash deposit during Ground No 2: Addition u/s 69A for cash deposit during Ground No 2: Addition u/s 69A for cash deposit during demonetization worth Rs 40,41,500/ demonetization worth Rs 40,41,500/- The CIT(A), NFAC not justified in confirming the ad The CIT(A), NFAC not justified in confirming the addition on The CIT(A), NFAC not justified in confirming the ad account of cash deposits out of cash withdraw from the bank account of cash deposits out of cash withdraw from the bank account of cash deposits out of cash withdraw from the bank account. account. The CIT(A), NFAC confirmed the addition only on the basis of The CIT(A), NFAC confirmed the addition only on the basis of The CIT(A), NFAC confirmed the addition only on the basis of assumption presumption, estimation and own imagination of assumption presumption, estimation and own imagination of assumption presumption, estimation and own imagination of the Ld. ITO Wd 20(1)(1) and without any base or specific the Ld. ITO Wd 20(1)(1) and without any base or specific the Ld. ITO Wd 20(1)(1) and without any base or specific reasons. The Ld. ITO Wd 20(1)(1) made own imaginary story easons. The Ld. ITO Wd 20(1)(1) made own imaginary story easons. The Ld. ITO Wd 20(1)(1) made own imaginary story that withdrawn money has been utilised for investment that withdrawn money has been utilised for investment that withdrawn money has been utilised for investment purpose & unexplained income deposited in bank account is purpose & unexplained income deposited in bank account is purpose & unexplained income deposited in bank account is total unjustified and unwarranted total unjustified and unwarranted The CIT(A), NFAC not considered the fact that there The CIT(A), NFAC not considered the fact that there is no proof The CIT(A), NFAC not considered the fact that there that cash deposited is not withdrawn from the bank. that cash deposited is not withdrawn from the bank. that cash deposited is not withdrawn from the bank. The CIT(A), NFAC not considered the facts that government The CIT(A), NFAC not considered the facts that government The CIT(A), NFAC not considered the facts that government has allowed to deposit the old currencies upto 31.12.2016 & has allowed to deposit the old currencies upto 31.12.2016 & has allowed to deposit the old currencies upto 31.12.2016 & assessee has deposit the cash before due date. assessee has deposit the cash before due date. The CIT(A), NFAC not justif The CIT(A), NFAC not justified in making assumptions that the ied in making assumptions that the cash withdrawn by the assessee has been utilized for cash withdrawn by the assessee has been utilized for cash withdrawn by the assessee has been utilized for expenses or investment. Only on the basis of own theories expenses or investment. Only on the basis of own theories expenses or investment. Only on the basis of own theories without any concrete evidence simply dismissing the appeal is without any concrete evidence simply dismissing the appeal is without any concrete evidence simply dismissing the appeal is not justified. not justified. The Ld. ITO WD 20(1)(4) had taken The Ld. ITO WD 20(1)(4) had taken the criteria for the criteria for disallowance of deposits and the same is confirmed by CIT(A), disallowance of deposits and the same is confirmed by CIT(A), disallowance of deposits and the same is confirmed by CIT(A), NFAC as a date of deposits. If a deposit was made on NFAC as a date of deposits. If a deposit was made on NFAC as a date of deposits. If a deposit was made on 09.11.2016 then he intend to allow but assessee has 09.11.2016 then he intend to allow but assessee has 09.11.2016 then he intend to allow but assessee has deposited on Dec 2016 so disallow. So, a reason for deposited on Dec 2016 so disallow. So, a reason for deposited on Dec 2016 so disallow. So, a reason for disallowance itself disallowance itself is debatable.
At the threshold, the learned counsel for the assessee assailed At the threshold, the learned counsel for the assessee assailed At the threshold, the learned counsel for the assessee assailed the impugned order on the ground that the learned CIT(A) failed to the impugned order on the ground that the learned CIT(A) failed to the impugned order on the ground that the learned CIT(A) failed to afford proper and adequate opportunity of hearing before afford proper and adequate opportunity of hearing before afford proper and adequate opportunity of hearing before dismissing the appeal. It was submitted that only a solitary notice dismissing the appeal. It was submitted that only a solitary notice dismissing the appeal. It was submitted that only a solitary notice was issued after an inordinate lapse of nearly five years and two was issued after an inordinate lapse of nearly five years and two was issued after an inordinate lapse of nearly five years and two months, on 17.03.2025, and thereafter the appeal was disposed of months, on 17.03.2025, and thereafter the appeal was disposed of months, on 17.03.2025, and thereafter the appeal was disposed of by by by order order order dated dated dated 11.04.2025 11.04.2025 11.04.2025 without without without granting granting granting any any any further further further opportunity. It was contended that such a course of action was opportunity. It was contended that such a course of action was opportunity. It was contended that such a course of action was violative of the principles of natural justice and, therefore, the ve of the principles of natural justice and, therefore, the ve of the principles of natural justice and, therefore, the appeal deserves to be restored to the file of the learned CIT(A) for appeal deserves to be restored to the file of the learned CIT(A) for appeal deserves to be restored to the file of the learned CIT(A) for fresh adjudication.
We have heard rival submissions and perused the material We have heard rival submissions and perused the material We have heard rival submissions and perused the material placed on record. The findings of the learned CIT(A), which placed on record. The findings of the learned C placed on record. The findings of the learned C culminated in the confirmation of the addition of ₹40,41,500/- culminated in the confirmation of the addition of culminated in the confirmation of the addition of under section 69A of the Act, are reproduced under section 69A of the Act, are reproduced as under: as under:
“1. This appeal is filed against the order of the ITO, Ward20(1)(1), 1. This appeal is filed against the order of the ITO, Ward20(1)(1), 1. This appeal is filed against the order of the ITO, Ward20(1)(1), Mumbai passed u/s143(3) of the I T Act, 1961 dated.21.12 Mumbai passed u/s143(3) of the I T Act, 1961 dated.21.12 Mumbai passed u/s143(3) of the I T Act, 1961 dated.21.12.2019. 2. The grounds of appeal object
2. The grounds of appeal object to addition of Rs. 4041500/ Rs. 4041500/- u/s.69A of the IT Act. 1961. The assessee had withdrawn large u/s.69A of the IT Act. 1961. The assessee had withdrawn large u/s.69A of the IT Act. 1961. The assessee had withdrawn large amounts of cash on various dates in the month of August 2016. amounts of cash on various dates in the month of August 2016. amounts of cash on various dates in the month of August 2016. Further, as mentioned in the showcause noticeissued by the AO, Further, as mentioned in the showcause noticeissued by the AO, Further, as mentioned in the showcause noticeissued by the AO, cash ash ash was was was deposited deposited deposited on on on 05/12/16 05/12/16 05/12/16 (7,30,000), (7,30,000), (7,30,000), (7,20,000), (7,20,000), (7,20,000), 07/12/16 (Rs.4,90,000), 06/12/2016 (Rs.8,90,000), 13/12/2016 07/12/16 (Rs.4,90,000), 06/12/2016 (Rs.8,90,000), 13/12/2016 07/12/16 (Rs.4,90,000), 06/12/2016 (Rs.8,90,000), 13/12/2016 (4,50,000), 19/12/16 14/12/2016 (6,81,500) and 30/12/16 (4,50,000), 19/12/16 14/12/2016 (6,81,500) and 30/12/16 (4,50,000), 19/12/16 14/12/2016 (6,81,500) and 30/12/16 (80,000). A perusal of the bank statement reveals that there is no (80,000). A perusal of the bank statement reveals that there is no (80,000). A perusal of the bank statement reveals that there is no consistency in the consistency in the withdrawal and deposit pattern in pre withdrawal and deposit pattern in pre- demonetisation and post demonetisation and post-demonetisation period. Large amounts demonetisation period. Large amounts have been received on various dates from Auric Bullion and have been received on various dates from Auric Bullion and have been received on various dates from Auric Bullion and Jewellers followed by large cash withdrawals in the month of Jewellers followed by large cash withdrawals in the month of Jewellers followed by large cash withdrawals in the month of August 2016. No cogent reason has be August 2016. No cogent reason has been offered for the same. A en offered for the same. A person would not keep on withdrawing cash in spite of having person would not keep on withdrawing cash in spite of having person would not keep on withdrawing cash in spite of having large amount of cash in hand without any plausible reason. large amount of cash in hand without any plausible reason. large amount of cash in hand without any plausible reason. The onus is on the assessee to prove the recycling of fund and that The onus is on the assessee to prove the recycling of fund and that The onus is on the assessee to prove the recycling of fund and that the cash withdrawn was not utilised for the cash withdrawn was not utilised for expenses or investment. expenses or investment. The assessee failed to discharge this burden. Since the entire cash The assessee failed to discharge this burden. Since the entire cash The assessee failed to discharge this burden. Since the entire cash withdrawn during the early part of the year was not deposited, in withdrawn during the early part of the year was not deposited, in withdrawn during the early part of the year was not deposited, in all probability the cash withdrawn during the period August 2016 all probability the cash withdrawn during the period August 2016 all probability the cash withdrawn during the period August 2016 to October 2016 was also utilised to October 2016 was also utilised for the expenses or investment. for the expenses or investment. It is also seen that the cash of Rs. 40,41,500/ It is also seen that the cash of Rs. 40,41,500/- was not not deposited immediately after demonetisation but was deposited very late immediately after demonetisation but was deposited very late immediately after demonetisation but was deposited very late starting from 05/12/2016 to as late as 30/12/2016, ie. over a starting from 05/12/2016 to as late as 30/12/2016, ie. over a starting from 05/12/2016 to as late as 30/12/2016, ie. over a span of 26 days. The very act of span of 26 days. The very act of the assessee in depositing the the assessee in depositing the cash on various dates as mentioned above clearly prove beyond cash on various dates as mentioned above clearly prove beyond cash on various dates as mentioned above clearly prove beyond doubt that either the same was his unaccounted income or he had doubt that either the same was his unaccounted income or he had doubt that either the same was his unaccounted income or he had been involved in converting the demonetized currency into legal been involved in converting the demonetized currency into legal been involved in converting the demonetized currency into legal tender. The addition of Rs.4041500 tender. The addition of Rs.4041500 is confirmed.” 3.1 On a careful consideration of the matter, we find that the On a careful consideration of the matter, we find that the On a careful consideration of the matter, we find that the impugned order of the learned CIT(A) does not contain any impugned order of the learned CIT(A) does not contain any impugned order of the learned CIT(A) does not contain any discussion with regard to the issuance of notices by him or the discussion with regard to the issuance of notices by him or the discussion with regard to the issuance of notices by him or the alleged non-compliance on the part of the assessee. The compliance on the part of the assessee. The compliance on the part of the assessee. The record produced before us demonstrates that the assessee was not produced before us demonstrates that the assessee was not produced before us demonstrates that the assessee was not afforded adequate opportunity to substantiate its case. The denial afforded adequate opportunity to substantiate its case. The denial afforded adequate opportunity to substantiate its case. The denial of sufficient time and opportunity strikes at the very root of the of sufficient time and opportunity strikes at the very root of the of sufficient time and opportunity strikes at the very root of the principles of natural justice. It is trite law that justi principles of natural justice. It is trite law that justice must not only ce must not only be done but must manifestly appear to have been done. The right to be done but must manifestly appear to have been done. The right to be done but must manifestly appear to have been done. The right to be heard before an adverse decision is a basic facet of fair be heard before an adverse decision is a basic facet of fair be heard before an adverse decision is a basic facet of fair procedure.
3.2 In these circumstances, and in order to advance the cause of In these circumstances, and in order to advance the cause of In these circumstances, and in order to advance the cause of substantial justice, we deem it fit substantial justice, we deem it fit and proper to set aside the order and proper to set aside the order of the learned CIT(A) on the issue in dispute and remit the matter of the learned CIT(A) on the issue in dispute and remit the matter of the learned CIT(A) on the issue in dispute and remit the matter back to his file for fresh adjudication. The learned CIT(A) shall grant back to his file for fresh adjudication. The learned CIT(A) shall grant back to his file for fresh adjudication. The learned CIT(A) shall grant due opportunity to the assessee to file its submissions and due opportunity to the assessee to file its submissions and due opportunity to the assessee to file its submissions and evidences, and thereaf evidences, and thereafter decide the appeal in accordance with law. ter decide the appeal in accordance with law. At the same time, the assessee is directed to extend full co- At the same time, the assessee is directed to extend full co At the same time, the assessee is directed to extend full co operation and ensure due compliance with the notices issued, operation and ensure due compliance with the notices issued, operation and ensure due compliance with the notices issued, without seeking unnecessary adjournments. without seeking unnecessary adjournments.
In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for In the result, the appeal of the assessee is allowed for statistical purposes. statistical purposes.
Order pronounced in the open Court on ounced in the open Court on 23/09/2025. /09/2025.