THIYAGARAJAN SURESH,VIRUDHNAGAR vs. ITO, WARD 3, VIRUDHNAGAR, VIRUDHNAGAR

आयकरअपील�यअ�धकरण ’ए’ �यायपीठ,चे�नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI �ी इंतूरी रामा राव लेखासद� एवं �ी मनु कुमार िग�र, �ाियक सद� BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER

आयकर अपील सं./ITA No. 3424/Chny/2025 �नधा�रण वष�/Assessment Year: 2017-18 THIYAGARAJAN SURESH v. ITO, Ward 3, Virudhnagar Thiyagarajan Suresh Virudhnagar, Karur-625002, 2/824, V S K D Nagar, Satchiyapuram, Sivakasi H.O., Sivakasi, Virudhunagar, Virudhunagar-626123, Tamil Nadu [PAN: AZDPS2178M] (Appellant) (Respondent)

अपीलाथ� क� ओर से/ Appellant by : Mr. R.Thulasiram, Advocate & Mr. Kumarasubramanian, Advocate !यथ� क� ओर से /Respondent by : Ms. Anshu Sharawat, Addl.CIT सुनवाई क� तार�ख/Date of Hearing : 01.07.2026 घोषणा क� तार�ख /Date of : 10.09.2026 Pronouncement आदेश / O R D E R PER MANU KUMAR GIRI, JM:

This appeal by the assessee is directed against the order dated 24.09.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the Ld. CIT(A)"], arising out of the assessment order passed under section 147 read with section 144 of the Income Tax Act, 1961 ("the Act"), for the Assessment Year 2017-18.

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 2 :: 2. The assessee has raised the following grounds: 1. The order of the NFAC, Delhi is opposed to law and the facts and circumstances of the case. 2. The NFAC, Delhi erred in allowing the appeal only in part and in sustaining the addition of Rs.2,32,11,790/- under section 69 of the Act made by the National Faceless Assessment Centre, Delhi. 3. For these and such other grounds as may be adduced at the time of hearing, the assessee prays that the issue may be remitted to the file of the Assessing Officer for fresh consideration and for passing a fresh order. 3. The assessee is stated to be engaged in the business of purchase and sale of gold and silver jewellery. The assessee did not originally file his return of income for the relevant assessment year. Subsequently, the assessment was reopened under section 147 of the Act on the basis of information relating to substantial cash deposits aggregating to Rs.2,59,62,600/- and cash withdrawals aggregating to Rs.2,58,30,350/- in the bank account maintained with Canara Bank in the name of "Monica Jewellers". In response to notice issued under section 148 of the Act, the assessee filed his return of income on 21.04.2021 declaring total income of Rs.3,87,330/-. The assessment was thereafter completed under section 147 read with sections 144 and 144B of the Act on 26.03.2022. In the absence of satisfactory explanation regarding the cash transactions, the Assessing Officer made an addition of Rs.2,58,30,350/- under section 69A of the Act, treating the same as unexplained money, and assessed the total income at Rs.2,62,17,680/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A).

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 3 :: 4. During the appellate proceedings, the assessee contended, inter alia, that he was carrying on the business of purchase and sale of gold and silver articles and that the cash deposits represented business receipts. It was further submitted that the assessee was also engaged in purchase and sale of gold and silver articles on commission/brokerage basis and had disclosed brokerage income of Rs.22,18,500/-. The Ld. CIT(A), in the course of appellate proceedings, called for a remand report from the Assessing Officer. The Assessing Officer furnished the remand report dated 04.06.2024. In the remand proceedings, the assessee furnished, inter alia, his registration certificate, sales and purchase ledgers and GST returns relating to his own business. On examination thereof, the Assessing Officer accepted that sales of Rs.26,18,620/- were duly accounted for and represented receipts from the assessee's own business. As regards the alleged commission/brokerage business, however, the Assessing Officer noted that the assessee had furnished only a commission ledger and had not furnished party-wise sales and purchase ledgers, agreements, TDS details, particulars of purchasers and sellers, their PAN, addresses, e-mail particulars, brokerage rates or other corroborative material. The Assessing Officer accordingly recommended sustaining the balance addition. The Ld. CIT(A), after considering the remand report, deleted the addition to the extent of Rs.26,18,620/- and confirmed the balance addition of Rs.2,32,11,730/- under section 69A of the Act. The Ld. CIT(A) also held that the claim of brokerage income of Rs.22,18,500/- was not supported by adequate documentary evidence and that no corresponding TDS under section 194H was reflected in Form 26AS. The assessee's plea regarding peak credit

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 4 :: was also rejected for want of a cash-flow statement or reconciliation demonstrating nexus between withdrawals and subsequent deposits. The Ld. CIT(A) further held that the income assessed under section 69A was liable to be taxed in accordance with section 115BBE of the Act, while interest under sections 234A, 234B and 234C was held to be consequential and directed to be recomputed. The request for a de novo assessment was also rejected. Hence, the present appeal. 5. The Ld. Authorised Representative ("Ld. AR") appearing for the assessee submitted that the impugned addition of Rs.2,32,11,730/- sustained by the Ld. CIT(A) is not justified either on facts or in law. The Ld. AR submitted that the assessee is engaged in the business of purchase and sale of gold and silver articles and that the nature of such business involves substantial cash transactions. During the relevant previous year, the assessee had carried on two streams of business, namely, (i) outright purchase and sale of gold and silver articles, and (ii) purchase and sale transactions undertaken on brokerage/commission basis. 5.1 It was submitted that the assessee had duly disclosed sales of Rs.26,18,620/- from his own business and brokerage income of Rs.22,18,500/- in the return of income filed in response to notice under section 148 of the Act. The Ld. AR pointed out that the Assessing Officer himself, during the remand proceedings, examined the sales and purchase ledgers and GST returns and categorically accepted the sales of Rs.26,18,620/- as genuine business transactions.

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 5 :: 5.2 According to the Ld. AR, once the existence of the assessee's business activity has been accepted and the Assessing Officer has accepted a part of the cash deposits as arising from business receipts, the remaining deposits could not have been mechanically treated as unexplained merely because the assessee was unable to furnish every document called for by the Assessing Officer. 5.3 The Ld. AR further submitted that the assessee had furnished the commission ledger showing the receipt of brokerage amounting to Rs.22,18,500/-. It was contended that the assessee was acting as an intermediary between purchasers and sellers and that the gross transaction value handled by him was substantially higher than the brokerage income actually earned. Therefore, the fact that the brokerage income was only Rs.22,18,500/- should not be construed to mean that the corresponding cash deposits could not have been generated from the transactions undertaken by him as an intermediary. 5.4 The Ld. AR submitted that the absence of TDS credit under section 194H in Form 26AS cannot, by itself, establish that no commission business was carried on. According to him, the provisions relating to TDS operate independently and non-reflection of TDS in Form 26AS cannot be treated as conclusive evidence regarding the existence or otherwise of the underlying business transactions. It was further submitted that the assessee had explained the source of the cash deposits as business receipts and that the Revenue had not brought any independent material on record to establish that the impugned cash deposits represented income from any undisclosed source or any activity unconnected with the assessee's disclosed business. The Ld. AR also contended

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 6 :: that the bank account reflected substantial cash withdrawals during the year. The Assessing Officer, according to the assessee, considered the cash deposits in isolation and failed to appreciate the possibility that the cash withdrawn from the same bank account had been utilised in the course of business and that subsequent deposits represented circulation or recycling of the same business funds. 5.5 In this regard, the Ld. AR submitted that, without prejudice to the primary contention that the deposits represented business receipts, the addition, if at all warranted, ought to be restricted to the peak credit after considering the corresponding cash withdrawals. The assessee should not be subjected to taxation on the gross amount of deposits where the same funds have moved repeatedly through the bank account. 5.6 The Ld. AR further submitted that the assessee had sought adequate opportunity before the Assessing Officer and that the assessment order had been passed shortly after issuance of the show-cause notice dated 24.03.2022. The assessee had sought further time to furnish the requisite details, but the assessment was completed on 26.03.2022. It was therefore contended that the assessment suffered from violation of principles of natural justice. 5.7 According to the Ld. AR, the subsequent production of documents during the appellate proceedings and remand proceedings should not deprive the assessee of an effective opportunity to establish the source of the deposits. It was accordingly prayed that the matter may, in the alternative, be restored to the file of the Assessing Officer for fresh examination after granting one more effective opportunity to the assessee to

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 7 :: furnish the party-wise details, supporting documents, cash-flow statement and reconciliation. 5.8 The Ld. AR therefore prayed that the addition of Rs.2,32,11,730/- be deleted. In the alternative, it was prayed that the addition be restricted to the peak credit or that the matter be restored to the file of the Assessing Officer for fresh adjudication after allowing reasonable opportunity to the assessee. 6. Per contra, the Ld. Departmental Representative ("Ld. DR") supported the orders of the Assessing Officer and the Ld. CIT(A). The Ld. DR submitted that the assessee did not originally file a return of income for the relevant assessment year and that the assessment was reopened only after the Department received specific information regarding substantial cash deposits aggregating to Rs.2,59,62,600/- in the assessee's bank account. It was submitted that, in response to notice under section 148, the assessee declared total income of only Rs.3,87,330/-, whereas substantial cash transactions were reflected in the bank account. The onus was therefore upon the assessee to satisfactorily explain the nature and source of the cash deposits. The Ld. DR submitted that the assessee had succeeded in explaining only Rs.26,18,620/-, representing the sales from his own business. This amount was duly allowed by the Ld. CIT(A) after considering the remand report of the Assessing Officer. However, in respect of the balance Rs.2,32,11,730/-, the assessee failed to furnish the basic primary evidence necessary to establish the alleged commission business. The Ld. DR specifically referred to the remand report and submitted that the Assessing Officer had called for: • party-wise sales and purchase ledgers;

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 8 :: agreements entered into with the concerned parties; • • TDS details; • names, PAN and addresses of the purchasers and sellers; • details of the quantum of transactions; • brokerage rates; • stock and transaction records; and other corroborative evidence establishing the assessee's role • as an intermediary.

Despite sufficient opportunity, the assessee furnished only a commission ledger. According to the Ld. DR, such a self-generated ledger cannot, by itself, establish the existence of the underlying transactions or prove that the cash deposits represented sale proceeds received on behalf of identifiable third parties. The Ld. DR further submitted that the assessee's own claim was that he earned brokerage at rates ranging from 5% to 9% and had disclosed brokerage income of Rs.22,18,500/-. However, no corresponding transaction-wise details were furnished to establish the gross sales handled by the assessee or the nexus between such transactions and the cash deposited in the bank account. The absence of any corresponding TDS under section 194H in Form 26AS was also relied upon by the Ld. DR as a corroborative circumstance indicating that the assessee had failed to substantiate the alleged commission income. It was fairly submitted, however, that such absence was being relied upon along with the assessee's failure to produce independent transaction evidence. The Ld. DR contended that the assessee could not claim the benefit of the principle that business receipts cannot be treated as unexplained money because, unlike cases where regular books, sales invoices and corresponding turnover establish the source of deposits, the assessee in the present case had failed to establish the source of the substantial

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 9 :: balance deposits. According to the Ld. DR, the mere existence of a business does not automatically establish the source of every cash deposit in the bank account. The assessee was required to establish a clear nexus between the particular deposits and the alleged business transactions. 6.1 On the issue of peak credit, the Ld. DR submitted that the assessee had not furnished any reliable cash-flow statement or reconciliation showing that the earlier withdrawals remained available with him and were subsequently redeposited. In the absence of such evidence, the mere existence of cash withdrawals cannot automatically be treated as the source of subsequent cash deposits. The peak-credit theory is not an automatic rule and depends upon establishment of a common circulating fund. 6.2 The Ld. DR further submitted that the assessee had already been granted substantial relief by the Ld. CIT(A) to the extent of Rs.26,18,620/- after verification of the books and GST returns. Therefore, there was no justification for restoring the entire matter to the Assessing Officer for a de novo assessment. 6.3 As regards the alleged violation of natural justice, the Ld. DR submitted that any alleged deficiency in opportunity at the assessment stage stood cured during the appellate proceedings, since the assessee was granted opportunity to furnish additional evidence and the same was forwarded to the Assessing Officer for examination in the remand proceedings. The Assessing Officer thereafter furnished a detailed remand report. It was therefore submitted that the assessee had been afforded adequate opportunity at the appellate stage and had failed to substantiate the remaining cash deposits despite such opportunity.

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 10 :: The Ld. DR accordingly submitted that the order of the Ld. CIT(A) was based upon proper appreciation of the material available on record and that the addition of Rs.2,32,11,730/- under section 69A was rightly sustained. The Ld. DR thus prayed for dismissal of the appeal. 7. The controversy before us essentially relates to the sustainability of the addition of Rs.2,32,11,730/- representing the balance cash deposits after allowing credit for the explained sales of Rs.26,18,620/-. At the outset, we note that the Assessing Officer, in the remand proceedings, has accepted the assessee's claim to the extent of Rs.26,18,620/- after examining the sales and purchase ledgers and the GST returns. Accordingly, the said amount has already been excluded from the addition by the Ld. CIT(A). To this extent, there is no dispute before us. The principal issue that remains for consideration is whether the assessee has satisfactorily explained the balance cash deposits of Rs.2,32,11,730/- by establishing that the same represented receipts arising from his alleged commission/brokerage business. 7.1 The assessee has consistently contended that, apart from his own business of purchase and sale of gold and silver articles, he was engaged in similar transactions on brokerage basis and had earned brokerage income of Rs.22,18,500/- during the relevant previous year. However, mere disclosure of brokerage income in the return of income or production of a self-generated commission ledger, by itself, cannot establish that the substantial cash deposits in the bank account represented sale proceeds handled by the assessee as a commission agent.

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 11 :: 7.2 The assessee was specifically called upon, during the remand proceedings, to furnish party-wise details, purchase and sales ledgers, agreements with the concerned parties, TDS details, particulars of purchasers and sellers, their PAN and addresses, the quantum of transactions and the rate of brokerage. As recorded by the Assessing Officer, the assessee did not furnish the aforesaid primary and corroborative evidence. We find considerable force in the observation of the lower authorities that, where the assessee claims to have acted as an intermediary in substantial purchase and sale transactions, the identity of the parties and the corresponding transaction trail constitute relevant evidence for establishing the nature and source of the cash receipts. The assessee has not brought on record sufficient material to establish a direct nexus between the cash deposits of Rs.2,32,11,730/- and any identifiable sale transactions undertaken by him on behalf of third parties. Further, the absence of corresponding TDS entries under section 194H in Form 26AS, though not by itself conclusive of the issue, is a circumstance which assumes relevance in the overall appreciation of the evidence, particularly when the assessee has failed to produce independent documentary material supporting the alleged commission transactions. Thus, on the material presently available, we are unable to accept the assessee's contention that the entire balance cash deposits represented business receipts arising from the alleged commission activity. 7.3 The assessee has also contended that the Assessing Officer ought not to have treated the aggregate cash deposits as unexplained, particularly in view of the corresponding cash withdrawals from the bank account. We find that the assessee has

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 12 :: not furnished any cash-flow statement, day-to-day cash book, reconciliation or other material demonstrating that particular withdrawals were subsequently redeposited into the bank account. In the absence of such a demonstrated nexus, the plea for application of the peak credit theory cannot be accepted merely on the basis of the existence of withdrawals in the same bank account. Accordingly, we find no infirmity in the order of the Ld. CIT(A) on this aspect. 7.4 The assessee has also challenged the assessment on the ground of inadequate opportunity, pointing out that the show-cause notice dated 24.03.2022 afforded only a short period for compliance and that the assessment order came to be passed on 26.03.2022. We have considered the said contention. It is evident from the record that the assessee subsequently placed material before the appellate authority and that such material was forwarded to the Assessing Officer for examination during the remand proceedings. The Assessing Officer thereafter examined the documentary material furnished by the assessee and accepted the sales of Rs.26,18,620/- as explained. Therefore, whatever prejudice may have been caused by the limited opportunity at the assessment stage stood substantially addressed in the appellate proceedings through the remand mechanism. The assessee has also failed to demonstrate before us any specific material which he was prevented from producing and which, if considered, would conclusively explain the balance cash deposits. In these circumstances, we do not find sufficient ground to annul the assessment or to restore the entire matter to the Assessing Officer merely on the ground of alleged inadequacy of opportunity.

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 13 :: 7.5 Section 69A of the Act applies where an assessee is found to be the owner of money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him, and the assessee offers no explanation about the nature and source thereof, or the explanation offered is not satisfactory in the opinion of the Assessing Officer. In the present case, the assessee has been able to substantiate the source of cash deposits only to the extent of Rs.26,18,620/-, representing his disclosed sales, which has already been accepted by the Assessing Officer in the remand proceedings. As regards the balance amount of Rs.2,32,11,730/-, the assessee has failed to establish, by reliable and independent evidence, the nature and source of the cash deposits. The mere assertion that the deposits constituted receipts from commission transactions, unsupported by party-wise details and corresponding transaction records, is insufficient to discharge the onus cast upon the assessee. We therefore find no reason to interfere with the order of the Ld. CIT(A) in sustaining the addition of Rs.2,32,11,730/- under section 69A of the Act. 7.6 The assessee has also challenged the application of section 115BBE of the Act. Once the amount is held to be taxable as unexplained money under section 69A of the Act, the consequential tax treatment under section 115BBE follows in accordance with law. The Ld. CIT(A) has, therefore, rightly held that the income so assessed is liable to be subjected to the provisions of section 115BBE. The Assessing Officer shall, however, recompute the tax liability in accordance with law after giving effect to the relief

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 14 :: sustained/deleted by the appellate authorities. Accordingly, this ground of the assessee is dismissed. 8. In view of the foregoing discussion, we hold that the assessee has failed to satisfactorily explain the balance cash deposits of Rs.2,32,11,730/-. However, the amount of Rs.26,18,620/- representing the assessee's disclosed sales has already been accepted as explained by the Assessing Officer in the remand proceedings and deleted by the Ld. CIT(A). The said relief is not liable to be disturbed. The assessee's prayer for a de novo assessment is also not warranted, since the material subsequently furnished by the assessee has already been examined by the Assessing Officer in the remand proceedings and appropriate relief has been granted. 9. Accordingly, the appeal filed by the assessee is partly allowed for statistical purposes in terms of the above observations. The Assessing Officer is directed to give effect to this order and recompute the tax and consequential interest liability, in accordance with law. Order pronounced in the open court on the 10th day of September, 2026 in Chennai.

Sd/- Sd/- (इंतूरी रामा राव) (मनु कुमार िग�र) (INTURI RAMA RAO) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER �या�यक सद*य/JUDICIAL MEMBER चे�नई/Chennai, +दनांक/Dated: 10th September 2026. SNDP, Sr. PS

ITA No. 3424/Chny/2025 (AY 2017-18) Thiyagarajan Suresh Vs ITO W-3, Virudhnagar :: 15 :: आदेश क� �त,ल-प अ.े-षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF SAND Digitally signed by EEP SANDEEP KUMAR KUM Date: 2026.09.17 AR 12:14:33 +05'30'