GURUMURTI SHANKARAPPA BHANDARAKAVATE,VIJAYAPUR vs. INCOME TAX OFFICER, WARD-2, VIJAYAPUR

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ITA 1723/BANG/2025Status: DisposedITAT Bangalore07 September 2026AY 2014-156 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that non-compliance by the assessee cannot be a ground to dismiss the appeal without examining the issue on merits. The CIT(A) was required to adjudicate the grounds raised by the assessee on merits.

What were the facts?

The assessee's appeal against the confirmation of an addition of Rs. 1,20,91,600/- as unexplained investment was dismissed by the CIT(A) due to non-response to notices. The assessee claimed non-receipt of notices via email as the reason for non-compliance.

What were the issues?

Whether the CIT(A) erred in confirming the addition without adjudicating the issue on merits solely due to the assessee's non-response to notices. Whether the cash deposits require examination on merits, including the possibility of peak credit theory.

Which sections of the Income-tax Act were involved?

Section 69,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SANDEEP SINGH KARHAIL

For Respondent: Shri. Balusamy. H, JCIT

आदेश / ORDER

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER:

The present appeal has been instituted by the assessee against the order of the Learned Commissioner of Income Tax Appeal (hereafter the Ld. CIT(A)) passed under section 250 of the Income Tax Act, 1961 (hereafter the Act) for the A.Y. 2014-15.

2. The only issue raised by the assessee in this appeal is that the learned CIT(A) erred in confirming the addition of 1,20,91,600/- by holding it as an unexplained investment under section 69 of the Act.

3.

During the assessment proceedings, the AO treated the cash deposits of Rs.1,20,91,600/- as unexplained investment u/s 69 of the Act and added the same to the total income of the assessee.

5.

The aggrieved assessee preferred an appeal before the learned CIT(A). However, the learned CIT(A) dismissed the assessee's appeal by observing that the assessee was given sufficient opportunity to file written submissions and evidence in support of the grounds of appeal, but the assessee remained non-responsive. Accordingly, the learned CIT(A) held that he had no option but to confirm the addition made by the AO.

5.1 Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

6.

The learned AR submitted that the learned CIT(A) erred in confirming the addition of Rs. 1,20,91,600/- merely on account of non-compliance with the notices, without adjudicating the issue on merits. It was contended that the assessee had selected “No” for receiving communications through email while filing Form No. 35 and, therefore, could not effectively respond to the notices. The ld. AR further submitted that the cash deposits require examination with reference to corresponding cash withdrawals and subsequent redeposits appearing in the bank accounts. The entire deposits could not be mechanically treated as unexplained. The ld. AR accordingly prayed for restoration of the matter for fresh adjudication on merits, including consideration of peak credit.

7.

The learned DR, on the contrary, vehemently supported the order of the lower authorities. He submitted that sufficient opportunities were granted by the Ld. CIT(A), but the assessee failed to furnish the necessary submissions and evidence. He, therefore, submitted that there was no infirmity in the order passed by the Ld. CIT(A).

8.

We have heard the rival submissions of both the parties and perused the materials available on record. We find that the Ld. CIT(A) dismissed the appeal mainly on the ground that the assessee did not respond to the notices issued during the appellate proceedings.

8.1 Before us, the assessee submitted that while filing Form No. 35, he had selected “No” against the option for receiving notices and communications through email. Therefore, according to the assessee, he could not respond to the notices issued by the Ld. CIT(A).

8.2 We have considered this submission. In this regard, it is relevant to refer to the Faceless Appeal Scheme, 2021 notified by the Central Government vide Notification No. 139/2021 dated 28.12.2021. Para 11(1) of the said Scheme provides the manner in which a notice, order or other electronic communication is to be delivered to the appellant. The relevant part reads as under:

“11. Delivery of electronic record.—(1) Every notice or order or any other electronic communication under this Scheme shall be delivered to the addressee, being the appellant, by way of— (a) placing an authenticated copy thereof in the appellant’s registered account; or (b) sending an authenticated copy thereof to the registered email address of the appellant or his authorised representative; or (c) uploading an authenticated copy on the Mobile App of the appellant followed by a real time alert.” 8.3 Thus, the Scheme provides three modes for delivery of an electronic communication. One of the modes is by placing an authenticated copy in the registered account of the assessee. Therefore, communication through email is not the only mode prescribed under the Scheme.

8.4 We also note that para 11(3) of the Scheme requires the appellant to furnish his response to any notice or other electronic communication through his registered account. The entire appellate proceeding under the faceless scheme is conducted electronically. Therefore, once the assessee has filed an appeal, he is also expected to follow the appellate proceedings and monitor his registered account on

the e-filing portal. Merely selecting “No” against the option for receiving communication through email cannot, by itself, relieve the assessee from following the appellate proceedings through his registered account.

8.5 Therefore, we are unable to accept the explanation of the assessee that his failure to respond to the notices was justified merely because he had not opted to receive communications through email.

8.6 Having said so, we find that the Ld. CIT(A) has confirmed the addition merely because the assessee did not respond to the notices. In our view, non- compliance by the assessee cannot be a ground to dismiss the appeal without examining the issue on merits. The Ld. CIT(A), being the first appellate authority, was required to examine the grounds raised by the assessee and the material available on record and thereafter pass a reasoned and speaking order as provided under section 250(6) of the Act.

8.7 In the present case, the addition relates to cash deposits of Rs. 1,20,91,600/- in the bank accounts of the assessee. The explanation regarding the source of such deposits requires examination on merits. Further, the bank accounts are required to be examined to ascertain whether there were withdrawals before the subsequent deposits. If the assessee had withdrawn cash and subsequently redeposited the same, the availability of such withdrawals for explaining the subsequent deposits also requires examination. The entire amount of deposits cannot be brought to tax mechanically without examining these facts. Depending upon the facts emerging from such examination, the applicability of the peak credit theory may also require consideration.

8.8 In view of the above, and in the interest of substantial justice, we deem it appropriate to provide one more opportunity to the assessee. Accordingly, we set aside the impugned order and restore the entire issue to the file of the Ld. CIT(A). The Ld. CIT(A) is directed to decide the appeal afresh on merits after considering the submissions and evidence furnished by the assessee. The Ld. CIT(A) shall also examine the bank statements, cash deposits, corresponding withdrawals and subsequent deposits and consider the applicability of peak credit theory, if warranted by the facts. Thereafter, the Ld. CIT(A) shall pass a reasoned and speaking order in accordance with law after providing reasonable opportunity of being heard to the assessee.

8.9 The assessee is also directed to cooperate with the appellate proceedings, follow the proceedings through his registered account on the e-filing portal and furnish all necessary submissions and supporting evidence before the Ld. CIT(A).

8.10 We make it clear that we have not expressed any opinion on the merits of the addition. All the contentions are left open for consideration by the Ld. CIT(A). Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

9.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 7th Sept. 2026

Sd/- Sd/- SANDEEP SINGH KARHAIL WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 7th Sep. 2026 Vms Copy to: GURUMURTI SHANKARAPPA BHANDARAKAVATE, SHROFF MERCHANT, KUMBAR GALLI, 1 CHADACHAN,, VIJAYAPURA-586102, KARNATAKA

INCOME TAX OFFICER, WARD-2, 2 INCOME TAX OFFICER, WARD-2, VIJAYAPURA-586102, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE

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