RAMASAMY PERUMALSAMY,TIRUVARUR vs. ITO, WARD-1, TIRUVARUR

The Assessee raised the following grounds of appeal : 1. The order of the NFAC, Delhi dated 29.09.2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1081301689(1) for the above-mentioned Assessment Year is contrary to law, fact and in circumstances of the case.

Briefly the facts of the case are that the appellant is an Individual. No regular return of income under the provisions of section 139 of the Income Tax Act, 1961 was filed by the appellant for the assessment year 2020-21. Based on the information received u/s.135A of the Act that the appellant made a cash deposits of Rs.1,36,36,200/- in the account maintained with City Union Bank. The Jurisdictional Assessing Officer formed an opinion that income got escaped assessment from tax, accordingly, a notice u/s.148 was issued to the appellant on 30.03.2024. In response to notice u/s.148 of the Act, the appellant filed return of income belatedly on 20.02.2025. When the appellant was called-upon to explain the source of the cash deposits during the course of assessment proceedings, the appellant submitted that the cash deposits were made out of business receipts from the finance business. However, the Assessing Officer rejected the above explanation and made addition of cash deposits in the bank account of Rs.2,11,14,815/- as unexplained money of the appellant vide order dated 27.02.2025 passed u/s.147 read with section 144 r.w.s 144B of the Act.

Being aggrieved by the above assessment order, an appeal was filed before the ld.CIT(A) contending that the Learned CIT(A) ought not have made addition of cash deposit, as the appellant offered plausible explanation as to the source of the cash deposits. It was further contended that the addition if at all is warranted to be confirmed only the addition should be made only to the extent of pre-credits. However, the Learned CIT(A) after calling for the remand report from the Assessing Officer rejected the explanation of the appellant by holding that the appellant had not provided evidence in support of the contention that cash deposits in the bank accounts are made out of the business receipts of money lending. Further, the Learned CIT(A) held that the benefit of pre-credit cannot be granted to the appellant in the absence of factual foundation laid by the appellant placing reliance on the following decisions :  In the case of Commissioner of Income Tax v.D.K. Garg [2017] 84 taxmann.com 257 (Delhi) the Hon'ble Delhi High Court following the decision of the Allahabad High Court in CIT v. Vijay Agricultural Industries [2007] 294 ITR 610 which, in turn, followed its earlier decision in Bhaiyalal Shyam Behari v. CIT [2005] 276 ITR 38 (All.)  Similar view was taken by the Hon'ble Punjab & Haryana High Court in Sudhir Kumar Sharma (HUF) v. CIT [2014] 46 taxmann.com 340/224 Taxman 178.  In the case of Shivraj Mishrilal Bafna v. ITO (IT Appeal No.434/PN/2013)]  In Commissioner of Income-tax v. Vijay Agricultural Industries [2007] 294 ITR 610 (Allahabad)  In 25 taxmann.com 440 Manoj kumar Jain (ITAT Delhi) Hon'ble ITAT Delhi.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. The Learned Counsel submits that the Learned CIT(A) ought not have rejected the explanation of the appellant despite the fact that the appellant had provided evidence of carrying on the money lending business. He further submits that the Learned CIT(A) ought to have appreciated the submission of the appellant that having regard to the nature of the money lending business wherein, the same funds were recycled many times during the same financial year. The appellant disburse loans to farmers, traders and individuals and the same amounts along with interests were received back and were again lent back to other borrowers and the facts of the case justify the application of principle of Peak Credit Theory.

On the other hand, the learned Sr.DR opposed the above submission.

At the outset, we find that there is a delay of 73 days in presenting appeal before this Tribunal. The appellant had filed an Affidavit seeking condonation of delay.

We have perused the Affidavit and the averments made in the Affidavit. The averments made in the affidavit remain uncontroverted by Learned CIT-DR. The Hon’ble Supreme Court in the case of M.Kalappa Sethi Vs. M.V.Laxmi Narain Rao AIR 1973 SC 627, held that an uncontroverted affidavit shall be taken as an affidavit on fact. In the light of this legal position, we are of the considered opinion that the delay had occurred in filing the appeal on account of Bonafide reasons and the explanation cannot be brushed aside. Therefore, we are of considered opinion that there is a reasonable and sufficient cause for the delay, hence, the delay is condoned. Accordingly, we admit the appeal for adjudication on merits.

We heard the rival submissions and perused the material on record. The issue that arises for our consideration is whether the ld.CIT(A) justified in confirming the additions made by the Assessing Officer. On mere perusal of the assessment order, it would reveal that the Assessing Officer made addition of cash deposits in bank account as unexplained money of the appellant rejecting the explanation of the appellant that the cash deposits were made out of business receipts of money lending business, as the appellant failed to produce the evidence of carrying on the money lending business. However, during the course of proceedings before the Learned CIT(A), the appellant had produced the copy of money lending business license etc. It is an undisputed fact that the appellant had been maintaining books of accounts of money lending business. The cash deposits made in the bank account were duly reflected in the books of accounts. The Assessing Officer could have very-well verified the source of cash deposits from the books of accounts maintained by the appellant, which the Assessing Officer as well as the Learned CIT(A) failed to do so. Therefore, we are of the considered opinion that the interests of justice would be met, if the matter is restored to the file of Assessing Officer for de novo assessment in accordance with law after affording an opportunity of being heard to the appellant.

In the result, appeal filed by the assessee stands partly allowed for statistical purpose. Order pronounced in the open Court on 19th August, 2026.