MR. VIJAYENDRAN,NAGAPATTINAM vs. ITO, NAGAPATTINAM

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ITA 2094/CHNY/2026Status: DisposedITAT Chennai11 August 2026AY 2018-194 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) had not recorded any specific findings regarding the documentary evidence submitted by the assessee. Therefore, the Tribunal decided to re-examine the additions in the interest of natural justice.

What were the facts?

The assessee, an individual, did not file an income tax return. The AO received information about a large cash deposit in the assessee's bank account. The AO reopened the assessment and made an addition for unexplained money as the assessee's explanation for the difference between bank credits and declared turnover was not satisfactory.

What were the issues?

Whether the assessee provided a satisfactory explanation and verifiable reconciliation for the difference between bank credits and declared turnover. Whether the CIT(A) properly considered the documentary evidence submitted by the assessee.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 69A,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S

For Respondent: Ms. Pushpa Hemachand, Sr. AR

आदेश / O R D E R

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 23.02.2026 for Assessment Year (AY) 2018-19.

2.

The assessee is an individual and did not file the return of income. The AO received information that the assessee has made cash deposit of Rs.52,86,010/- during the year under consideration. Since the assessee did not file the return of income, the A.O reopened the assessment by issue of

ITA No.2094/Chny/2026 Mr. Vijayendran :- 2 -:

notice u/s. 148 of the Act after passing order u/s. 148A(d) of the Act. The assessee in response filed the return of income on 14.12.2022 declaring total income of Rs. 4,40,090/- being 8% of the gross turnover of Rs. 55,01,155/-. The assessee however did not respond to any further notices issued by the AO and therefore the AO treated the difference between the total credit in the bank account and the amount of turnover declared by the assessee as unexplained money to make an addition of Rs. 70,51,449/-. Aggrieved, the assessee filed further appeal before the CIT(A). The assessee submitted before the CIT(A) that the difference amount is the jewel loan disbursement aggregating to Rs.36,45,262/- and a sum of Rs. 34,06,187/- is the repayment received from money lending business. The CIT(A) however did not accept the submission of the assessee and upheld the addition made by the AO by holding that:

The addition has been made on the basis of a clear mismatch between the bank credits reflected in the account and the turnover declared in the return under section 44AD. The statutory position is that where money is found credited/available and the assessee fails to offer a satisfactory explanation about the nature and source, the law permits an adverse inference and addition in accordance with the applicable deeming provisions. In bank-credit mismatch cases, the initial onus lies on the assessee to bring on record a cogent, specific and verifiable explanation, supported by a reconciliation capable of being tested entry-wise. A broad narrative or a mere bifurcation, without linking the disputed credits to identifiable sources through a reliable trail, does not meet this test. In the present case, the explanation advanced is that the impugned amount of Rs 70,51,449 is covered by jewel loan disbursements (Rs 36,45,262) and loan repayments/credits from money-lending (Rs 34,06,187). However, what is required is not only a statement of these figures, but a complete entry-wise mapping demonstrating that each component of the impugned credits corresponds to a particular jewel loan disbursement or an identifiable repayment, with basic supporting trail that can be independently verified and that rules out duplication. The material placed does not demonstrate such a complete and verifiable linkage for the entire disputed amount. In the absence of a satisfactorily verifiable reconciliation, the explanation remains unsubstantiated and cannot

ITA No.2094/Chny/2026 Mr. Vijayendran :- 3 -:

displace the inference drawn from the bank account pattern vis-a-vis the declared turnover. It is also relevant that the taxing authorities are entitled to examine the surrounding circumstances and apply the test of human probabilities while evaluating explanations offered against apparent entries. The Hon'ble Supreme Court in CIT v. Durga Prasad More (82 ITR 540) and Sumati Dayal v. CIT (214 ITR 801) has reiterated that the apparent may not be real and that explanations must be tested on the touchstone of probabilities and material on record. Applying these settled principles, and considering the absence of a full, verifiable entry-wise trail to support the claim that the entire impugned credits are sourced from jewel loans and repayments, the addition of Rs 70,51,449 sustained under section 69A calls for no interference. As regards the alternative plea under section 44AD, the same cannot be accepted as a substitute where the amount is sustained as unexplained money under section 69A. Presumptive taxation under section 44AD applies to eligible business receipts/turnover disclosed by the assessee and does not, by itself, regularise or convert unexplained money sustained under section 69A into business turnover. Accordingly, the alternative computation plea is rejected and Ground No. 5 is also dismissed.”

3.

We have heard the parties, and perused the material available on record. The Ld. Authorized Representative (AR) of the assessee submitted that the assessee submitted all the relevant details before the CIT(A) which has not been properly considered. The ld. DR on the other hand submitted that the reason for the CIT(A) to sustain the addition is that the assessee has not been able to map the credits with the claim that the credits in the bank account is sourced from amount received towards jewel loans and return of loan from money lending business. From the perusal of the record, we notice that the assessee has shown a gross receipt of Rs. 55,01,155/- whereas the total credits in the bank account is at Rs.1,25,52,604/-. Though the assessee has submitted before the CIT(A) the source for the differential amount being jewel loan and money from money lending business, the CIT(A) has recorded that the assessee has not furnished any satisfactory explanation and has also

ITA No.2094/Chny/2026 Mr. Vijayendran :- 4 -:

not submitted proper reconciliation for the difference. We also notice that the CIT(A) has not recorded any finding with regard to the documentary evidences which the assessee is claiming to have submitted before the CIT(A). In view of this discussion, we are of the considered view that the impugned additions need to be re-examined in the interests of natural justice. We therefore remit the issue back to the CIT(A) with a direction to examine the addition afresh in the light of the documents already submitted by the assessee and to call for any further details as may be required to decide the issue in accordance with law. The CIT(A) further directed to call for a remand report from the AO if he deems fit before deciding the issue. The assessee is directed to furnish the details as may be called for and cooperate with the appellate proceedings. It is ordered accordingly.

4.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 11th day of August, 2026 at Chennai.

Sd/- Sd/- (एबी टी. वक�) (पदमावती यस) (ABY. T. Varkey) (Padmavathy.S) लेखा लेखा सद लेखा लेखा सद सद�य सद �य �य /Accountant Member �य �याियक सद�य �याियक सद�य / Judicial Member �याियक �याियक सद�य सद�य चे�नई/Chennai, �दनांक/Dated: 11th August, 2026. EDN, Sr. P.S EJTADA Digitally signed by EJTADA DURGA आदेश क� �ितिल�प अ�े�षत/Copy to: DURGA NARESH 1. अपीलाथ�/Appellant Date: 2026.08.13 NARESH 12:31:02 +05'30' 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

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