INCOME-TAX OFFICER, VILLUPURAM vs. DHAKSHINAMOORTHY DURAIRAJAN, VILLUPURAM

आदेश / O R D E R

ITA No. 1602 & 977/Chny/2026 (AYs 2020-21 & 2020-21) ITO Vs Dhakshinamoorthy Durairajan :: 2 :: PER MANU KUMAR GIRI, JM: These are cross appeals filed by the assessee as well as the Revenue directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 16.01.2026 for the assessment year 2020-21. Since common issues are involved in both the appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. Brief facts of the case are that the assessee is an individual engaged in the business of pawn broking. For the assessment year under consideration, information available with the Department revealed that the assessee had deposited cash aggregating to Rs.1,05,61,915/- in his bank account. Since no return of income had originally been filed, proceedings u/s. 147 of the Income Tax Act, 1961 ("the Act") were initiated by issuance of notice u/s. 148 of the Act. In response thereto, the assessee filed his return of income declaring total income of Rs.4,24,600/-. 2.1 During the course of reassessment proceedings, the Assessing Officer (AO) called upon the assessee to explain the source of the cash deposits. The assessee explained that he was carrying on pawn broking business, wherein loans were advanced against pledge of gold ornaments and the borrowers repaid the principal together with interest at the time of redemption of the pledged articles. It was submitted that the cash deposits represented the business receipts arising out of such transactions. The assessee also produced, inter alia, the pawn broking receipt book, jewel loan ledger, sundry debtors ledger, details of loans advanced during the year, details of repayments received and copies of Aadhaar cards of certain borrowers together with corresponding pawn receipts. The AO

ITA No. 1602 & 977/Chny/2026 (AYs 2020-21 & 2020-21) ITO Vs Dhakshinamoorthy Durairajan :: 3 :: observed that the material produced by the assessee prima facie indicated that the assessee was carrying on pawn broking business. However, according to the AO, the assessee had failed to furnish complete particulars of the borrowers such as full name, PAN, Aadhaar, address and contact details. The AO was of the view that in the absence of complete particulars, the genuineness of the transactions and the source of the cash deposits remained unverified. The AO also noticed variation in the rate of interest charged from different borrowers and concluded that the explanation offered by the assessee was not satisfactory. Accordingly, invoking the provisions of section 69A of the Act, the AO treated the entire cash deposits of Rs.1,05,61,915/- as unexplained money and completed the assessment at a total income of Rs.1,09,86,515/-. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A).Before the ld. CIT(A), the assessee reiterated that he was carrying on pawn broking business and that the Assessing Officer himself had accepted the existence of such business in the assessment order. It was further submitted that the bank deposits represented circulation of business funds arising from lending and recovery of loans against pledged jewellery. The assessee contended that all primary books of account and business records including the pawn broking receipt book, jewel loan ledger, sundry debtors ledger and details of loans advanced and recovered had been furnished during the assessment proceedings. It was also submitted that copies of Aadhaar cards and pawn receipts of several borrowers had been produced. The assessee further explained that complete identity particulars of every borrower could not be furnished because the transactions pertained to Financial Year

ITA No. 1602 & 977/Chny/2026 (AYs 2020-21 & 2020-21) ITO Vs Dhakshinamoorthy Durairajan :: 4 :: 2019-20 and several customers had shifted their residence after the Covid-19 pandemic and many customers were unwilling to furnish identity documents after closure of the transactions; and some borrowers could no longer be traced. 3.1 The ld. CIT(A), after considering the submissions and examining the material available on record, observed that although the assessee had not furnished complete particulars in respect of all the borrowers and had not fully explained the cash flow relating to every transaction, the documentary evidence produced clearly established that the assessee was carrying on pawn broking business and that the bank transactions were relatable to such business activity. Having regard to the nature of the business and the evidences placed on record, the ld. CIT(A) held that the entire cash deposits could not be brought to tax u/s. 69A of the Act merely because complete particulars of every borrower were not available. However, considering the deficiencies noticed in the evidence furnished by the assessee, the ld. CIT(A) sustained an ad hoc addition of 25% of the total cash deposits amounting to Rs.26,40,478/- and deleted the balance addition of Rs.79,21,437/-. 4. Aggrieved by the relief granted by the ld. CIT(A), the Revenue is in appeal before the Tribunal. The assessee is also in appeal challenging the sustenance of the addition of Rs.26,40,478/-. 4.1 The ld. Authorised Representative (AR) submitted that the authorities below have failed to appreciate the peculiar nature of the pawn broking business. She submitted that the cash deposits represented repayments of loans advanced against pledge of gold ornaments and could never be regarded as unexplained money within the meaning of section 69A of the Act. The ld. AR drew our attention to the pawn broking receipt book, jewel loan ledger,

ITA No. 1602 & 977/Chny/2026 (AYs 2020-21 & 2020-21) ITO Vs Dhakshinamoorthy Durairajan :: 5 :: sundry debtors ledger, details of loans advanced and repayments received during the relevant previous year and submitted that these contemporaneous records clearly established the business activity carried on by the assessee. It is argued that the AO himself had accepted that the assessee was carrying on pawn broking business and therefore there was no justification for treating the entire bank deposits as unexplained money. She further submitted that the assessee had made sincere efforts to collect identity documents of the borrowers. However, owing to the considerable lapse of time, relocation of customers after the Covid-19 pandemic and reluctance of several borrowers to furnish Aadhaar details after closure of the transactions, complete particulars could not be produced. The ld. Authorised Representative therefore submitted that even the addition sustained by the ld. CIT(A) is liable to be deleted. 5. Per contra, the ld. Departmental Representative (DR) strongly supported the assessment order. It was submitted that the assessee had failed to discharge the burden cast upon him under the provisions of the Act by producing complete particulars of the borrowers including their identity and addresses. The ld. DR submitted that mere production of self-maintained records would not establish the genuineness of the transactions in the absence of independent evidence regarding the identity of the borrowers. She further submitted that the ld. CIT(A) was not justified in granting substantial relief merely on an ad hoc basis without calling for a remand report from the Assessing Officer on the additional evidences produced during the appellate proceedings. Accordingly, it was prayed that the order of the Assessing Officer be restored.

ITA No. 1602 & 977/Chny/2026 (AYs 2020-21 & 2020-21) ITO Vs Dhakshinamoorthy Durairajan :: 6 :: 6. We have heard the rival submissions, perused the orders of the authorities below and carefully considered the material placed on record. The primary controversy in the present case is whether the cash deposits of Rs.1,05,61,915/- made in the bank account of the assessee are liable to be assessed in their entirety as unexplained money u/s. 69A of the Act. 6.1 A careful reading of the assessment order itself shows that the AO has recorded a categorical finding that the assessee was carrying on pawn broking business. Thus, the existence of the business activity is not in dispute. The assessee had produced before the AO as well as before the ld. CIT(A) the pawn broking receipt book, jewel loan ledger, sundry debtors ledger, details of loans advanced, details of repayments received and supporting documents relating to several borrowers. These contemporaneous business records lend considerable support to the explanation offered by the assessee that the deposits in the bank account represented receipts arising during the ordinary course of the pawn broking business. The addition made by the AO proceeds primarily on the ground that the assessee failed to furnish complete particulars such as PAN, Aadhaar, address and contact details of every borrower. While such deficiency may justify drawing an adverse inference to a limited extent, in our considered opinion, it cannot by itself justify treating the entire cash deposits as unexplained money, particularly when the business itself stands accepted and the assessee has maintained contemporaneous business records evidencing lending and recovery transactions. At the same time, we find that the assessee has admittedly not furnished complete particulars in respect of all the borrowers. The

ITA No. 1602 & 977/Chny/2026 (AYs 2020-21 & 2020-21) ITO Vs Dhakshinamoorthy Durairajan :: 7 :: cash flow relating to every individual transaction also does not stand fully established by independent evidence. Therefore, the explanation furnished by the assessee cannot be accepted in its entirety. The ld. CIT(A), after taking into consideration the entirety of the facts and circumstances of the case, has adopted a balanced approach by accepting the business explanation substantially while sustaining an addition of 25% of the deposits to account for deficiencies in the supporting evidence. Such estimation has been made on appreciation of the material available on record. The Revenue has not placed before us any material to demonstrate that the findings recorded by the ld. CIT(A) are either perverse or contrary to the evidence available on record. Likewise, the assessee has also not produced any further material before us to establish that the residual addition sustained by the ld. CIT(A) deserves to be deleted in toto. 6.2 In our considered opinion, the order passed by the ld. CIT(A) represents a fair and reasonable appreciation of the facts of the case. We therefore do not find any good or sufficient reason to interfere with the conclusions arrived at by the first appellate authority. Accordingly, we uphold the order of the ld. CIT(A). 7. In the result, the appeal filed by the assessee is dismissed. The appeal filed by the Revenue is also dismissed. Order pronounced in open Court on the 03rd day of August 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

ITA No. 1602 & 977/Chny/2026 (AYs 2020-21 & 2020-21) ITO Vs Dhakshinamoorthy Durairajan :: 8 :: चे�नई/Chennai, +दनांक/Dated: 03rd August, 2026. SNDP, Sr. PS 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

SANDEE Digitally signed by SANDEEP P KUMAR Date: KUMAR 2026.08.05 16:45:01 +05'30'