MUGUTHIHALLI SIDDEGOWDA RAJEGOWDA,CHIKKAMAGALURU vs. INCOME TAX OFFICER, CHIKKAMAGALURU

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ITA 201/BANG/2026Status: DisposedITAT Bangalore27 July 2026AY 2017-184 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the appeal to the Assessing Officer, noting that the assessee, an elderly individual with ailments, may not have received email notices. The assessee needs to substantiate the source of cash deposits with evidence.

What were the facts?

The assessee failed to file a return and explain substantial cash deposits made during demonetization. The Assessing Officer made an addition of ₹13,11,000 under section 69A, which was upheld by the CIT(A) who dismissed the appeal for non-response to notices.

What were the issues?

Whether the addition of unexplained cash deposits is sustainable when the assessee claims non-receipt of notices and provides reasons for non-appearance. The need for the assessee to substantiate the source of cash deposits.

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 144,Section 139,Section 142(1),Section 270AAC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: BANGALORE

Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI KESHAV DUBEY

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 201/Bang/2026 Assessment Year: 2017-18

Muguthihalli Siddegowda Rajegowda, No. 01, Madhugiri Estate, The Income Tax Officer, Dasarahalli, Tarikere Road, Ward – 2, Vs. Kaimara BO, Arlaguppe, Chikkamagaluru. Chikkamagaluru – 577 131. PAN: BSCPR7627D APPELLANT RESPONDENT

: Sri Ravish Rao – CA Assessee by : Sri Subramanian S – JCIT DR Revenue by

Date of Hearing : 07-05-2026 Date of Pronouncement : 27-07-2026

ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT

1.

This appeal is filed by the assessee against the order of the learned CIT(A), National Faceless Appeal Centre, Delhi, for the assessment year 2017-18. The learned CIT(A) dismissed the appeal as the assessee did not respond to five notices issued by him and confirmed the assessment order passed by the Income Tax Officer, Ward-2, Chikkamagaluru, dated 28 October 2019, making an addition of ₹13,11,000 in the hands of the assessee under section 69A of the Income Tax Act. The assessee is therefore in appeal before us, raising several grounds. The principal grievance is that the assessment was completed under section 144 of the Act, and the appellate order was also passed without granting

ITA No. 201/Bang/2026 Page 2 of 4 the assessee an opportunity of being heard. The appeal was found to be in order by the Registry and was accordingly taken up for hearing.

2.

In the assessee’s case, information was received regarding substantial cash deposits during demonetization. Despite such deposits, he did not file his return for assessment year 2017-18 within the time prescribed under section 139 of the Income Tax Act, 1961. As the transactions exceeded the basic exemption limit, notice under section 142(1) dated 12 March 2018 was issued requiring him to file the return by 31 March 2018. Records showed that he neither e-filed the return under section 139 nor filed it pursuant to the notice. A further notice under section 142(1) dated 16 November 2018 also remained unanswered. Independent enquiries were then made, and the ICICI Bank statement for financial year 2016- 17 showed cash deposits of ₹12,53,500 in account No. 073951000054 during demonetization. 3. During assessment, the Joint Commissioner of Income Tax, Hassan Range, reviewed the records and issued directions under section 144A to exhaust enquiry options, analyses the cash deposits, tax unexplained deposits under section 115BBE, and initiate penalty proceedings under section 270AAC. Accordingly, a show-cause notice dated 5 September 2019, and summons dated 13 September 2019 were issued requiring the assessee to explain the cash deposits, failing which they were proposed to be treated as unexplained investment for assessment year 2017-18. Other cash deposits during the year also remained unexplained due to non-compliance. All online notices were served through the assessee’s e-filing profile and registered email and were also sent by registered or speed post. 4. The bank statement for ICICI Bank account No. 073951000054 showed cash deposits of ₹12,53,500 during demonetization and ₹75,500 during the remaining financial year 2016-17, totaling ₹13,11,000. As the assessee failed to explain their nature and source, the amount was treated as unexplained investment under section 69 of the Income Tax Act, 1961, under the head “Income from Other Sources”, and taxed under section 115BBE. 5. On appeal, the learned CIT(A) dismissed the appeal for want of response despite the issuance of five notices. After considering the facts discussed the learned

ITA No. 201/Bang/2026 Page 3 of 4 CIT(A) held that the assessee had shown gross negligence during both the assessment and appellate proceedings. The assessee had not filed any application seeking condonation of delay in filing the appeal, had failed to comply with the hearing notices, and had not filed any submissions on merits or evidence to rebut the Assessing Officer’s findings. Relying on the judgments of the Hon’ble Supreme Court and High Courts, the learned CIT(A) held that the addition of ₹13,11,000 made by the Assessing Officer was correct and upheld it as unexplained money under section 69A read with section 115BBE of the Income Tax Act, 1961. Accordingly, the grounds of appeal were dismissed. 6. The assessee’s representative submitted that the assessee is 78 years old, suffers from several ailments supported by medical certificates, and could not understand the intricacies of the tax proceedings, which led to his non- appearance before the lower authorities. It was submitted that the cash deposits represented proceeds from cash sales and past savings, and therefore the addition made by the Assessing Officer was not sustainable on merits. It was further submitted that the learned CIT(A) issued notices by email, though the assessee, who resides in a remote village in Chikkamagaluru District, was not conversant with email communication and had specifically not opted in Form No. 35 to receive notices by email. For this reason, he could not respond to those notices. The learned CIT(A), it was submitted, ought to have examined Form No. 35 before issuing notices by email. 7. The learned Departmental Representative strongly supported the orders of the lower authorities and submitted that the assessee had failed to explain the cash deposits taxable under section 69A of the Income Tax Act. He contended that there was no infirmity in the orders of the lower authorities. 8. We have carefully considered the rival contentions and perused the orders of the lower authorities. The record shows that the assessee, a 78-year-old resident of a village, suffers from ailments supported by medical certificates filed before us. He did not appear before either the Assessing Officer or the learned CIT(A), which resulted in an addition of ₹13,11,000 under section 69A of the Act. The record also shows that, in Form No. 35, the assessee had not opted to receive notices by email. Therefore, if the learned CIT(A) issued notices only by email, the assessee cannot be presumed to have received them, and his non- appearance before the appellate authority stands reasonably explained.

ITA No. 201/Bang/2026 Page 4 of 4 However, the assessee also failed to represent his case before the Assessing Officer. The Assessing Officer, after making enquiries with the banker, treated the cash deposits as unexplained and made the addition under section 69A because no explanation was furnished. In these circumstances, we restore the appeal to the file of the Assessing Officer with directions to the assessee to substantiate, with evidence, the source of the cash deposits and to show that they do not represent unaccounted income. The assessee has claimed that the amount came from past savings and sale proceeds. The Assessing Officer shall examine this claim and decide the issue afresh in accordance with law. 9. Accordingly, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 27th July 2026.

Sd/- Sd/- (KESHAV DUBEY) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, 27th July 2026. Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order

Assistant Registrar, ITAT, Bangalore

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