ANURAG SINGHAL,GHAZIABAD vs. ITO, GHAZIABAD

PER ANUBHAV SHARMA, JM:

This appeal preferred by the assessee against the order dated

06.08.2025 of Ld. National Faceless Appeal Centre (NFAC) (hereinafter

referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in DIN

P a g e | 2 ITA No.6251/Del/2025 AnuragSinghal (AY: 2017-18) & Order No : ITBA/NFAC/S/250/2025-26/1079334601(1)arising out of the

assessment order dated 31.12.2019 u/s 143 of the Income Tax Act, 1961

(hereinafter referred to as ‘the Act’) passed by ITO, Ward

2(1)(1)Ghaziabad,for AY: 2017-18.

filed his return of income for the A.Y.2017-18 on 06.01.2018 declaring total

income of Rs. 7,07,980/-. The case was selected for scrutiny on the specific

issue of large cash deposits in bank accounts during the demonetisation

period. It was observed that the appellant had deposited cash amounting to

Rs. 57,04,000/- during the demonetisation window in his bank accounts

maintained with IndusInd Bank. After issuance of statutory notices and due

consideration of replies and documents submitted, the A.O. framed the

assessment under section 143(3) of the Income-tax Act, 1961 on 31.12.2019

at an assessed income of Rs. 64,11,980/-, making an addition of Rs.

57,04,000/-. Aggrieved by the said assessment, the appellant preferred appeal

where the addition was sustained for which the assesse is in appeal here.

deposited in cash in the bank accounts was not his personal income, but

P a g e | 3 ITA No.6251/Del/2025 AnuragSinghal (AY: 2017-18) represented money received from his client, M/s Sagar Motors, towards VAT

dues, which he, acting in a professional capacity, deposited into the

Government Treasury on their behalf. It was explained that this was a normal

professional practice wherein clients route their statutory payments such as

VAT, service tax, and income tax through advocates or tax professionals for

convenience. The appellant contends that this receipt was purely in fiduciary

capacity as a conduit for tax deposit, not a business transaction generating

income. It was asserted that the deposit was followed by immediate onward

transfer of funds to the government exchequer, and the VAT challans and

bank statements had been submitted manually during the assessment

proceedings to substantiate the nature of the transaction.

corroborative evidence aswhile the appellant claims that he submitted VAT

challans and bank statements manually but no record of such submissions is

available on the digital portal or found annexed in the assessment folder. The

AO categorically recorded in the assessment order that the bank statements

submitted pertain to a period post-dating the demonetisation window and,

therefore, have no bearing on the transactions under scrutiny. Further, despite

P a g e | 4 ITA No.6251/Del/2025 AnuragSinghal (AY: 2017-18) repeated notices under Section 142(1) along with detailed questionnaires, the

appellant failed to furnish a verifiable cash book, ledger accounts of M/s

Sagar Motors, confirmations from the said party, or even their PAN or return

copies which could substantiate the claim that the funds were indeed received

for onward deposit. The appellant's omission to produce a clear audit trail of

receipts and corresponding deposits in the Government Treasury is a material

deficiency that undermines the veracity of his explanation. The explanation

that the appellant was acting merely as an intermediary is also not borne out

by any service agreement or letter of authority executed by M/s Sagar

Motors. It is not customary for a dealer to hand over such substantial amounts

of cash, amounting to Rs. 57,04,000/-, to a professional without any formal

mandate or safeguard, especially in the absence of a written agreement. In the

absence of any such documentation, the appellant’s assertion remains self-

serving and unsubstantiated. Ld. CIT(A) observed that in fact, the AO had

specifically sought confirmation from the alleged client along with their

audited books and bank statements to verify the claim, but no such evidence

was produced. It was also observed that in the practice of taxation and law,

receiving clients’ tax liabilities in cash and depositing the same in one’s

personal or proprietary bank accounts is neither standard nor encouraged,

P a g e | 5 ITA No.6251/Del/2025 AnuragSinghal (AY: 2017-18) especially in the absence of written instructions. Such conduct carries

inherent risk and lacks transparency. More significantly, no explanation has

been offered as to why the client could not deposit the tax themselves or why

digital payments, widely available even at that time, were not used. These

unexplained anomalies in the transaction structure raise legitimate doubt

regarding the genuineness of the appellant’s narrative. Ld.CIT(A) has also

held that the mere act of depositing unexplainedcash in one's bank account,

even if it is subsequently transferred elsewhere, does not absolve the taxpayer

from explaining the source and nature of funds. Ld. CIT(A) relied Hon’ble

Supreme Court decision in Chuharmal v. CIT (172 ITR 250) and CIT v. P.K.

Noorjahan (237 ITR 570) for proposition that in the absence of cogent

explanation and credible supporting evidence, unexplained cash deposits may

be treated as the income of the assessee. The mere assertion of a plausible

story, unsupported by documents or third-party confirmations, does not meet

the standard of satisfactory explanation under the Act.

however, all the submissions have not been taken into consideration. In the

paper book on behalf of assessee screen shots of the portal has been filed

P a g e | 6 ITA No.6251/Del/2025 AnuragSinghal (AY: 2017-18) showing the use of two different emails for communication. Ld. counsel has

submitted that assessee has all the relevant explanation and evidence,

however, an opportunity of hearing was not sufficiently given. We are of the

considered view that order of ld. CIT(A) does not sufficiently discloses as to

when by what mode notices were issued and what submissions were received

by the ld. CIT(A) which form basis of reaching the conclusion. The manner

in which the impugned order is narrated goes to show that due to lack of

satisfactory corroborative evidence assessee’s contention was not accepted.

issue on merits as well as law to the files of ld. CIT(A) to give fresh

opportunity of hearing to the assessee and thereupon pass fresh order.

Order pronounced in the open court on 29.04.2026

Sd/- Sd/- (Manish Agarwal) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 29.04.2026 Rohit, Sr. PS

P a g e | 7 ITA No.6251/Del/2025 AnuragSinghal (AY: 2017-18) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI