CHANDRAPRAKASH,BENGALURU vs. INCOME TAX OFFICER WARD 1(2)(4), BENGALURU

Aggrieved by the said order, the assessee is in appeal before us.

The only issue raised in this appeal concerns the addition of ₹22,48,500 made by the Assessing Officer under section 69A of the Income Tax Act in respect of cash deposits made by the assessee in three bank accounts during the demonetization period, treating the deposits as unexplained money.

Briefly stated, the assessee filed his return of income for Assessment Year 2017-18 on 1 August 2017 declaring total income of ₹4,99,190. The return was selected for scrutiny due to cash deposits made during demonetization. The Assessing Officer found that the assessee had deposited ₹22,48,500 in total, comprising ₹9,00,000 in one account with Lakshmi Vilas Bank, Halasuru Branch, ₹9,00,000 in another account with the same branch, and ₹4,48,500 with Canara Bank. Accordingly, notices under section 143(2) were issued and the assessee was asked to furnish details.

The assessee explained the deposits by uploading his income-tax return, statement of total income, capital account, balance sheet, and bank statements. He claimed that the cash deposited represented cash in hand from savings of earlier years and income earned before demonetization. His sources of income included salary from Shanthi Jewelers and interest income declared under income from other sources. However, as the assessee failed to furnish concrete evidence in support of the cash deposits, the Assessing Officer made an addition of ₹22,48,500 under section 69A and determined the total income at ₹27,47,690 by order dated 16 December 2019.

Aggrieved, the assessee preferred an appeal before the learned CIT(A). During the appellate proceedings, the Assessing Officer submitted a remand report. Relying on the material before him, the learned CIT(A) confirmed the addition made by the Assessing Officer and dismissed the appeal.

Before us, the assessee submitted that he had furnished evidence including cash books for Financial Years 2015-16 and 2016-17, capital accounts, balance sheets, bank statements, debtor confirmation letters evidencing loan recoveries, salary certificate from the employer, income-tax return of his Hindu Undivided Family, cash deposit challans, and a bank confirmation letter dated 27 February 2020 from Lakshmi Vilas Bank confirming the HUF account. It was claimed that ₹9,00,000 deposited in Lakshmi Vilas Bank account No. 14549 belonged to the HUF, ₹9,00,000 deposited in Lakshmi Vilas Bank account No. 13487 belonged to the assessee individually, and ₹4,48,500 deposited with Canara Bank also belonged to his individual account. The assessee further submitted that, during the appellate proceedings, the learned CIT(A) called for a Page 2 of 7 remand report, and after examining the documents, the Assessing Officer reported that ₹9,00,000 in the Lakshmi Vilas Bank account belonged exclusively to the HUF and not to the assessee. The remaining ₹13,48,500 was stated to be fully explained from the assessee’s accumulated savings, cash salary, commission income, loan recoveries, and interest income. The remand report concluded that the deposits were made from the assessee’s savings and accumulated cash. It was argued that despite this finding, the learned CIT(A) confirmed the addition without cogent reasons, ignored the remand report, wrongly concluded that the assessee diverted firm cash as a partner of Shanthi Jewelers, and dismissed the HUF account claim as an afterthought despite evidence being available since 2019. The assessee also submitted that the learned CIT(A) disregarded the income-tax return history showing total income of ₹38,64,555. Accordingly, it was contended that the addition accepted as explained by the Assessing Officer in the remand report ought not to have been sustained.

The learned Departmental Representative vehemently supported the orders of the lower authorities.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that, during the appellate proceedings, the learned CIT(A) obtained a remand report, a copy of which was placed before us by the authorised representative. The report is dated 12 December 2025. In respect of the deposit relating to the HUF account, the Assessing Officer noted that ₹9,00,000, which had been considered in the assessee’s individual assessment, belonged to the separate entity of Chandra Prakash HUF. Lakshmi Vilas Bank issued a letter dated 27 February 2020 confirming that the cash deposit of ₹9,00,000 was made in account No. 14549, which belonged to the HUF and not to the assessee individually. The bank also confirmed that the account was an HUF account. Thus, the Assessing Officer accepted that this amount did not belong to the assessee but to his HUF.

Regarding the source of the remaining cash deposits, the assessee submitted cash books for Financial Years 2015-16 and 2016-17, stating that the deposits were made from receipts from debtors and income earned during the year, and Page 3 of 7 that sufficient cash balance was available to cover the deposits. During the remand proceedings, the assessee furnished extensive details of cash availability, reproduced in paragraph 2 at page 4 of the remand report. Additional submissions were also made on 5 December 2025. The Assessing Officer recorded that the assessee had explained the entire deposit as arising from savings and accumulated cash derived from declared financial activities, supported by the cash book, confirmations of loans and interest from debtors, and bank statements. Salary received in cash from Shanthi Jewelers was supported by the employer’s confirmation, and the cash book also reflected commission income received in cash. The assessee also maintained a Canara Bank account in his capacity as a businessman, in which loan recoveries and related interest income were received in cash from various persons. The deposit of ₹13,48,500 was therefore stated to arise from cash flow, salary, commission, and money-lending activities accumulated over time and recorded in the books of account. On this basis, the Assessing Officer stated that the cash deposits of ₹13,48,500 in the assessee’s individual accounts during Financial Year 2016-17 were made from the assessee’s savings and accumulated cash.

Thus, based on the above material and the remand report, it is evident that the Assessing Officer accepted during the remand proceedings that the addition made in the hands of the assessee was not justified. Despite this finding, the learned CIT(A) confirmed the addition.

We find that the learned CIT(A) has completely ignored the remand report furnished by the Assessing Officer, wherein it was accepted that the cash deposits of ₹22,48,500 in various bank accounts did not constitute unaccounted or unexplained income of the assessee. The learned CIT(A) has not assigned any reason for rejecting the remand report while confirming the addition.

On considering the remand report, we find that the assessee explained that ₹9,00,000 did not belong to him individually but to the Hindu Undivided Family, as supported by the bank statement and bank certificate. Therefore, even otherwise, this amount could not have been added in the hands of the assessee.

With respect to the remaining amount, the Assessing Officer examined the documents produced before him, including the cash book, evidence of salary received in cash, and receipts from the assessee’s money-lending business. These facts were not disputed either by the Assessing Officer in the remand report or by the learned CIT(A). The cash on hand available with the assessee Page 6 of 7 was also properly explained and was neither rejected by the Assessing Officer in the remand report nor disbelieved by the learned CIT(A) for any cogent reason. Rejecting the remand report without assigning reasons and yet confirming the addition is not a proper approach.

In view of the facts and circumstances of the case, we hold that the learned CIT(A) was not justified in sustaining the addition of ₹22,48,500 made by the Assessing Officer, particularly when the Assessing Officer himself accepted in the remand report that the amount did not represent unexplained income of the assessee. Accordingly, the order of the learned CIT(A) is reversed, and the Assessing Officer is directed to delete the addition of ₹22,48,500 made in respect of the cash deposits in the assessee’s bank accounts.

In the result, the appeal filed by the assessee is allowed.