RAVI PALANISAMY,NAMAKKAL vs. ITO, WARD-1,, TIRUCHENGODE

The brief facts of the case emanating from the records are that the assessee is a HUF had not filed the return of income for the AY 2017-18 within the time allowed u/s.139(1) of the Act. Based on the information under Data Analytics gathered during the online verification under an ‘Operation Clean Money’, the AO found that the assessee had deposited cash of Rs.13,53,000/- into its bank account during the demonetisation period. Accordingly notice u/s.142(1) was issued on 09.03.2018 calling the assessee to prepare a true and correct return of income for the AY 2017- 18. However, the assessee did not file the return of income u/s.139 of the Act on or before 31.03.2018. The AO sent letters to banks and obtained statement from Indian Overseas Bank and found that the assessee had total credits of Rs.1,54,98,000/- during the financial year 2016-17 including cash deposit of Rs.13,53,000/- during the demonetisation period. Subsequently, the assessee filed its return of income on 24.06.2019 electronically. Since the assessee filed the return after the due date of 31.03.2018, the same was treated as invalid and taken up for case for scrutiny. On perusal of the details, it was found that the assessee has engaged in the business of rig and lorry, dealing in real restate broking and money lending. The assessee had declared a turnover of Rs.48,75,000/- by showing a business income of Rs.3,90,000/- and interest income of Rs.1,32,750/-. During the assessment proceedings, the assessee submitted that the cash deposits made during the demonetisation period was out of cash balance which is realized from old debtors and sundry debtors by furnishing the details of debtors showing the balance of Rs.98,03,750/-. In order to verify the genuineness of the debtors list produced by the assessee, letters were sent for confirmation by the department. However, many of the people have responded that they do not know the assessee and many of the letters were returned as insufficient address or address not existing. Since the debtors did not respond to the notices of the AO or responded as not known to the

Further, on verification of the financials filed by the assessee, it is found that the assessee has declared a receipt of Rs.48,75,000/- against the credits accumulated in the bank account the tune of Rs.1,54,98,000/-. In the absence of the explanation and supporting evidences of the sources of the total credits in the bank account, the AO decided to adopt the provisions of sec.44AD of the Act and estimated the income at 8% of total deposits of Rs.1,54,98,000/- i.e. Rs.12,39,840/- as business income of the assessee. Further, the AO also made an addition of Rs.1,32,750/- as income from other sources, which were shown in the invalid return of the assessee. By considering the above three additions, the AO passed an exparte order u/s.144 of the Act dated 29.12.2019 as the assessee’s return has been treated as invalid.

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) on 23.01.2020. Before the ld.CIT(A), the assessee filed a detailed written submission on 08.07.2024 explaining the details of bank credits and also the debtors. On perusal of the submission made by the assessee, the ld.CIT(A) confirmed the estimated business income of 8% on Rs.55,61,500/- i.e. Rs.4,44,980/- instead of Rs.12,39,840/- (8% of total deposits of Rs.1,54,98,000/-). Since the AO has already considered Rs.98,03,750/- as unexplained money u/s.69A of the Act and Rs.1,32,750/- as income from other sources, the AO reduced the same from the total credits of Rs.1,54,98,000/- in the bank account to arrive at the business receipts as Rs.55,61,500/-. The ld.CIT(A) confirmed the addition of Rs.98,03,750/- as unexplained money u/s.69A of the Act and Rs.1,32,750/- under income from other sources by passing an order dated 22.09.2025. The assessee is not under dispute in respect of addition made of Rs.1,32,750/- under income from other sources.

Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. The ld.AR for the assessee submitted that the order of the ld.CIT(A) sustaining the addition of Rs.98,03,750/- being cash deposits made in SBNs during the demonetisation period as unexplained money u/s.69A of the Act is not justified and hence needs to be deleted. The ld.AR filed a paper book of 205 pages consisting of the return of income for the AY 2017-18, statement of total income, the written submissions made before the first appellate authority, details of sundry debtors / advances, replies filed during the assessment proceedings along with confirmation letters of collection of debtors. Further the ld.AR submitted that the assessee is into the business of bore well rigging and real estate activities. The assessee had filed its return of income by estimating the income based on the turnover of Rs.48,75,000/- u/s.44AD of the Act. Further, the ld.AR submitted that the AO has wrongly estimated the business income addition of 8% on the entire bank credits of Rs.1,54,98,000/-. Apart from that the AO has erroneously added Rs.98,03,750/- as unexplained money u/s.69A of the Act though the entire credits of the bank had already been treated as business receipts for estimating the income of 8% u/s.44AD of the Act. Since the authorities have wrongly taxed the amount u/s.69A of the Act and also by estimating the business income on the entire credits made in the bank accounts, it amounts to double taxation which is not permissible under law. Further the ld.AR submitted the details of debtors / advances given along with confirmation letters, identity of the persons for having collected the money from the debtors before the demonetisation announcement. The ld.AR drew our attention to paper book page Nos.119 to 172 which shows the details of confirmation, identity of the persons who have paid or refunded the amounts to the assessee. In view of the above, the ld.AR prayed for deleting the additions made u/s.69A of the Act.

Per contra, the ld.DR for the Revenue supported the orders of the authorities and submitted that the ld.CIT(A) has already given a relief by

We have heard the rival submissions, perused material available on record and gone through the orders of the authorities along with paper book filed. Admittedly, the assessee had not filed the return of income before the due date provided u/s.139 of the Act. From the records, it is evident that the assessee-HUF is engaged in the business of borewell rigging, lorry operations, real estate broking and money lending activities. It is an admitted fact that the assessee had deposited cash amounting to Rs.13,53,000/- during the demonetisation period and the aggregate credits reflected in the bank account during the relevant financial year amounted to Rs.1,54,98,000/-. The assessee subsequently filed its return of income declaring turnover of Rs.48,75,000/- and offered income on presumptive basis u/s.44AD of the Act.

On perusal of the submissions made by the assessee and details obtained from the bankers, the AO found that the total credits made in the bank account by the assessee was Rs.1,54,98,000/- during the financial year 2016-17. Since the assessee did not explain the entire sources of credits, the AO concluded the assessment by estimating 8% of business income on the entire credits, apart from making addition of Rs.98,03,750/- u/s.69A of the Act and Rs.1,32,750/- under income from other sources by rejecting the return of income filed by the assessee belatedly as invalid return. It is observed that though the assessee had made a cash deposit of Rs.13,53,000/- during the demonetisation period, the details of debtors realized was Rs.98,03,750/-. Since the parties did not confirm the payment of money to the assessee during the demonetisation period, the AO made an addition of Rs.98,03,750/- as unexplained income. In the appellate

We note that the assessee has filed a confirmation and identity of the persons to whom the assessee had given services and also amounts lent in page Nos.119 to 172 in the paper book filed towards sources of money deposited into the bank account. Further, we note that the assessee has deposited only Rs.13,53,000/- of SBNs during the demonetisation period. However, the AO has made an addition u/s.69A of the Act, the entire debtors list of Rs.98,03,750/- as unexplained money. Since the assessee has not produced the complete details of the bank credit neither during the assessment nor appellate proceedings, we are convinced that estimating the business income at 8% on the entire credits in bank is reasonable. Further we do not support the view of the authorities for making separate addition of Rs.98,03,750/- as unexplained income. Therefore, we are of the considered opinion that in the absence complete details of credits and considering the receipts are from the business, estimating the business income at 8% of the entire receipts is fair in the interest of justice. Hence, we are inclined to confirm the addition of business income at 8% on Rs.1,54,98,000/-.

Considering the entirety of the facts, the nature of business carried on by the assessee, the details and confirmations furnished in support of debtors and advances, and more particularly the fact that the Revenue itself has treated the entire bank credits as business receipts for estimation of income, we are of the considered opinion that the separate addition of Rs.98,03,750/- u/s.69A of the Act, which is confirmed by the ld.CIT(A) is unsustainable in law. Accordingly, the addition of Rs.98,03,750/- made u/s.69A of the Act is directed to be deleted. Since the assessee has not

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