ARUNODAY ANDANEPPA BELLAD,BAGALKOT vs. INCOME TAX OFFICER, WARD-1 & TPS, BAGALKOT

PER WASEEM AHMED, ACCOUNTANT MEMBER:

This set of two-appeals filed at the instance of the assessee is directed against the sperate orders of the learned Commissioner of Income Tax- Appeal (hereafter ld. CIT(A)), under section 250 of the Income Tax Act, 1961 (hereafter- the Act) confirming the quantum addition made in the assessment order passed under section 143 r.w.s. 147 of the Act and confirming the levy of penalty order passed under section 271(1)(c) of the Act for the Assessment Year 2016-17.

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First, we proceed to adjudicate assessee’s quantum appeal in ITA No. 12/Bang/2026 for the AY 2016-17

3.1 However, the AO did not admit the assessee’s explanation. The AO found that the assessee though furnished some land revenue records but did not furnish the details of agricultural income earned and failed to furnished the supporting documentary evidence such land owned by him, detail of crops, mandi receipt, expenses detail etc. hence, the contention about the cash deposits out of agricultural income from past 10 year was rejected.

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3.2 Likewise, the AO found that the assessee claimed cash loan from neighbours and friends but did not provide evidence in respect of identity of the person, creditworthiness and genuineness. Therefore, in the absence of corroborative evidence, the claim of cash deposits out of loan receipts was also rejected by the AO. Accordingly, the AO treated the entire cash deposit of Rs. 73,08,300/- as unexplained cash under section 69A of the Act and added to the total income of the assessee.

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principals wherein they have accepted receipt of amount from the appellant through banking channel as tabulated below: Sr. No. Name of the party Amount 1 P Jeevaratnam 5,75,400 2 N Chandrashekar 10,91,200 3 T E Kesannagouda 11,34,800 4 Tamavara Pubhas 12,23,400 5 N Venkat Raman 4,26,400 Total 44,51,200 7.4 In is clear from the facts narrated above that during assessment proceedings, the appellant attributed the cash deposits to have accumulated from agriculture income and loans from neighbours for medical reasons. However, at the appellate stage, he withdrew the earlier explanation entirely and claimed that the cash belonged to various principals for whom he allegedly worked as a consignment agent. It is observed from the record, that the appellant provided no documentary evidences to substantiate the alleged agricultural income. No ownership documents, cultivation records, land details, crop-wise statements, sale bills, or evidence showing accumulation over 10 years were submitted. Regarding the loan claim, the appellant did not furnish names, identities, PAN, addresses, confirmations, bank statements, or any evidence from any alleged lender. However, the alternative explanation offered at the appellate stage introduces an entirely new narrative that contradicts the appellant's earlier stand. 7.5 The shift in explanation indicates that the appellant has not maintained any consistent or reliable account of the source of deposits. The confirmations now submitted under Rule 46A do not reconcile with the total cash deposits of Rs.73,08,300/- and they do not establish any business relationship also as the appellant has not furnished any supporting evidence such as agreements with principals, books of account, or evidence showing that the appellant actually acted as a consignment agent. Additionally, the claim that the consultant filed an incorrect reply before the AO lacks any supporting proof, and such unverified assertions cannot displace the statutory proceedings already conducted. 7.6 In view of contradictory stand taken by the appellant and in the absence of any contemporaneous evidence, failure to respond to repeated notices both at assessment and appellate stages, and the inability to correlate the additional documents with the full amount of cash deposits, the requirements of Section 69A of the Act remain unfulfilled. The AO's observations that the cash deposits represent unexplained money is supported by the factual record and the appellant has not brought any credible material to rebut the findings. 7.8 Further, during appellate proceedings, the appellant has failed to furnish any submission/evidences in support of its ground of appeal. As referred in foregoing paras, sufficient opportunity have been provided to the appellant for furnishing submission/evidences in support of grounds of appeal. However, the appellant could not furnish any explanation/evidences in support of his grounds of apeal. Accordingly, it is clear that the appellant has not discharged the burden of proof as required under the respective provisions.

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7.9 Hence, in view of the facts discussed above, the addition of Rs.73,08,300/- made by the Assessing Officer under section 69A of the Income-tax Act, 1961 vide assessment order dated 26.02.2024 is upheld.

6.1 At the outset, the learned AR before us submitted the assessee is not willing to press the legal grounds. Hence, the legal issue raised through ground No. 5 of the appeal is hereby dismissed as not pressed. On the merit, the learned AR before us that the assessee could not properly participate in the assessment proceedings due to ill health. Because of this reason, the necessary details and supporting documents could not be filed before the AO during the course of assessment proceedings.

6.2 The Ld. AR further submitted that the authorised representative who appeared at the assessment stage had wrongly filed a submission stating that the cash deposits represented agricultural income and loans from friends and neighbours. It was submitted that the said explanation was not correct and was filed without proper understanding the facts of the case. Accordingly, the assessee should not be prejudiced for the mistake committed by the earlier authorised representative.

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6.3 The Ld. AR submitted that the correct factual position is that the assessee was working as a commission agent in the business of raw granite blocks. The cash deposited in the bank account did not belong to the assessee in his individual capacity. The said amounts represented business receipts collected on behalf of the principals and were thereafter transferred to the respective principal’s bank accounts through banking channel.

6.4 The Ld. AR further submitted that during the appellate proceedings before the Ld. CIT(A), the assessee filed additional evidence under Rule 46A of the Income Tax Rules, 1962. Such evidence included confirmations from the principals, wherein they accepted the receipt of amounts from the assessee through banking channel. Therefore, the assessee had produced materials to show that the cash deposits related to the business of commission agency and did not represent unexplained money u/s 69A of the Act.

6.5 The Ld. AR submitted that the Ld. CIT(A) rejected the additional evidence without forwarding the same to the AO for a remand report. It was contended that once additional evidence was filed explaining the source and nature of deposits, the Ld. CIT(A) ought to have forwarded the same to the AO for verification. Without such verification, the evidence could not have been rejected merely on the ground that the assessee had taken a different stand before the AO.

6.6 The Ld. AR submitted that the assessee is ready and willing to produce all necessary evidence before the AO, including confirmations, bank statements, details of principals, business transactions and any

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other supporting materials required for verification. Therefore, in the interest of justice and fair play, the matter may kindly be restored to the file of the AO for fresh adjudication. Accordingly, the Ld. AR prayed that the addition of Rs. 73,08,300/- made u/s 69A of the Act may be set aside and the issue may be restored to the file of the AO for fresh assessment after considering the additional evidence and after providing proper opportunity of hearing to the assessee.

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issued by the AO. The assessment ultimately came to be completed u/s 147 r.w.s. 144 r.w.s. 144B of the Act.

8.1 We further note that during the assessment proceedings, a reply was filed before the AO explaining the source of cash deposits as agricultural income accumulated over a period of years and loans taken from friends and neighbours for medical treatment of parents. However, before the Ld. CIT(A), the assessee took a different stand and contended that the cash deposits pertained to business transactions carried out in the capacity of a commission agent dealing in raw granite blocks and that the amounts belonged to various principals. In support of the said contention, the assessee also filed additional evidence under Rule 46A of the Income Tax Rules, 1962 including confirmations from certain parties.

8.2 The explanation offered by the assessee at different stages may create doubt regarding the consistency of the stand taken by the assessee. However, at the same time, it is also a settled principle of law that a matter should ordinarily be decided based on proper verification of material facts and supporting evidence rather than on technical considerations alone. The assessee before us has explained that due to ill health, he could not properly participate in the assessment proceedings and that the earlier authorised representative had wrongly filed the explanation relating to agricultural income and loans without properly understanding the factual position. The assessee has now come forward with a fresh explanation supported by certain documentary evidence.

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8.2 On perusal of the impugned appellate order, we notice that though the assessee had filed additional evidence before the Ld. CIT(A), the same were not forwarded to the AO for examination and remand report. In our considered opinion, once the assessee had furnished additional evidence claiming that the cash deposits represented business receipts belonging to principals, the correctness and genuineness of such claim required proper verification at the level of the AO. The evidence filed by the assessee could not have been rejected outrightly without affording an opportunity to the AO to examine the same.

8.3 We are conscious of the fact that the assessee had failed to properly respond during the assessment as well as appellate proceedings. However, considering the nature of dispute involved, the explanation now sought to be advanced by the assessee, and in the larger interest of substantial justice, we are of the considered view that one more opportunity deserves to be granted to the assessee to substantiate his claim with proper documentary evidence.

8.4 Accordingly, in the interest of justice and fair play, we deem it appropriate to set aside the orders of the lower authorities on this issue and restore the matter to the file of the AO for fresh adjudication. The AO shall examine the claim of the assessee regarding the nature and source of cash deposits after considering all supporting evidence including confirmations, bank statements, details of principals, books of accounts and any other documentary evidence that may be furnished by the assessee. The AO shall also be at liberty to make such enquiries as may be deemed necessary in accordance with law. The assessee is also directed to extend full cooperation and furnish all relevant

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details/documents called for by the AO without seeking unnecessary adjournments. Needless to state, the AO shall afford adequate opportunity of being heard to the assessee and thereafter decide the issue afresh in accordance with law. Accordingly, the grounds raised by the assessee on merits are allowed for statistical purposes.

Coming to assessee’s appeal against penalty order in ITA No. 13/Bang/2026

11.1 Since the quantum proceedings have already been restored to the file of the AO for fresh assessment, in our considered opinion, the ends

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of justice would be met if the impugned penalty order is also set aside and restored to the file of the AO for fresh adjudication. The AO shall be at liberty to examine the issue of levy of penalty afresh depending upon the outcome of the reassessment proceedings and in accordance with law, after providing reasonable opportunity of being heard to the assessee. Accordingly, the appeal of the assessee against the penalty levied under section 271(1)(c) of the Act is treated as allowed for statistical purposes.

Order pronounced in court on 13th day of May, 2026 Sd/- Sd/- (SOUNDARARAJAN K) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 13th May, 2026 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore