WINTER BORN SIANGSHAI,EAST JAINTIA HILLS vs. ITO W-2 SHILLONG, SHILLONG

Brief facts of the case are that the assessee is had not filed the return of income for the AY 2015-16. Pursuant to the information received through the Insight Portal regarding cash deposits of ₹99,81,000/- in his savings bank account, the Assessing Officer (hereinafter referred to as Ld. 'AO') issued notice u/s 148 of the Act on 04.04.2022 and initiated reassessment proceedings after passing an order u/s 148A(d) of the Act on 31.03.2022. In response to the notice issued under section 148 of the Act, the assessee filed the return of income on 30.04.2022 declaring the total income at ₹NIL by claiming exemption u/s 10(26) of the Act on the grounds that the deposits pertained to the cash sales from a coal business and that he belonged to a Scheduled Tribe in Meghalaya. The Ld. AO rejected this claim because the assessee failed to furnish any concrete documentary evidence such as books of accounts, sale invoices, or valid mining permissions, to substantiate the claim of carrying on the coal business. Furthermore, the Ld. AO also noticed an unexplained credit entry of ₹8,20,000/- received through RTGS from HVS Construction on ITA No(s). 80/GTY/2026 Assessment Year(s) 2015-16 23.07.2014, for which no satisfactory explanation or supporting documentation was provided. Consequently, the Ld. AO passed the assessment order u/s 147 r.w.s. 144B of the Act on 08.02.2024, treating the cash deposit of ₹99,81,000/- and the RTGS credit of ₹8,20,000/- as unexplained money u/s 69A of the Act and assessed the total income at ₹1,08,01,000/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who observed that despite sufficient opportunities being granted, the assessee failed to adduce any supporting evidence, such as cash flow statements, sales invoices, ledger extracts, or confirmations from transacting parties, to establish that the cash deposits and credits were indeed from the explained coal business transactions. The Ld. CIT(A) held that mere claims without substantiating documents were not justified, and therefore, the deposits were squarely attracted the provisions relating to unexplained money u/s 69A r.w.s. 115BBE of the Act. Finding no infirmity in the assessment order, the Ld. CIT(A) held the additions made by the Ld. AO to be legally maintainable. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

None appeared on behalf of the assessee and the appeal was heard with the assistance of the Ld. DR. The assessee had sought adjournment vide application filed but since there was no justification for seeking the adjournment, therefore, the same was rejected and the appeal was heard. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.

The assessee has submitted in the statement of facts filed before us that he is a Schedule Tribe individual who is engaged in the business of selling coal produced in the State of Meghalaya. As per the Ld. AO, it was found that he had deposited cash to the tune of ₹ 99,81,000/- in the bank account maintained with United Bank of India (now merged with Punjab National Bank) during the financial year 2014-15 relevant for the Assessment Year 2015-16. It is stated that he did not file the Income Tax Return under section 139(1) of the Income Tax Act, 1961 for the year under consideration due to a misunderstanding of the provisions of Section 10(26) of Income Tax Act as he of as he believed that his income was fully exempt from taxation under section 10(26) and concluded that filing a return was not necessary. The assessee has acknowledged that this interpretation of the law was incorrect. But he has been duly filing his returns of income from Assessment Year 2016- 17 onwards. In compliance with the said notice issued under section 148 of the Act, he filed his return of income on 30.04.2022, declaring total income of Rs. Nil for the relevant assessment year 2015-16 relevant to financial year 2014-15. Furthermore, in the course of reassessment proceedings, statutory notices under sections 143(2) and 142(1) of the Income-tax Act, 1961 were duly issued to the appellant. In compliance therewith, the assessee furnished the requisite details and explanations from time to time. It was consistently submitted that the cash deposits pertained to business transactions undertaken during the relevant financial year. Supporting documents and information were provided to substantiate the nature and source of the deposits. During the year under consideration, he was engaged in the business of selling, coal produced in the village of Wapung Skur in the Jaintia 1lills District of the stale of Meghalaya. The entire business was conducted in his individual name and capacity, operating from an office set up at his residence. The coal was primarily mined from a piece of land located in the Rymbai arca of the Jaintia ills District which belonged to the appellant. Additionally, some extraction was carried out from nearby plots belonging to other individuals. However, such third-party mining was limited in volume and occurred only occasionally. For the purpose of mining in third party lands, the appellant had entered into concise agreements which were written in the vernacular language and was locally accepted, thus, granting him mining access to those plots. These documents, though drafted on plain paper or ₹10 stamp paper and bearing dates outside the financial year 2014-15, pertained to prior arrangements that permitted mining activities during the relevant year. Such documentation was customary and acceptable within the tribal communities of Meghalaya, where these types of agreements were both common and binding. The appellant deposited a total sum of Rs.99,81,000/- in his bank account. These cash deposits represented receipts from business activity arising from the sale of coal. The total turnover for the year was Rs.99,87,160/- which was duly declared in the appellant's return of income. Moreover, Mr. Dhirendra Pratap Singh (D.P. Singh) assisted the appellant as a manager during the year under consideration. ‘Transfers made to him were for the purpose of handling business expenses such as labour payments, supply of coal, and related operational costs. However, while filing the return of income for A.Y. 2015-16, there was an inadvertent error in entering the relevant figures, leading to the return being reflected under the ‘no account case’ category. ‘This misclassification occurred due to a minor oversight during the filing process. It is respectfully submitted that this was a minor clerical error made in good faith, without any intention to conceal income. Furthermore, the aforementioned income was in any case fully exempt under Section 10(26) of the Income-tax Act, 1961, as the appellant belongs to a Scheduled Tribe residing in the notified areas of Meghalaya and derived business income within that region. The return was promptly filed in response to the notice issued under Section 148, demonstrating the appellant's willingness to comply and cooperate with the assessment procedure. Furthermore, il is respectfully submitted that the earlier reference to the amount of Rs.8,20,000/- received from 11VS Construction as a “due payment” was an inadvertent error. The said amount was, in fact, an advance received against a verbal supply order for coal, to be fulfilled in the subsequent financial year. The corresponding sale was executed in the following year. The appellant regrets the misstatement and seeks to clarify the true nature and timing of the transaction. The reference to the amount of ₹ 8,20,000/- as a 'due payment’ was made inadvertently, it was sale only but the appellant received advance for making sale in the following year. The said amount was received in advance against a verbal arrangement for supply of coal, and no sale corresponding to this receipt was affected during the relevant financial year. In light of these points, it is evident that the AO’s assessment is incorrect. The entire cash deposits of ₹ 99,81,000/- and credit entry of ₹ 8,20,000/- should not have been added under Section 69A of the IT Act and should be overturned.

It is further mentioned with reference to the order under section 250 dated 09.12.2025, the appeal was rejected by the Hon'ble Commissioner of Income Tax (Appeals) on the ground that the appellant failed to provide supporting evidence. This finding is factually incorrect. The appellant had filed a detailed submission along with documentary in response to the notice under section 250 issued on 17.06.2025, and ITA No(s). 80/GTY/2026 Assessment Year(s) 2015-16 the response was submitted on 11.07.2025. Moreover, the income tax portal records show that the learned AO viewed the response on 23.07.2025. The submission enclosed documentary evidence including agreements with sellers, landholding certificate, sales ledger, cash ledger, financial statements, bank statement, and Scheduled Tribe certificate. All these documents were on record before the Hon’ble Commissioner of Income Tax (Appeals). The rejection of the appeal without considering these materials amounts to a violation of natural justice. The order is defective in law and liable to be set aside. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.

We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). We find that the appeal had been decided ex parte, primarily on account of non-prosecution of the appeal on behalf of the assessee. Therefore, we deem it appropriate in the interest of justice and fair play that another opportunity needs to be provided to the assessee to represent his case properly before the Ld. CIT(A) to which the Ld. DR had no serious objections although he requested that the order of the Ld. CIT(A) may be confirmed. In such circumstances, in the interest of justice, we restore the issues to the file of Ld. CIT(A) for re-adjudicating the issues afresh after granting the assessee adequate opportunity of being heard. The assessee is also directed to cooperate with the Ld. CIT(A) in the readjudication proceedings, positively. We, therefore, set aside the order of the Ld. CIT(A) and remit the appeal to him to be decided afresh, who shall allow an opportunity of being heard to the assessee and also grant an opportunity of representing the case and be heard to the Ld. AO as per rule 46A of the Income Tax Rules, 1962, if required, and thereby pass an order in accordance with law. In the result, the grounds of appeal are partly allowed for statistical purpose

In the result, the appeal filed by the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 5th June, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 05.06.2026 Bidhan (Sr. P.S.)

CIT-

CIT(DR), Guwahati Benches, Guwahati.

Guard File. //// By order