SAMUEL KEISHING,WINOTANG vs. INCOME TAX OFFICER, WARD SHL-W-(9)(3), IMPHAL

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ITA 41/GTY/2026Status: DisposedITAT Guwahati01 June 2026AY 2022-20238 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that due to disturbances in Manipur, the assessee may not have had a reasonable opportunity to present their case. Therefore, the case was remanded to the AO for fresh assessment.

What were the facts?

The assessee claimed exemption under Section 10(26) for income earned in Manipur, but the Assessing Officer (AO) treated cash deposits of ₹1,13,00,000 as unexplained money and added ₹16,03,530 as income from other sources. The assessment was completed ex-parte under Section 144 due to non-compliance with notices.

What were the issues?

Whether the assessment under Section 144 was validly made and if the assessee's claim for exemption under Section 10(26) was correctly denied, considering the circumstances in Manipur.

Which sections of the Income-tax Act were involved?

Section 10(26),Section 144,Section 69A,Section 56

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, GUWAHATI ‘DB’ BENCH AT KOLKATA

Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2022-23 dated 27.11.2025. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: Ground No. 1 – Invalid Assessment u/s 144 That the learned CIT(A) erred in upholding the assessment framed under section 144 despite the fact that the assessment was completed in violation of principles of natural justice, without granting effective and reasonable opportunity of being heard, particularly in the background of prolonged internet suspension and serious law-and-order disturbances in Manipur. Ground No. 2 – Erroneous Addition u/s 69A That the learned CIT(A) erred in confirming the addition of ₹ 1,13,00,000 as unexplained money under section 69A without appreciating that: - the deposits were related to the appellant’s business activities carried on in Manipur; - the appellant is covered by the exemption under section 10(26); - no adverse material was brought on record to establish that the money represented income from non-exempt sources. Ground No. 3 – Misapplication of Section 10(26) That the learned CIT(A) grossly erred in law and on facts in denying exemption under section 10(26) despite the appellant satisfying the statutory conditions of: - being a member of a Scheduled Tribe, - residing in a notified area of Manipur, and - earning income arising within the said area. Ground No. 4 – Addition of ₹16,03,530 as Income from Other Sources That the learned CIT(A) erred in confirming the addition of ₹ 16,03,530 as income from other sources merely on conjectures and surmises, ignoring the settled legal position that income of Scheduled Tribe members covered by section 10(26) is exempt when arising in specified areas. Ground No. 5 – Failure to Consider Evidence That the learned CIT(A) failed to properly appreciate the documentary evidence such as caste certificate, financial statements, and proof of internet suspension, thereby rendering the order perverse and unsustainable in law. Ground No. 6 – Excessive, Arbitrary and Unjustified Additions That the additions sustained are excessive, arbitrary, based on presumptions, and contrary to the facts, law, and binding judicial precedents. Ground No. 7 – General That the appellant craves leave to add, alter, amend, or withdraw any ground of appeal at or before the time of hearing.”

3.

Brief facts of the case are that the assessee e-filed the return of income on 31.07.2022 declaring NIL income and claimed exemption of ₹16,03,530/- u/s 10(26) of the Act on the ground of being a member of the Scheduled Tribe and resident of Manipur. The Assessing Officer (hereinafter referred to as Ld. 'AO') noted that during the FY 2021-22, the assessee had deposited cash of ₹61,00,000/- and ₹52,00,000/- in ITA No(s). 41/GTY/2026 Assessment Year(s) 2022-23 two accounts held with HDFC Bank, totalling to ₹1,13,00,000/-. The Ld. AO examined the claim of the assessed and observed that the exemption is available only if three conditions are cumulatively fulfilled: (i) the person belongs to a Scheduled Tribe, (ii) resides in the specified areas of the North-Eastern states, and (iii) the income arises from a source within those areas. The assessee failed to substantiate the residential status and the source of income from within the exempted region. Since the assessee did not comply with notices under section 142(1) of the Act and failed to explain the cash deposits or the exemption of income claimed, the Ld. AO completed the assessment ex-parte u/s 144 r.w.s. 144B of the Act and treated the cash deposits of ₹1,13,00,000/- as unexplained money u/s 69A of the Act and taxed it as deemed income. Further, the exempt income of ₹16,03,530/- was treated as “Income from Other Sources” and the total income was determined at ₹1,29,03,530/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who considered the submission of the assessee, the details and documents uploaded by the assessee on the ITBA portal and the case laws referred by the assessee and the Ld. AO and thereafter dismissed the appeal of the assessee as per his findings as under:

“6. 1. Ground No. 1 challenges the validity of the Assessment Order under Section 144 of the Act. The appellant has challenged the validity of the assessment made under section 144 of the Income Tax Act on the ground that the order is bad in law and violative of the principles of natural justice. However, from the assessment record, it is evident that the AO had issued multiple notices under sections 143(2) and 142(1) on several occasions — dated 02.06.2023, 26.06.2023, 25.07.2023, 17.08.2023, and 12.12.2023 — none of which were complied with except for one partial submission of the caste certificate on 10.12.2023. The appellant did not furnish any supporting evidence to substantiate the claim of exemption under section 10(26) or to explain the sources of the substantial cash deposits amounting to Rs. 1,13,00,000/-.

6.1.

1. Section 144(1)(b) empowers the AO to make a best judgment assessment where there is a failure to comply with notices issued under section 142(1). The Hon’ble Supreme Court in Kachwala Gems v. JCIT [(2007) 288 ITR 10 (SC)] held that when the assessee fails to cooperate or produce relevant documents, the AO is justified in making a best judgment assessment. Further, the Hon’ble Delhi High Court in CIT v. Poonam Rani [(2010) 326 ITR 223 (Del)] upheld that where the assessee chooses not to respond to statutory notices, the assessment framed under section 144 cannot be faulted. 6.1. 2. In the present case, the AO had provided ample opportunities, which the assessee wilfully ignored. Therefore, the contention that the assessment order is invalid or violative of natural justice is untenable. The ground no. 1 is accordingly dismissed.

6.2.

Ground No. 2 is against the Addition of Rs. 1,13,00,000/- made by the AO under Section 69A as Unexplained Money. The AO, based on information from the Financial Intelligence system, found that the appellant had deposited a total of Rs. 1,13,00,000/- in his two current accounts with HDFC Bank during the relevant financial year. Despite repeated notices, the appellant failed to provide any explanation or supporting evidence to establish the source and genuineness of these deposits. Even during appellate proceedings, except for furnishing a caste certificate and a vague claim of internet suspension, the assessee has not demonstrated the origin of funds, nor has he reconciled the bank transactions with any business or exempt income. 6.2. 1. As per section 69A of the Act, if an assessee is found to be the owner of any money not recorded in the books of account and offers no satisfactory explanation about the nature and source thereof, such amount may be deemed as the income of the assessee for that year. The onus squarely lies on the assessee to substantiate the source. In CIT v. Devi Prasad Vishwanath Prasad [(1969) 72 ITR 194 (SC)], it was held that unexplained cash credits can be treated as income if no proper explanation is provided. Mere assertions without evidence cannot discharge the burden of proof under section 69A. 6.2. 2. The appellant’s explanation that his income is exempt under section 10(26) is unsubstantiated, as the cash deposits in HDFC Bank accounts located outside the notified tribal areas and in the nature of business transactions cannot be presumed to arise from exempt sources. The AO rightly invoked section 69A, and the addition of Rs. 1,13,00,000/- is fully justified and confirmed. This ground is, therefore, dismissed.

6.3.

Ground No. 3 relates to the Addition of Rs. 16,03,530/- as “Income from Other Sources”. The appellant claimed exemption under section 10(26) of Rs. 16,03,530/-, asserting that he belongs to the Scheduled Tribe community of Manipur. The AO, after detailed consideration, found that while the appellant had produced a caste certificate dated 04.10.2018, no evidence was provided to prove that the income in question accrued or arose within the specified exempt area, or that it was derived from sources covered under section 10(26). The statutory conditions under section 10(26) are threefold — (a) the person must be a member of a Scheduled Tribe, (b) must reside in the specified area, and (c) the income must accrue or arise from a source within such area. 6.3. 1. The Hon’ble Gauhati High Court in Moina Lallung v. CIT [(2000) 241 ITR 849 (Gau)] and Tomo Riba v. CIT [(1999) 236 ITR 507 (Gau)] held that exemption under section 10(26) is available only when all three conditions are cumulatively satisfied. Mere tribal status or residence in a notified area is insufficient unless the income arises within that area. The appellant’s business activities involving trading of doors, windows, and furnishings, as mentioned in his submission, are commercial in nature and not shown to have been confined to or sourced from within the exempt area of Manipur. Further, no business registration, sales records, or tax invoices have been furnished to prove that the transactions were conducted within the exempt territory. 6.3. 2. Accordingly, the AO’s treatment of Rs. 16,03,530/- as taxable “Income from Other Sources” is legally sustainable. The addition made is confirmed, and this ground of appeal is dismissed.

6.4.

Ground No. 4 is general and does not require specific adjudication. It provides no independent basis for relief and is accordingly dismissed.

7.

The appellant has neither produced credible evidence during the assessment proceedings nor during appellate proceedings to rebut the findings of the AO. The reasons advanced, such as disturbance of law and order or internet suspension in the State of Manipur, cannot absolve the assessee from the statutory responsibility to substantiate claims of exemption or explain the nature and source of large cash deposits. The Hon’ble Supreme Court in CIT v. Calcutta Discount Co. Ltd. [(1973) 91 ITR 8 (SC)] has held that the burden of proof lies on the assessee to disclose fully and truly all material facts necessary for assessment. Failure to do so justifies the inference drawn by the AO.

8.

In view of the totality of facts, statutory provisions, and judicial precedents, it is evident that the assessment under section 144 was made validly, the additions under section 69A and section 56 were based on ITA No(s). 41/GTY/2026 Assessment Year(s) 2022-23 material available on record, and the appellant failed to discharge his burden. Therefore, the findings of the Assessing Officer are upheld in toto.

The appeal filed by the assessee is dismissed, and the additions of Rs. 1,13,00,000/- and Rs. 16,03,530/- made by the Assessing Officer are hereby confirmed in favour of the Revenue.”

4.

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

5.

Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that the addition was made on account of cash deposited. The assessee resides in Imphal and therefore, the income is exempt u/s 10(26) of the Act. Due to suspension of internet, the notices which sent online could not be received and responded. However, the show cause notice was received and only one notice was complied with. The assessee trades in PVC products. The caste certificate is enclosed at page 66 of the paper book filed before us and the bank account details of the HDFC bank are from page 129 of the paper book and the bank is also at Imphal. The copy of the assessment order is also placed at page 69 of the paper book. It was requested that the assessment order was made u/s 144 of the Act on account of non-compliance for which the assessee had a reasonable cause and requested that the issue may be remanded to the Ld. AO. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.

6.

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). The Bench was of the view that in the interest of justice and fair play, the request of the assessee to set aside the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided as proper representation could not be made on account of disturbance in Manipur. Hence, after examining the facts of the case, we set aside the order of the Ld. CIT(A) and remand the assessment proceeding before the Ld. AO for making the reassessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission he wants to make in support of his grounds of appeal and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in the appeal are partly allowed for statistical purposes.

7.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 1st June, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 01.06.2026 Bidhan (Sr. P.S.)

Copy of the order forwarded to:

1.

Samuel Keishing, House No. 12, Near Ukhrul, Post-Ukhrul, Imphal, Manipur, 795142. 2. ITO, Ward-3, Imphal, Manipur, 795001. 3. CIT(A)-NFAC, Delhi.

4.

CIT-

5.

CIT(DR), Guwahati Benches, Guwahati.

6.

Guard File. //// By order

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