MAHESH SAHADEV SHEDAGE,SATARA vs. INCOME TAX OFFICER, WARD 3, SATARA, PAWAI NAKA, SATARA

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ITA 1580/PUN/2026Status: DisposedITAT Pune14 October 2026AY 2018-198 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal, considering the totality of the facts and submissions, deemed it fit in the interest of justice to set aside the impugned order of the CIT(A)/NFAC and restore the matter back to the file of the AO. The AO was directed to consider the issue afresh after providing the assessee with due opportunity of hearing. The AO was instructed to conduct necessary verification of the assessee's claim regarding transfers from the Over Draft Account. If the assessee's contention was found to be correct, the AO was to allow the same and amend the order accordingly. The assessee was directed to make submissions without seeking adjournments unless for sufficient cause. The effective grounds raised by the assessee were allowed for statistical purposes.

What were the facts?

The assessee, Mahesh Sahadev Shedage, an individual working as a Bank Correspondent for Central Bank of India, did not file his return of income for Assessment Year 2018-19. The Assessing Officer (AO) noted substantial cash deposits of Rs. 52,71,400/- in two savings bank accounts. The case was reopened under Section 147, and a notice under Section 148 was issued. The assessee filed a return declaring Rs. 89,290/-. Despite statutory notices and a show cause notice, the assessee failed to explain the source of the cash deposits or provide supporting documents. The AO added the entire Rs. 52,71,400/- as unexplained money under Section 69A, treating it as income. The Commissioner of Income Tax (Appeals) [CIT(A)/NFAC] upheld the AO's order. The assessee appealed to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the addition of Rs. 52,71,400/- as unexplained money under Section 69A of the Income Tax Act, 1961, was wrongly confirmed by the CIT(A)/NFAC? 2. Whether the CIT(A)/NFAC erred in not considering that the appellant acted solely as a Business Correspondent (BC) as per RBI Regulations and Government policy on financial inclusion? 3. Whether the CIT(A)/NFAC erred in considering the entire income as deposited in cash, when the appellant was earning a commission of 0.13% as a BC? 4. Whether the CIT(A)/NFAC erred in not considering the submissions and relevant documents produced by the appellant? 5. Whether the principle of natural justice was violated during the proceedings before the CIT(A)/NFAC? Assessee's Contentions: The assessee argued that the cash deposits were made from transfers from his Over Draft (OD) Account No. 03566769414. He contended that the AO misidentified the bank accounts, stating that Account No. 3341362177 was a joint account with his father and Account No. 3294819851 was jointly held with his wife, not as stated by the AO. A chart detailing transfers from the OD account to these joint accounts was submitted to the AO and CIT(A)/NFAC but not considered. The assessee also claimed that his role as a BC involved handling public money and earning commission, and that the entire deposits were not his income. He further argued that the proceedings violated the principle of natural justice. Revenue's Contentions: The Revenue relied on the orders of the CIT(A)/NFAC and the AO.

Which sections of the Income-tax Act were involved?

Section 69A,Section 147,Section 148,Section 143(2),Section 142(1),Section 144B,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI RAMA KANTA PANDA & Ms. ASTHA CHANDRA

For Appellant: CA Deepak S. Sasar and CA Rasika Galande
For Respondent: Shri Sandeep Sathe, JCIT

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND Ms. ASTHA CHANDRA, JUDICIAL MEMBER

ITA No. 1580/PUN/2026 Assessment Year : 2018-19 Mahesh Sahadev Shedage, Income Tax Officer, Rajale Phaltan, Ward-3, Satara-415523. vs. Aaykar Bhawan, PAN : CDZPS9698N Manjunath Manor, Pawai Naka, Satara-415001. (Appellant) (Respondent) Assessee by : CA Deepak S. Sasar and CA Rasika Galande Department by : Shri Sandeep Sathe, JCIT Date of Hearing : 30-07-2026 Date of Pronouncement : 14-10-2026 O R D E R PER ASTHA CHANDRA, J.M.:

The appeal filed by the assessee is directed against the order dated 29-01-2026 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”], u/s. 250 of the Income Tax Act, 1961 (the “Act”), pertaining to Assessment Year (“AY”) 2018-19.

2.

Briefly stated, the facts of the case are that the assessee is an individual, working as Bank Correspondent for Central Bank of India at Rajale Village in Satara Dist. of Maharashtra. For AY 2018-19, he did not file his return of income. Based on the information available with the Department, the Ld. Assessing Officer (“AO”) found that the assessee has made substantial cash deposits to the tune of Rs. 52,71,400/- into his following two savings bank accounts maintained with Central Bank of India during the year under consideration:

2 ITA No. 1580/PUN/2026 S.No. Central Bank of India Amount of deposit SB A/c No. (Rs.) 1. 3341362177 26,96,500 2. 3294819851 25,74,900 (Joint A/c with Sahadev Mahipati Shedage)

2.1. The case of the assessee was reopened u/s. 147 of the Act and notice u/s. 148 of the Act was issued to the assessee on 01-04-2022. In response thereto, the assessee filed his return of income on 29-04-2022, declaring total income of Rs. 89,290/-. Subsequently, statutory notices u/s. 143(2) and 142(1) of the Act as well as show cause notice(s) were issued on several dates and served upon the assessee, seeking information/explanation regarding the aforesaid transactions done by the assessee along with supporting documents. In reply, the assessee neither explained the source of the said cash deposits nor furnished supporting evidences. Furthermore, the assessee did not furnish the bank account as well as the day to day cash book with narration of each entry in support of cash deposits. The Ld.AO further observed that the return declared in the ITR is not commensurate with the source of the cash deposited in the said accounts. Accordingly, the Ld.AO proceeded to complete the assessment, treating the total cash deposits of Rs.52,71,400/- as unexplained money u/s 69A of the Act and added the same to the total Income of the assessee, vide his order dt. 20-03-2024 passed u/s. 147 r.w.s. 144B of the Act.

3.

Aggrieved, the assessee filed appeal before the Ld.CIT(A)/NFAC, who dismissed the appeal of the assessee, upholding the order of the Ld.AO, by observing as under: “5. Observations, Findings and Decision 5.1. I have perused the Assessment Order, the Grounds of Appeal, and the detailed written submissions filed by the appellant. The core issue involves the addition of Rs. 52,71,400/- as unexplained money under section 69A and the alleged procedural irregularity under section 144B. 5.2. On the Merits of the Addition u/s 69A: The appellant's primary defense is that he functions as a Bank Correspondent and the cash deposits in his savings account reflect transactions carried out on behalf

3 ITA No. 1580/PUN/2026 of the bank's customers. While the appellant has provided evidence of his appointment as a BC, the mere status of being a BC does not grant immunity from explaining specific cash credits in a personal bank account. 5.3. Section 69A of the Act mandates that where in any financial year the assessee is found to be the owner of any money which is not recorded in the books of account, and the assessee offers no explanation about the nature and source thereof, or the explanation offered is not satisfactory, the money may be deemed to be the income of the assessee. In this case, the appellant deposited large sums of cash into a joint savings account. Standard operating procedures for Bank Correspondents typically require the use of specific settlement accounts or rigorous record-keeping of customer funds. 5.4. The appellant failed to produce a contemporaneous cash book or a customer-wise register that could link the cash deposits to specific banking transactions of villagers. A "source" of cash cannot be explained in a vacuum; it requires a granular trail. The appellant's submission lacks a "one-to-one" correlation. Without a daily cash balance report verified by the bank, the claim that these were customer funds is merely an assertion without evidentiary backing. In the absence of such records, the AO was justified in concluding that the explanation was not satisfactory. 5.5. On the Legal and Procedural Grounds (Section 144B): The appellant contended that the assessment is non-est because no "Draft Assessment Order" was issued. It is observed from the records that the assessment was conducted under Section 147 read with Section 144B. Under the current Faceless Assessment Scheme, a Show Cause Notice (SCN) stating the proposed variations is issued to the assessee. The records indicate that multiple notices under section 142(1) were issued (11/08/2023, 01/09/2023, etc.), and the appellant responded to these. 5.6. The requirement for a "Draft Assessment Order" as it existed in the initial version of the Faceless Scheme has been modified. The current legal requirement is the issuance of a Show Cause Notice where a variation prejudicial to the assessee is proposed. The AO did issue notices seeking explanation for the cash deposits, and the appellant was aware of the proposed addition. The principles of natural justice were followed as the appellant had multiple opportunities to submit evidence, which he did on various dates (25.01.2023 to 16.03.2024). Therefore, the argument that the order is non-est for lack of a draft order is technically and legally unsustainable under the amended provisions of Section 144B. 5.7. Conclusion on Factual Matrix: The appellant's role as a Bank Correspondent involves handling public money, which necessitates a higher standard of transparency and record-keeping. Using a personal joint savings account for such voluminous cash transactions without maintaining a formal cash book is a gross violation of standard accounting practices. It creates a commingling of personal and professional funds that makes the verification of the "source" impossible for the revenue authorities. 5.8. Relying on the principle laid down by the Hon'ble Supreme Court in Sumati Dayal vs CIT, the "test of human probabilities" must be applied. It is highly improbable that a professional handling over Rs. 52 Lakhs in cash would not maintain a single register or log documenting from whom the cash was collected and when. In the absence of such primary evidence, the addition under section 69A stands on firm legal and factual ground. 5.9. Therefore, after considering the totality of the facts, the legal provisions, and the failure of the appellant to discharge the primary onus of proving the nature and source of the cash deposits, I find no reason to interfere with the findings of the Assessing Officer. Decision: The appeal is rejected, and the order of the Assessing”

4 ITA No. 1580/PUN/2026 4. Dissatisfied, the assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. The Hon. Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi wrongly confirmed the addition made by the Ld. Assessing Officer of Rs.52,71,400/- u/s. 69A of the Income Tax Act, 1961. 2. The Hon. CIT(A), (NFAC), Delhi erred in not considering the Appellant acted as only Business Correspondent as per Regulations of RBI and Government of India's Policy of "Financial Inclusion of Rural Population in Banking System". 3. The Hon. CIT(A), (NFAC), Delhi erred in considering entire income of the Appellant as Deposited in Cash, but in fact the Appellant was earning 0.13% Commission of Amount Deposited as Bank Correspondent (BC). 4. The Hon. CIT(A), (NFAC), Delhi erred in not considering the submissions and the relevant documents produced before them during the Proceedings. 5. The Hon. CIT(A), (NFAC), Delhi, while conducting the proceedings has violated the Principle of Natural Justice. 6. The appellant craves leave to add, delete, amend, alter, vary and/or withdraw all or any of the above grounds of appeal.”

5.

We have heard the Ld. Representatives of the Parties and perused the material available on record and the paper book filed by the Ld.AR on behalf of the assessee. We find that the Ld.AO has completed the assessment treating the total cash deposits of Rs.52,71,400/- by the assessee in his two savings bank accounts maintained with Central Bank of India being Account No. 3341362177 and Account No. 3294819851 (Joint A/c with his father, Sahadev Mahipati Shedage) as unexplained money u/s 69A of the Act and added the same to the total income of the assessee, vide his order dt. 20-03-2024 passed u/s. 147 r.w.s. 144B of the Act. We find that the Ld.CIT(A)/NFAC has upheld the findings of the Ld.AO on the ground of assessee‟s failure to discharge the primary onus of proving the nature and source of the said cash deposits, the detailed reasoning of which is already reproduced in the preceding paragraphs. Before us, the Ld.AR at the outset submitted that the said cash deposits were made from transfer from Over Draft Account No. 03566769414 of the assessee. He submitted that the Ld.AO has wrongly narrated the fact that the assessee maintains a single savings bank account No. 3341362177

5 ITA No. 1580/PUN/2026 with Central Bank of India and Joint bank account along with his father bearing No. 3294819851 with Central Bank of India. He submitted that bank account No. 3341362177 is a joint account held by the assessee with his father, Mr. Sahadev Mahipati Shedage and bank account No. 3294819851 is jointly held by the assessee with his wife, Mrs. Ashwini Mahesh Shedage. Apart from these two accounts, the assessee also has an Over Draft Account No. 03566769414 and the alleged unexplained cash deposited have been made by transfer from the said Over Draft Account No. 03566769414. Referring to pgs. 433-473 of the paper book, the Ld.AR submitted that a full chart reflecting the transfer of entries in the Over Draft Account No. 03566769414 of the assessee was duly submitted before the Ld.AO as well as the Ld.CIT(A)/NFAC explaining the source of the said cash deposits. However, the same has not been considered.

6.

The Ld.AR further submitted that as per the direction of the Bench, the assessee has prepared a chart of cash deposits made to the joint account No. 3341362177 held by the assessee with his father, Mr. Sahadev Mahipati Shedage and bank account No. 3294819851 which is jointly held by the assessee with his wife, Mrs. Ashwini Mahesh Shedage in Central Bank of India, Phaltan Branch, Dist. Satara, wherein the date-wise details of the amount credited and debited to the said joint accounts of the assessee with his father and wife from the Over Draft Account No. 03566769414, which is held by the assessee as Business Correspondent of Central Bank of India, is provided. The said chart submitted by the Ld.AR is reproduced below:

6 ITA No. 1580/PUN/2026

7.

In view of his above submission, the Ld.AR requested that the issue may be set aside to the file of the Ld.AO with a direction to verify the transactions on one-to-one basis taking into consideration the transfers from the Over Draft Account of the assessee.

8.

On the other hand, the Ld.DR relied on the order of the Ld.CIT(A)/NFAC and the Ld.AO, however, he had no serious objection if the matter is set aside to the file of the Ld.AO, for verification of the assessee‟s claim.

9.

Considering the totality of the facts and in the circumstances of the case and in light of the above submissions/details filed by the Ld.AR, we deem it fit and proper, in the interest of justice to set aside the impugned order of the Ld.CIT(A)/NFAC and restore the matter back to the file the

7 ITA No. 1580/PUN/2026 Ld.AO with a direction to consider the impugned issue afresh and as per fact and law after providing due opportunity of hearing to the assessee. The Ld. AO shall make necessary verification and if the contention of the assessee is found to be correct, allow the same and amend the order accordingly as per law. We order and direct accordingly. The assessee is also hereby directed to make the submissions as may be required/called upon on the appointed date without seeking any adjournment under any pretext, unless required for the sufficient cause, failing which the Ld.AO shall be at liberty to pass appropriate order as per law. The effective grounds raised by the assessee are accordingly allowed for statistical purposes.

10.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

Order pronounced in the open Court on 14-10-2026

Sd/- Sd/- (RAMA KANTA PANDA) (ASTHA CHANDRA) VICE PRESIDENT JUDICIAL MEMBER पुणे/Pune; दिन ांक/Dated : 14-10-2026 TNMM

8 ITA No. 1580/PUN/2026 आिेश की प्रदिदिदप अग्रेदिि / Copy of the Order is forwarded to: 1. अपीि र्थी / The Appellant प्रत्यर्थी / The Respondent 2. 3. The concerned Pr.CIT, Pune 4. DR, ITAT, „B‟ Bench, Pune 5. ग र्ड फ ईि / Guard file. आदेशानुसार/ BY ORDER, Sunil Kumar Digitally signed by Sunil Kumar More // True Copy // More Date: 2026.10.24 12:59:11 +05'30' Assistant Registrar आयकर अपीिीय अदिकरण ,पुणे / ITAT, Pune

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