PANDURANGASETTY SATHEESH KUMAR,DENKANIKOTTAI vs. INCOME TAX OFFICER, WARD 1, HOSUR

Brief facts of the case are that the assessee is an individual, engaged in the business of mobile recharge services and trading in grocery items under the name of Vasavi Agencies, Hosur and did not file his return of income for AY 2017-18. As per information available with the department, the AO found that the assessee has deposited substantial amount of cash in the bank accounts during demonetization period. The case was selected for scrutiny under Operation Clean Money (OCM) cases, accordingly, a notice u/s.142(1) of the Act and statutory notices were issued to the assessee and by calling for details. In the meanwhile, the AO issued notice u/s.133(6) of the Act and obtained bank statement from Indian Bank. On perusal of the bank statement, the AO found that the assessee made cash deposits to the tune of Rs.25,42,000/- during the demonetization period. Since the assessee chose to be silent and failed to respond to any of the notices, the AO concluded the assessment and passed

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) on 12.01.2020.

At the outset, we observed that ld.CIT(A) has provided four opportunities for the assessee to appear for hearings as detailed in paragraph 3.1 of the ld.CIT(A) order to support the appeal of the assessee. However, the assessee chose to be silent and did not respond to any of the notices and hence the ld.CIT(A) passed an order dated 20.01.2025 by confirming the order of the AO. Aggrieved by the impugned order of the Ld.CIT(A), the assessee is in appeal before us.

The ld.AR submitted that the ld.CIT(A) erred in confirming the addition of Rs.25,42,000/- made u/s.69A r.w.s 115BBE of the Act, without appreciating that the cash deposits made during the demonetization period represented business receipts and that, in respect of the assessee’s mobile recharge business carried on as an agent, the assessee was entitled only to the marginal commission and, therefore, such business receipts could not be treated as unexplained money u/s.69A of the Act. In view of the above, the ld.AR prayed that the Tribunal may be pleased to set aside the order of ld.CIT(A) and remit the issues to the file of AO. Further, ld.AR assured the bench that the ld.AR will represent on behalf of the assessee before the AO to complete the assessment proceedings effectively.

Per contra, the ld.DR submitted that the assessee has already been given sufficient opportunity and there is no error in the order of the ld.CIT(A) and hence, prayed for confirming the order of the ld.CIT(A).

We have considered the rival submissions. Although the assessee failed to avail of the opportunities provided by the authorities below, the addition in question is required to be examined in the light of the actual nature and source of the cash deposits and the business activities carried on by the assessee. The assessee’s contention that the deposits arose from business receipts, including collections relating to mobile recharge transactions, requires verification with reference to the relevant bank statements, books of account, cash book, sales records, mobile recharge transaction statements, commission details and other supporting evidence, as may be applicable. The nature of the grocery trading activities and the corresponding cash receipts, if any, also require examination. In the absence of such verification, we deem it appropriate to restore the matter to the file of the AO for fresh examination rather than adjudicate the issue solely on the basis of the material presently available on record.

Accordingly, in the interest of substantial justice, we set aside the impugned order of the ld.CIT(A) and restore the matter to the file of the AO for framing the assessment de novo in accordance with law. The AO shall examine the nature and source of the cash deposits of Rs.25,42,000/- made during the demonetisation period, consider the explanation furnished by the assessee along with the supporting documentary evidence, and determine the assessable income in accordance with the applicable provisions of the Act. The

In view of the above and to meet the ends of justice we set aside the order of ld.CIT(A) and remit the matter back to the file of AO and direct the AO to frame the assessment denovo and pass the order in accordance with law, after providing reasonable opportunity to the assessee. Needless to say, the assessee to be diligent and file the details and relevant documents if advised so.

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