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Facts
The Revenue Department appealed against an order of the Commissioner (Appeals) concerning the Assessment Year 2017-18. The Assessee had deposited a significant amount of cash (Rs. 25,88,495/- and later Rs. 3,85,27,871/-) during the demonetization period but failed to file an income tax return or explain the source of these deposits.
Held
The Tribunal held that the Assessee's failure to provide explanations and documentation for the substantial cash deposits made during the demonetization period indicated that these were likely undisclosed income. The Commissioner's deletion of a portion of the addition was found to be based on conjecture. Therefore, the issue was remanded to the Assessing Officer for a fresh decision.
Key Issues
Whether the substantial cash deposits made by the Assessee during the demonetization period, without proper explanation or return filing, constitute undisclosed income. The adequacy of the Commissioner's deletion of additions made by the AO.
Sections Cited
142(1), 139, 144(1)(b), 133(6), 68, 270A, 274, 11, 12A, 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Revenue Department against the order dated 25.06.2024, impugned herein, passed by the National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short “Ld. Commissioner”) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
2. In the instant case, the notice u/s 142(1) of the Act was issued to the Assessee on dated 24.03.2018, by which the Assessee was asked to prepare a true and correct return of income, relevant to the assessment year under consideration and to furnish the same in the manner prescribed in Rule 12 of the Income Tax Rules, 1962 (in short ‘the Rules’) on or before 31.03.2018, however, the Assessee failed to furnish the same either u/s 139 (on or before 31.03.2018) or in response to the notice issued u/s 142(1) of the Act.
Subsequently, on the basis of data analytics and information gathered during the phase of online verification under “operation clean money” the Revenue Department has gathered a list of Assessees who, during the demonetization period (from 09.11.2016 to 30.12.2016) though had deposited substantial cash in bank account/s but have not filed any income tax return for the A.Y. 2017-18.
4. According to the data, it was also revealed that the Assessee during the demonetization period, had also deposited an amount of Rs.25,88,495/- as cash in its bank accounts including in old currency (Rs.500/- & Rs.1000/- notes), in the following bank accounts:
S Name & address Bank Date of Cash No. of bank Account deposit deposit in No. Rs.
1 UCO Bank, Fort 00030100 09-11- 2016 8,52,695/- Branch 029062 to 31-12- 2016 2 Vijaya Bank, 12010101 09-11-2016 5,06,375/- Bangalore 1006533 to 31-12- 2016 3 Bank of 20032792 09-11-2016 7,16,925/-
Maharashtra, 385 to Belapur Branch 31-12- 2016 4 Axis Bank, 91202003 09-11- 2016 5,12,500/- Aurangabad 83611 to Branch 31-12- 2016 25,88,495/ Total
From the aforesaid details, it was observed by the Assessing Officer (AO) that the Assessee though has made cash deposits of Rs.25,88,495/- during the demonetization period but has not filed its return of income for the AY under consideration, either u/s 139 or in response to the notice issued u/s 142(1) of the Act and therefore, the source of cash deposits made remained un-explained. As the Assessee failed to comply with the terms of notice issued u/s 142(1) of the Act and therefore by taking refuge of the provisions of section 144(1)(b) of the Act, the AO proceeded with the completion of assessment as “best judgment assessment”. However, before proceeding further, he issued a final show cause notice dated 23.09.2019 in manual form and through ITBA portal-registered email ID.
6. In response to the said notice, the Principal of Siddharth College of Commerce & Economics, vide letter dated 24.09.2019 furnished the reply on behalf of the Assessee manually, and more or less has claimed as under:
“5.1 A final show cause notice dated 23-09-2019 was issued and served through manually and through ITBA Portal-Registered email id, in response the Principal of Siddharth College of Commerce & Economics vide letter dated 24.09.2019 furnished the reply on behalf of the Trust manually which is as under: “
“............In this connection we would like to state that trust- People’s Education Society has various institutions under its fold and these educational institutions receive fees from their students in cash which have been deposited in their bank accounts. You’re already aware that there have been disputes between the Trustees of the Trust and different groups are claiming Chairmanship of this Trust...........................”
The trust is running various educational institutions and the fees received from their students in cash has been deposited in their bank accounts. However, there have been disputes between the trustees of the trust for the chairmanship of the trust.”
Though the AO considered the above reply/letter dated 24.09.2019, however, found the same as not acceptable on the following reasons:
“That the Assessee has failed to furnish any supporting evidences relating to the activities undertaken by the Assessee Trust, nature of income earned, details of cash deposits made in the bank accounts, sources of cash deposits, details of cash deposits made during pre and post demonetization period along with sources thereof. As the Assessee has not supported its case by supporting evidences as called for in notice u/s 142(1) of the Act and therefore the he is having left with no option but to complete the best judgment assessment on the basis of material evidences gathered during the assessment proceedings, such as calling from the bank , the account opening form, bank account statement, KYC details of cash deposits made during F Y 2016- 17, details of cash deposits made during demonetization period, money trail, credit entries, debit entries and details of amount/sum transferred to other accounts by issuing notice u/s 133(6) of the Act to various banks”.
The AO further observed that on analysis of bank statements it was revealed that during F.Y. 2016-17 especially demonetization period, there were various credit and debit entries were available, in the bank accounts of the Assessee, having been made qua cash deposits, however, the Assessee has not offered any income from its activities by not filling any return of income. The Assessee also neither complied with the terms of notices issued nor responded online to the communication sent to the Assessee in terms of e- proceedings.
The AO, therefore on the aforesaid reasons, ultimately made the addition of Rs.3,85,27,871/-, by observing and holding as under:
“9. The data analysis of bank statement reveals various Credit entries, including Cash deposits made during the F Y 2016-17, especially during demonetization period. It is evident from bank credit and debit entries, the Assessee received credit entries, made cash deposits, but has not filed Income Tax Return, not offered Income from its activities and not paid taxes due on. The Assessee Trust has failed to comply with the terms of notices issued by this Office and never responded online to the communication sent to the Assessee company in terms of E- Proceedings. Considering the above facts and elaborate discussion, it is evident that Assessee failed to establish source and nature Cash deposits made during the F Y 2016-17, relevant to Assessment Year 2017-18. The details of cash deposits appearing in his Bank account of the Assessee company, which remained unexplained is given here under :-
“CASH DEPOSITS MADE DURING DEMONETISATION PERIOD (9th Nov to 30th December, 2016)
Table:3 S Name & Bank Date of deposit Cash No. address of Account No deposit bank in Rs.
1 UCO Bank, 0003010002 Between 8,52,695/- Fort Branch 9062 09-11- 2016 to 31-12- 2016
2 Vijaya Bank, 1201010110 Between 5,06,375/- Bangalore 06533 09-11- 2016 to 31-12- 2016
3 Bank of 2003279238 Between 7,16,925/ Maharashtra, 5 09-11- 2016 Belapur to Branch 31-12- 2016
4 Axis Bank, 9120200383 Between 5,12,500/- Aurangabad 611 09-11- 2016 Branch to 31-12- 2016 Total 25,88,495/- CASH DEPOSITS APPEARING DURING F Y 2016-17 Table:4
S No. Name & address of Bank Account No. Cash deposit in bank Rs. 1 UCO Bank, Fort 00030100029062 72,97,895/- Branch 2 Vijaya Bank, 120101011006533 5,06,375/- Bangalore 3 Bank of 20032792385 65,26,201/- Maharashtra, Belapur Branch 4 Axis Bank, 912020038361113 2,24,00,500/- Aurangabad Branch 5 Axis Bank, 916020085367511 8,94,900 Aurangabad Branch 6 Axis Bank, 914010015758122 9,02,000 Aurangabad Branch 3,85,27,871/-
ANALYSIS OF CASH ENTRIES APPEARING DURING F Y 2016-17 • The Reserve Bank of India (RBI) had withdrawn Legal Tender character of old bank notes in the denomination of Rs 500/- and Rs 1000/- w.e.f. 8 th November, 2016, through Specified Bank Notes (cessation of liabilities) Act, 2017 and Specified Bank Notes (deposit of confiscated notes) Rules, 2017. • As per details provided by the bank, the Assessee Trust had deposited Cash mainly old currencies of denomination of Rs 500/- and Rs 1000/- which were withdrawn or transferred to others. • The sources of deposits of old currency notes (SBNs) were not explained. • It is apparently clear that the cash deposits made in the bank accounts during F Y 2016-17 relevant to A Y 2017-18, especially during demonetization period, are unexplained and from undisclosed sources, the same was not offered for taxation purposes.
10. In the present case, the Assessee had deposited Cash in the bank account of UCO Bank, Vijaya Bank, Bank of Maharashtra and Axis Bank amounting to Rs. 3,85,27,871/- (as per Table: 4 ) which is treated as explained cash credit.
Therefore, in cases where Assessees’ deposited huge Cash in bank accounts during Demonetization period (9th November, 2016 to 30th December, 2016), but the sources were neither explained nor such receipts offered for taxation, the onus is on the Assessees’ to prove that the Cash deposits made did not bear the character of income. In this case, the Assessee Trust has failed to prove this fact that the Cash deposited during demonetization period are normal general receipts and therefore,
I hold that the amount of Deposits made in the bank accounts, including Cash deposited during Demonetization period, represented income from undisclosed sources. The Assessee Trust has concealed its true income which otherwise is taxable. Further, by relying upon deposits as cited in above tables that there was ample evidence that Cash was deposited in bank accounts, which is prima facie evidence against the Assessee that the deposits are undisclosed income or gross receipts on which the Department can proceed in absence of good explanation.
The Assessee has made cash deposits amounting to Rs. 3,85,27,871/- (Table:4 ) appearing in the account of UCO Bank, Vijaya Bank, Bank of Maharashtra and Axis Bank of the Assessee Trust in the F Y 2016-17 relevant to A Y 2017-18 remained unexplained and also undisclosed. Section 68 of the Income tax Act, 1961, provides that where any sum is found credited in the books of the Assessee for any previous year it may be charged to income-tax as the income of the Assessee of the previous year if the explanation offered by the Assessee about the nature and source of such sums found credited in the books of the Assessee is, in the opinion of the Assessing Officer, not satisfactory. Such opinion itself constitutes a prima facie evidence against the Assessee relating to the receipt of income, and if the Assessee fails to rebut the evidence it can be used against the Assessee holding that it was a receipt of an income. To prove the genuineness of the transaction, the burden lies on the Assessee and to discharge the onus, the Assessee must prove (i) the identity of the creditor, (ii) the capacity of the creditor to advance money, and (iii) the genuineness of the transaction. The Assessee Trust has not filed ITR for the particular Assessment Year i.e. 2017-18, not declared its true income and has not paid taxes due thereon. The Assessee Trust has not responded to notices u/s 142(1) issued during E-assessment proceedings (Table:2). The Assessee Trust failed to give any explanation about the nature and source of cash deposits, appearing in the Bank Account as tabulated in the body of the Order (Table:4 ) is treated as undisclosed and considered as the undisclosed Gross receipts of the Assessee in the year under consideration. Penalty proceedings 270 A r.w.s 274 of the I.T. Act is initiated separately for misreporting of income.
13. As discussed above, the Assessee has not filed any reply through e filing portal and it is pertinent to mentioned here that the Assessee has not submitted audit report in prescribed form as per Income Tax Act and Rules despite having gross receipts more than minimum prescribed limit. From the above, it is evident that the Assessee has made cash deposits of Rs. 3,85,27,871/- and the same has not been offered for taxation. There are debit entries in bank accounts of the Assessee, however, the Assessee has not submitted the copy of 12A certificate and neither filed
return of income to claim expenses. Therefore, the Assessee is not eligible for claim of exemption u/s. 11 of the act.
13.1 As discussed above, cash deposits amounts to Rs. 3,85,27,871/-. The Assessee has not offered any explanation regarding nature and source of the above deposits, therefore, the same is remained unexplained and also undisclosed as the Assessee has not filed return of income. Section 68 of the Income- tax Act, 1961, provides that where any sum is found credited in the books of the Assessee for any previous year it may be charged to income-tax as the income of the Assessee of the previous year if the explanation offered by the Assessee about the nature and source of such sums found credited in the books of the Assessee is, in the opinion of the Assessing Officer, not satisfactory. Such opinion itself constitutes a prima facie evidence against the Assessee relating to the receipt of income, and if the Assessee fails to rebut the evidence it can be used against the Assessee holding that it was a receipt of an income. To prove the genuineness of the transaction, the burden lies on the Assessee and to discharge the onus, the Assessee must prove (i) the identity of the creditor, (ii) the capacity of the creditor to advance money, and (iii) the genuineness of the transaction. The Assessee Trust has not filed ITR for the particular Assessment Year i.e. 2017-18, not declared its true income and has not paid taxes due thereon. The Assessee Trust has not responded to notices u/s 142(1) issued during E-assessment proceedings (Table:2). The Assessee Trust failed to give any explanation about the nature and source of cash deposits, hence the value of Credit entries/ gross receipts of Rs. 3,85,27,871/-. is treated as undisclosed and considered as the undisclosed Gross receipts of the Assessee in the year under consideration. Penalty proceedings 270 A r.w.s 274 of the I.T. Act is initiated separately for misreporting of income.”
The Assessee, being aggrieved, challenged the said addition before the Ld. Commissioner and raised following grounds of appeal:
“1.The AO erred in making the addition of Rs.3,85,27,871/- on account of deposits during the FY 2016-17 and levying taxes and interest thereon and initiating penalty proceedings without considering the facts of the case and without providing sufficient opportunity of being heard to the Assessee.
2.The Ld. AO passed the order u/s.144 without giving proper opportunity to the Assessee which is against natural justice.
3. The AO levied tax on deposits of Rs.3,85,27,871/- in various bank accounts of educational institutions belonging to the Trust u/s.68 without verifying the fact that those deposits were made out of various fees received by those educational institutions from their students.
4. The appellant craves to leave to add further grounds of appeal on or before the date of hearing.”
11. The Ld. Commissioner though by issuing various notices dated 02.04.2024, 20.05.2024 & 12.06.2024 to the Assessee had sought for following information:
“1. Please submit a copy of the registration u/s.12A/12AA. Please also explain the activities conducted by the Trust.
It is seen that you are non-filer of income tax returns for the AY 2017-18. Please explain whether your accounts are audited subsequently; if so, please furnish copies of P&L account, balance sheet etc. Please furnish nature and source of cash deposits of Rs.3,85,27,871/- in your bank account during the FY 2016-17 along with necessary evidences.
3. Please furnish copies of your bank accounts with UCO Bank, Fort Branch, Vijaya Bank, Bengaluru, Bank of Maharashtra, Belapur Branch and Axis Bank, Aurangabad for the FY 2016-17.
Please submit detailed submissions in support of your grounds of appeal along with necessary supporting and case laws if any.”
12. Somehow, the Assessee made no response to the aforesaid notices and therefore, the Ld. Commissioner in constrained circumstances decided the appeal of the Assessee, on the basis of material available on record. The Ld. Commissioner, though affirmed the addition of Rs.25,88,495/- made by the AO on account of deposits made during the demonetization period in its bank accounts by the Assessee, as un-explained by holding as under:
“6. The appellant submits that the cash deposits were made out of the fee receipts received by various educational institutions belonging to the Trust. However, the submissions of the appellant in this regard are not substantiated with necessary evidences.
Moreover, the appellant did not file its return of income for the subject AY. During the assessment proceedings or even during the appellate proceedings, the appellant did not furnish any information or evidences in support of its claim that the cash deposits are made out of its fee receipts. There may be partly some merit in the contentions of the appellant as some percentage or proportion of the fee receipts received by the educational institutions would be in cash. It is seen that the total cash deposits made by the appellant during the FY 2016-17 are Rs.3,82,27,871/- which includes an amount of Rs.25,88,495/- made during the demonetization period from 09.11.2019 to 31.12.2016. However, despite giving sufficient opportunities by the AO, the appellant did not explain the nature and sources of the cash deposits made during the demonetization period. Even during the appellate proceedings, the appellant did not avail the opportunities. Therefore, the cash deposits made during the demonetization period amounting to Rs.25,88,495/- in the bank accounts remains unexplained. Accordingly, the grounds in this regard are dismissed.”
However, the Ld. Commissioner, after excluding the cash deposit of Rs.25,88,495/- made during demonetization period and considering the facts and circumstances, understood that the substantial cash deposits to the tune of Rs.3,56,39,376/- are out of course fees received by the institution. There may be partly some cash deposits, source of which, may not be from regular courses. Therefore, to meet the ends of justice and protect the interest of Revenue, the Ld. Commissioner directed the AO to consider 80% of the cash deposits of Rs.2,85,11,501/- as out of course fees collected from the students and the balance of Rs.71,27,875/- as un-explained cash deposits of the Assessee.
In consequence, the Ld. Commissioner sustained the addition of Rs.71,27,875/- out of the amount of Rs.3,56,39,376/- and deleted the remaining amount of Rs.2,85,11,501/-.
The Revenue Department, being aggrieved, challenged the decision of the Ld. Commissioner in deleting the addition of Rs.2,85,11,501/- by filing 2nd appeal, which is under consideration.
This case was initially heard on 13.02.2025, as respective parties were represented by their representatives, who eventually argued the case and therefore on consideration of the orders passed by the authorities below, specifically by the Ld. Commissioner, it was transpired that the decision of the Ld. Commissioner in deleting the addition is not supported by any documents, as the Assessee remained un-represented on six occasions, out of seven, except filling its reply manually, only in response to the show cause notice dated 23.09.2019 and therefore for just and proper decision of the case and substantial justice, we were constrained to direct the Assessee to file Substantive documents in support of its claim and the Ld. AO through Ld. DR to file complete documents along with the reply manually filed by the Assessee on dated 25.09.2019, as reflects in the impugned order.
Though the AO has filed certain documents, such as notices issued u/s 133(6) and 142(1) of the Act, show cause notice and directions, register/journal of registered post in order to prove service of notice to the Assessee, during the assessment proceedings. The AO further clarified that the Assessee except filing its reply dated 24.09.2019 (page 38 of paper book) demonstrating the deposit amounting to Rs.25,88,495/- made during demonetization period, eventually submitted no reply against the cash deposit of Rs.4,00,00,000/-.
This Court has given reasonable opportunity to the Assessee to substantiate its claim, however, the Assessee, reason best known to it, failed to substantiate the same. From the impugned order, it is clear that the addition deleted by the Ld. Commissioner, has no base, as the Ld. Commissioner vide para 6.1 of the impugned order has understood that the substantial cash deposits are out of course fees received by the institution, just on the basis of conjecture and surmises and therefore the decision of the Ld. Commissioner in deleting the addition of Rs.2,85,11,501/-, is un-sustainable.
Mr. Devendra Jain {Ld. Advocate/Counsel of the Assessee} on the date of substantive hearing on 13.02.2025, had submitted that many legal as well as internal disputes are going on, in between the Assessee trust and other members of the society qua ownership of the present society, which are currently preventing the Assessee from taking definite legal action and making key decisions necessary for preparation of the case. And therefore the Assessee prays for remand of the instant case to the file of the AO or the Ld. Commissioner, however with a direction to provide an opportunity of being heard to the Assessee, for establishing its claim by producing relevant documents/reply. The Ld. DR though controverted the impugned order and requested for setting aside of the impugned order and restoring the Assessment order, however alternately agreed for remand of the case, to the extent as challenged in this case.
Thus, considering the peculiar facts and circumstances referred to above in totality, as the issues involved in the instant case remained to be adjudicated in its right perspective and proper manner, specifically in the absence of relevant documents and reply which the Assessee has failed to file and the Assessment order passed is also an ex-parte order; therefore for just and proper decision of the case and substantial justice, we are inclined to remand the issue concerning the addition deleted by the Ld. Commissioner, to the file of the Jurisdictional Assessing Officer for decision afresh, suffice to say by affording reasonable opportunity of being heard to the Assessee. We also deem it appropriate to direct the Assessee to comply with the notices and file the relevant documents and reply, in order to substantiate its claim.
We clarify that in case of subsequent default, the Assessee shall not be entitled for any leniency.
Thus, the impugned order to the extent as challenged by way of this appeal, is set aside and consequently the issue/addition under challenge, is accordingly, remanded to the file of the Jurisdictional Assessing Officer for decision afresh.
In the result, the appeal filed by the Revenue Department stands allowed for statistical purposes.
Order pronounced in the open court on 23.05.2025.