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Facts
The assessee's appeal was late by 55 days due to employment constraints, which he claimed hindered access to emails and the income tax portal. The appeal was against an order of the CIT(A) related to a rectification order passed by the AO concerning additions made on account of salary difference and unexplained cash deposits.
Held
The Tribunal condoned the delay in filing the appeal, finding the reasons to be bona fide. The Tribunal directed the deletion of the addition of Rs. 4,53,600/- confirmed by the CIT(A), stating that the assessee had sufficient cash withdrawals to cover the deposits and there was no evidence to suggest the withdrawn cash was used for other purposes or that the deposits were out of unaccounted income.
Key Issues
Whether the delay in filing the appeal can be condoned, and whether the addition made by the lower authorities on account of unexplained cash deposits is justified.
Sections Cited
154, 143(2), 143(3), 69A
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Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Suthakar Selvaraj (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the Addl./JCIT(A)-1, Gurugram [ld. CIT(A)] dated 04.03.2025 wherein the appeal filed by the assessee against the rectification order passed u/s. 154 of the Income-tax Act, 1961 [the Act] dated 24.2.2020 by the ITO, Ward 1(2), Mysuru [ld. AO] was partly allowed.
The assessee is aggrieved with the same and has preferred this appeal.
This appeal is late by 55 days and therefore the assessee filed an application for condonation of the delay along with. It was stated that assessment order was passed on 19/1/2019 which was further rectified on 24/02/2020. In the rectification order the amount of addition was reduced. Therefore the appeal was filed before the learned CIT – A 18/6/2020. This appeal was disposed of by the learned CIT – A on 4/3/2025. The appeal was filed on 25/7/2020. Therefore there is a delay. The delay is on account of the employment of the assessee because due to his employment there was limited access to his email and could not access the income tax portal. He was not aware of the order passed by the learned CIT – A. He got a call from local ITO, Mysore on the above passing of the demand order giving effect to the order of the CIT – A 21/7/2025. Later, on 23/7/2025 the appeal was prepared and it was filed on 25th of July 2025. This has caused the delay which is bona fide. It is small and therefore it may be condoned.
The learned DR vehemently objected to the same stating that there is no sufficient cause on delay in filing of the appeal and therefore the appeal cannot be admitted.
We have carefully considered the rival contention and find that delay has been on account of the employment of the assessee and he did not have any access to the portal of the Income Tax Department and therefore he was not aware about the order of the learned CIT – A. He came to know about the same only at the time of a call received from the income tax department about the outstanding demand which was raised on account of order giving effect passed by the AO. We find that delay is small, and is for bona fides reasons. Therefore same is condoned and appeal is admitted.
The brief fact of the case shows that assessee is an individual, who filed his return of income on 21/7/2017 at the total income of ₹ 578,420/–. The return of income was selected for scrutiny for verification of larger difference in total taxable income as per TDS return filed by employer and amount disclosed in the income tax return as well as large cash deposit during the year compared to return income.
Notice under section 143 (2) was issued on 16/8/2080. The assessee was asked to explain the difference. The assessee responded that assessee is an employee with Bharat Earth movers Ltd and has been sanctioned a housing loan from IDBI Bank. Assessee submitted F.No.16, promotion letter. As per the letter the annual gross total income of the assessee is ₹ 930,817. After claiming deduction, it was shown as ₹ 806,320/-. The increase in salary was also explained. The learned assessing officer examined the claim of deduction made by the assessee. It was found that there is a difference of Rs. 2,26,771/– between the total salary received and total salary shown in the return of income. In absence of proper explanation, the addition on account of difference in salary of Rs 226,771/– was made. Further it was found that assessee has deposited cash of ₹ 1,070,600/- in Canara bank
account during the year. The explanation of the assessee was considered, and the learned AO found that assessee has not explained ₹ 850,000/– and therefore further notices were issued to the assessee. It was submitted that the assessee has sold a property for total consideration of ₹ 13.50 lakhs wherein assessee has received a sum of ₹ 5 lakhs in Cash. Therefore, to the extent of ₹ 5 lakhs the source of cash deposit stands explained and the balance sum of ₹ 8,050,000 remained unexplained. The assessee explained that sum is deposited out of earlier cash withdrawal from the same bank account. Cash flow chart was also given where the assessee has withdrawn Rs 11 lakhs from the same bank account. However, Ld AO considered it as unexplained money under section 69A of the Act. Accordingly, the assessment order was passed under section 143 (3) of the Act on 19/12/2019 determining the total income of the assessee at ₹ 1,655,191/–.
Subsequently the learned assessing officer passed a rectification order u/s. 154 of the act on 24/2/2020 wherein it was found that though Assessee has made cash deposit of ₹ 1,070,600 out of which ₹ 5 lakhs was treated as explained and the balance amount of ₹ 850,000 was treated as unexplained. The said amount of ₹ 8,50,000 is an arithmetic error which should have been taken as ₹ 570,600. Therefore, assessed income was reduced to ₹ 1,149,020/-.
The assessee aggrieved filed an appeal before the learned CIT – A. In the appellate proceedings the assessee challenged the addition made
during the rectification proceedings. It was claimed that the assessee has not deposited cash on various date of ₹ 1,070,600 in the bank account of the assessee, however the lower authorities have failed to recognise that assessee has also withdrawn cash on various dates amounting to ₹ 1,108,500. The entire cash deposit was made from the savings amount withdrawn from time to time. It was further stated that assessee is an Assistant General Manager with BEML Ltd. Assessee also claimed that the entire amount deposited during the demonetisation period is merely ₹ 117,000. The assessee enclosed detailed cash statement showing that the cash withdrawal is the source of deposits of cash made in the same bank account. Therefore, there should not have been an addition.
The learned CIT – A in paragraph number 4.1.2 held that the bank statement filed by the assessee that he was receiving salary through bank transfer mode and as such any person withdrawing money in cash from his bank account would withdraw the cash for the purpose of his household expenses. The assessee has not furnished the explanation for huge withdrawal and deposits in his bank account. He held that no sane person, particularly the one drawing salary would indulge in habit of first unnecessarily withdrawing money from the bank and then depositing the same after a few days. Considering this, the sum of money deposited during the period of demonetisation amounting to ₹ 117,000/– is considered out of his past withdrawals for household expenses and accordingly he allowed a relief to that extent and confirmed the balance addition of Rs 4,53,600/–. Against this addition the assessee is in appeal.
We have heard the parties, carefully considered the orders of the learned lower authorities. The facts clearly shows that assessee has deposited a sum of ₹ 1,070,600 in the bank account of the assessee comprising of various cash deposits on forty-two occasions. Assessee has withdrawn a sum of ₹ 1,108,500 on 117 occasions. The learned CIT – A believed that out of ₹ 1,108,500 withdrawn by the assessee, the cash deposited during the demonetisation period on five occasions of ₹ 117,000 is treated as explained. However, he did not accept the explanation to the extent of the balance sum of Rs 453,600. We find that assessee has enough cash withdrawals from his bank account amounting to ₹ 1,108,500/– out of that a sum of Rs. 453,600/–, he has re-deposited. There is no reason to disbelieve the explanation of the assessee on the assumption that a person drawing salary does not indulge in the habit of first unnecessarily withdrawing money and from the bank and then depositing the same after a few days. We find that there is no evidence or source of such assumption. When there is no evidence that the amount of cash withdrawn by the assessee is used for some other purposes and the amount of deposit made by the assessee is out of unaccounted income of the assessee, the addition made of Rs 453,600/– which is supported by bank statement and the cash deposit and withdrawal statement placed by the assessee. It clearly shows the above fact that except on few occasions the amount of deposit and withdrawal is small. However, if we look at the fact that on some of the days the assessee has withdrawn ₹ 20,000 also and deposited the identical sum in the bank account. But it cannot have any adverse impact in absence of contrary evidence. Unless there is any adverse evidence, merely based on assumption and presumption, the addition could not have been made. Accordingly, we direct the learned assessing officer to delete the addition of ₹ 453,600/– confirmed by the learned CIT – A.
In the result appeal filed by the assessee is allowed.
Pronounced in the open court on this 26th day of September, 2025.