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Facts
The assessee, a trust running an educational institute and a petrol pump, failed to file income tax returns. The Income Tax Department gathered information about a cash deposit of ₹3,235,900 during the demonetization period. An assessment order was passed under Section 144, leading to additions under Section 69A and Section 115BBE.
Held
The Tribunal held that while the assessee was given opportunities, there were issues with providing complete documentation. The Tribunal restored the issue to the Assessing Officer to allow the assessee to substantiate the cash deposit with proper documentation, including sales books, cash flow statements, and audited accounts.
Key Issues
Whether the additions made under Section 69A and Section 115BBE were justified without proper opportunity for the assessee to submit full documentation, and if the principles of natural justice were followed.
Sections Cited
144, 142(1), 133(6), 69A, 115BBE, 234
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Taluka Shikshan Prasarak Mandali Sindagi (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 11.6.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 144 of the Income-tax Act, 1961 [the Act] dated 16.11.2019 by the ITO, Ward 3, Bijapur [ld. AO] was dismissed.
The assessee is aggrieved and has preferred following grounds.
“1. On the facts and in the circumstances of the case, the ld. CIT(A) erred in upholding the order passed under sec 144 of the Act by the learned assessing authority is opposed to law and not valid and accordingly liable to be cancelled.
2. On the facts and in the circumstances of the case, the ld. CIT(A) ought to have given the opportunity to Appellant for explanation and refrained from confirming the impugned addition of Rs.32,35,900/- by applying the provisions of Sec.69A r w s 115BBE of the Act.
3. The learned CIT(A) ought to have appreciated that the notices issued to the Appellant were not received due to the fact that the trustee of the Appellant Trust was unwell and, as a result, was unable to provide instructions to others for the filing of the Income Tax Return and submission of replies. Therefore, the impugned addition is unwarranted and deserves to be deleted.
The learned CIT(A), in the interest of justice, ought to have provided the Appellant with a further opportunity in case he was not satisfied with the details available on record. Having failed to do so, the impugned addition is contrary to law and violative of the principles of natural justice. Accordingly, the addition made is liable to be deleted.
5. The ld. CIT(A) erred in confirming the addition of Rs. 32,35,900/- by treating entire income as unexplained and brought to tax under Section 69A of the Income Tax Act. The appellant had duly explained that the deposited cash for Rs 27,35,900/- into the Union Bank out of sale of petroleum products of the other firm, which was not related to the Appellant Trust and the confirmation letter was furnished.
6. When the source, nature and identity of the persons transacted to is established then confirming the invocation of section 69A of the Act is itself bad in law and therefore the impugned addition confirmed by the CIT(A) is liable to be deleted.
7. The ld. CIT(A) erred in confirming the provisions of Section 115BBE of the Act to the additions made under Sections 69A of the Act despite the fact that the transactions were fully explained. The invocation of Section 115BBE, which imposes a higher rate of tax on unexplained income, is wholly unjustified in the present case.
8. The ld. CIT(A) ought to have appreciated that during remand proceedings the Appellant has made a submission before the AO and submitted the details which were called for, without appreciating the explanation about source of cash deposit, the CIT(A) has proceeded to confirm the addition.
Without prejudice the addition is excessive arbitrary and unreasonable and liable to be reduced substantially.
The learned assessing authority erred in levying the interest us 234 of the Act.
For these and other grounds that may urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
Brief facts of the case shows that assessee is a trust running the educational Institute under the name and style of Taluka Shikshan Prasarak Mandali Sindagi and business of petroleum products under the name and style of Basaveshwar Petroleum at that place. The assessee did not file any return of income. On the basis of data analytics and information gathered during the phase of online verification under operation claim money the income tax department gathered information that assessee has made a cash deposit of ₹ 3,235,900 during the financial year 2016 – 17 relevant to assessment year 2017 – 18 in the demonetisation period of 9.11.2016 to 30.12.2016 and has not filed any return of income. Therefore notice under section 142 (1) of the Act was issued to the assessee. The assessee did not file any return of income. The assessee was also issued a show cause notice which was not furnished by the assessee. As the assessee has failed to furnish any details relating to its business activities undertaken, nature of income earned, details of bank accounts, details of cash deposits made in the bank account, sources of cash deposit and details of cash deposits made during demonetisation period, the learned assessing officer also issued a notice under section 133 (6) of the Act to the Karnataka Bank and Union Bank of India calling for the bank details of cash deposit. On the basis of the information it was found that assessee has deposited cash to the tune of ₹ 3,235,900 during demonetisation period in old currency notes. Therefore the learned assessing officer passed an assessment order under section 144 of the Act on 16/11/2019 making the addition of ₹ 3,235,900 under section 69A of the Act and taxed at the rate of 60% and surcharge at the rate of 25% as per provisions of section hundred and 15 BBE of the Act.
4. The assessee aggrieved with the assessment order preferred an appeal before the learned CIT – A. Before the learned CIT – A assessee furnished F.No. 35 along with the additional evidences such as copy of bank account statement and the statement of Hindustan Petroleum Corporation Limited. Same are forwarded to the learned assessing officer by the learned CIT – A for obtaining the remand report. The remand report of the assessee is reproduced by the learned CIT – A at paragraph 5.2 of the appellate order. On the basis of this remand report rejoinder letter was issued to the assessee calling for the comments which was not complied with the assessee and therefore the learned CIT – A reached at the conclusion that the appellant has not controverted the findings of the learned assessing officer by furnishing any written submission in response to the remand report. Therefore the learned CIT – A reached at the conclusion that the learned assessing officer has made the addition of ₹ 3,235,900/– as income of the appellant under section 69A of the Act correctly, accordingly the addition was upheld. Appeal of the assessee was dismissed.
The learned authorised representative submitted that that assessee is carrying on the activity of educational institute and also running a petrol pump but did not file any return of income because of the reason that the President of the trust was suffering from prolonged ill-health and further the tax practitioners and chartered accountants were busy in filing the income tax return and GST return. The President of the trust had requested for time and the AO hurriedly passed the assessment order u/s. 144 of the Act. Therefore one opportunity must be granted to the assessee. Assessee maintains the regular books of accounts and the cash deposited in the Union Bank of India for ₹ 2,735,900 is out of the business turnover of petroleum products. The cash was collected from the customers from the sale of petrol and diesel. Before the learned CIT – A assessee has submitted the details of the statement of account from Hindustan Petroleum Corporation Ltd. and the copy of the bank statement which clearly shows that the amount of cash deposited in the bank account is out of the cash sales of petroleum products. She further referred to paragraph no. 5.2 of the appellate order wherein the remand report furnished by the learned assessing officer was reproduced. She submitted that the addition has been made by the learned assessing officer as assessee has not furnished copy of sales ledger and cash flow statement for the period under consideration and therefore he did not believe the total cash deposit of ₹ 2,735,900. It was submitted that as the assessee has submitted the bank statement and the statement of Hindustan petroleum Corporation Ltd the learned assessing officer and the learned CIT – A should have accepted the same. With respect to the cash deposit of ₹ 5 lakhs it was submitted that it was pertaining to the another Institute wherein the assessee has furnished the bank letter confirming the same. She further submitted that merely because the assessee has not furnished copies of sales books, cash books and cash flow statement, the addition is confirmed. She further referred to paragraph no. 5.4 of the appellate order and stated that the learned CIT – A though noted that assessee has not submitted the rejoinder to remand report but did not give any credence to the bank account statement and the copy of account of Hindustan petroleum Corporation Limited. If both these items would have been verified, the addition would not have been made.
The learned DR vehemently supported the order of the learned lower authorities and submitted that assessee has been given enough opportunity before the learned CIT – A for submission of the rejoinder to the remand report before the assessing officer. The assessment order has resulted into an assessment u/s. 144 of the Act. Before the learned CIT-A also the assessee trust did not give any information. Therefore there is no infirmity in the orders of the learned lower authorities.
We have carefully considered the rival contention and perused the orders of the learned lower authorities. We find that the assessee trust
did not find any return of income. The learned assessing officer has given enough opportunities to the assessee by serving the notices on the email mentioned by the assessee. Further the notices were not replied to. During the course of remand proceedings also the learned assessing officer issued several intimations to the assessee to submit the detail but assessee has not responded. Before the assessing officer during the assessment proceedings as well as during the remand proceedings the assessee did not submit any information. Therefore the addition was made by the learned assessing officer and further confirmed the same facts during the course of remand proceedings. The learned CIT – A on the basis of the above remand report confirmed the addition. We find that in this case the cash deposit of ₹ 3,235,900 is stated to be out of the sale of petroleum products where the assessee is running a petrol pump and assessee submitted the same by corroborating the statement of Hindustan petroleum Corporation Ltd. The assessee did not furnish any information for the reason that the President of the assessee trust has requested the time as he was not well and suffering from prolonged health issues. We find that one more opportunity in the circumstances may be given to the assessee as the information furnished by the assessee with respect to the Hindustan petroleum Corporation Ltd statement with respect to the petroleum business of the assessee and cash was deposited out of the same. In view of this we restore the whole issue back to the file of the learned assessing officer with a direction to the assessee to substantiate the deposit of cash in its bank account of ₹ 3,235,900/– by furnishing the copies of the sales book, cashbook and cash flow statement along with the annual audited accounts of the assessee. The assessee is also directed to show that the amount of cash deposit is out of the petroleum business of the assessee and a further sum of ₹ 5 lakhs is belonging to the other Institute. The assessee is also required to explain the amount of ₹ 773,900 deposited in cash with Union Bank current account No.
The learned assessing officer may examine the same, grant an opportunity of hearing to the assessee and then decide the issue afresh.
In the result, the appeal by the assessee is allowed for statistical purposes.
Pronounced in the open court on this 26th day of September, 2025.