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Facts
The assessee challenged an addition of Rs. 26,62,500 made by the AO and confirmed by the CIT(A) treating cash deposits as unexplained money. The assessee claimed the deposits were from cash withdrawals, personal savings, and loans, but failed to provide supporting evidence.
Held
The Tribunal held that the CIT(A) passed an ex parte order without considering the merits of the case. The Tribunal restored the matter to the CIT(A) for a fresh decision after providing the assessee with a reasonable opportunity to present their case and evidence.
Key Issues
Whether the CIT(A) erred in dismissing the appeal ex parte without considering the merits of the case, and if natural justice principles were followed.
Sections Cited
250, 133(6), 143(2), 69A
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Income Tax Appellate Tribunal, ‘SMC’ BENCH : BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER
This appeal has been preferred by the assessee against the order dated 18/02/2025 passed by the National Faceless Assessment Center (NFAC), Delhi/Ld. CIT(A) in short (Ld. Commissioner) u/s 250 of the Income-tax Act 1961 (in short ‘the Act’) for the assessment year 2017-18.
The effective issue raised by the assessee through the grounds of appeal is that the learned CIT(A) erred in confirming the addition of Rs. 26,62,500/- made by treating the cash deposit as unexplained money u/s 69A of the Act in an ex parte order.
The relevant facts are that the assessee is an individual. For the A.Y. 2017-18 the assessee filed return of income as on 09th March 2018 declaring total income of Rs. 6,01,510/- which included income derived from Salary, house property, business & profession and other sources. The return was selected for scrutiny under CASS to verify the cash deposit and cash withdrawal during the year and accordingly notice u/s 143(2) of the Act was issued on 16th August 2018.
During the assessment proceeding, the AO obtained the bank statements of the assessee by issuing notice under section 133(6) of the Act to the concerned bank. It was found that the assessee during the year had made cash deposit of Rs. 26,62,500/- in bank account maintained with Sri Rama Co-operative Bank Ltd and SBI. Hence, the assessee was required to explain the nature and the source of the impugned cash deposits.
The assessee explained that the cash deposits during the year was sources out of cash withdrawal from bank for Rs. 11,50,00/- only, withdrawal from current accounts of Rs. 2,80,000/-, rent receipt of Rs. 3,42,000 which have already been offered to tax and withdrawal from partnership firm, the income of which was already offered to tax. Besides the above, the assessee claimed that he has availed loan of Rs. 60 Lakh from Sri Rama Cooperative Bank during F.Y. 2015-16 out of which cash of Rs. 10 Lakh was kept for repaying the loan and same was deposited during the year i.e. F.Y. 2016-17.
The AO did not accept the explanation of the assessee. The AO found that the assessee deposited a total of ₹26,62,500/- in various bank accounts during FY 2016-17. When asked to explain the source of these deposits, the assessee claimed that the amounts were available in cash, partly from withdrawals and partly from personal savings. However, no supporting documentary evidence, statement of affairs, or books of account were filed to substantiate these claims. The AO noted that the assessee’s explanation lacked credibility because no prudent person would withdraw cash for loan repayment when fresh loans were also being taken. No details of household expenditure, investments, or any other financial records were provided to justify the availability of such cash.
Since the assessee failed to explain the nature and source of the cash deposits despite sufficient opportunities, the AO concluded that the deposits remained unexplained. Accordingly, by invoking the provisions of section 69A of the Act, the AO held that the entire amount of ₹26,62,500/- represented unexplained money and added it to the assessee’s total income for Assessment Year 2017-18.
The aggrieved assessee preferred an appeal before the learned CIT(A).
Before the learned CIT(A), the assessee besides filing the statement of facts along with form 35 has not made any submission, explanation and evidence in support of the grounds of appeal. The learned CIT(A) issued several notices providing opportunity to the assessee to file submission and documentary evidence to support the grounds of appeal, but the assessee failed. Hence, the learned CIT(A) in the absence of submission, explanation and evidence held that the assessee has nothing to say against the finding of the AO and the assessee is not interested in pursuing the appeal. Thus, the learned CIT(A) dismissed appeal of the assessee.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before this Tribunal.
The learned AR before us submitted that the reply to the notices issued by the learned CIT(A) was not made for the reason that the notices were not received by the assessee as the same were issued on wrong e-mail address. The learned AR further submitted that the learned CIT(A) was not right in dismissing the appeal in an ex parte order merely for the reason that the response to the notices issued were not made without considering the issue on the merit.
On the contrary learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials placed on record. It is an admitted position that the learned CIT(A) has passed the impugned order ex parte, without considering issue on the merit. As such the assessee during the assessment proceeding has submitted the reply and the explanation. However, no submission or reply was made during the appellate proceedings. The assessee has contended that non-compliance before the learned CIT(A) was not deliberate but due to the fact that the notices were issued to an incorrect e-mail address, and hence the same were not received by him.
It is well-settled law that the first appellate authority is required to dispose of the appeal by passing a speaking order in accordance with the provisions of section 250(6) of the Act, after considering the grounds raised and the merits of the case. Dismissing the appeal for non-prosecution, without examining the matter on merits, amounts to denial of justice. The principle of natural justice demands that adequate and proper opportunity should be given to the assessee to present his case and support his explanation with necessary evidence.
In the present case, since the order of the learned CIT(A) is ex parte and the assessee has explained the circumstances for non-appearance, we are of the considered view that the matter deserves to be restored back. Therefore, in the interest of justice and fair play, we set aside the impugned order of the learned CIT(A) and remit the matter back to his file with the direction to decide the appeal afresh on merits after giving reasonable opportunity of hearing to the assessee. The assessee is also directed to extend full co-operation and file all necessary evidence in support of his claim. Thus, the appeal of the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 26th August, 2025.