PERUR BUILDERS PRIVATE LIMITED,COIMBATORE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CORPORATE WARD 1, COIMBATORE

The brief facts of the case are that the assessee is a Private Limited Company. It is an admitted position that the assessee did not file its return of income for the A.Y.2018-19 within the prescribed time. The case of the assessee was reopened on the basis of information available with the Department indicating that cash deposits aggregating to Rs.73,70,235/- had :-3-: ITA. No.:635 /Chny/2025 been made in the bank account of the assessee during the relevant financial year, coupled with the fact of non-filing of return of income for the said assessment year. Consequently, a notice u/s.148 of the Act was issued on 30.03.2022.

In response to the said notice, the assessee filed its return of income declaring NIL total income. During the course of reassessment proceedings, the AO called upon the assessee to explain the nature and source of the cash deposits amounting to Rs.73,70,235/- in its bank account.

In reply, the assessee submitted that it had entered into a lease agreement with M/s.Cheran Foundation Trust in respect of certain land owned by it, which had been leased out to the said Trust for the purpose of establishing a hostel for girl students. It was explained that the hostel residents, by inadvertence, had deposited cash aggregating to Rs.73,70,235/- into the assessee’s bank account. The assessee further contended that out of the said amount, a sum of Rs.42,15,704/- had been refunded to the Trust, while the balance amount of Rs.31,54,531/- was outstanding and payable to the Trust as on 31.03.2018. It was thus contended that the source of cash deposits represented amounts deposited by the hostel residents of the Trust and did not constitute unexplained income of the assessee.

The AO, however, was not satisfied with the explanation so furnished.

Accordingly, the AO concluded that the cash deposits of Rs.73,70,235/- made in the assessee’s bank account maintained with Bank of India represented unexplained money, the source of which remained unproved. The AO therefore, treated the said amount as unexplained money u/s.69A of the Act and made an addition to the total income of the assessee.

Aggrieved, assessee carried the matter before the Ld.CIT(A) who vide order dated 12.12.2024 dismissed the appeal of the assessee.

Aggrieved further, assessee is in appeal before us.

The Ld.AR appearing on behalf of the assessee submitted that the cash deposits in question were made inadvertently by the hostel residents into the bank account of the assessee. It was further contended that the said deposits represent amounts belonging to the trust and, therefore, the same cannot be regarded as unexplained money within the meaning of section 69A of the Act.

Per contra, the Ld.DR vehemently contended that the explanation tendered by the assessee is neither satisfactory nor substantiated by any cogent evidence and appears to be a concocted version intended to create an impression that the source of the cash deposits represents hostel receipts of the trust. The Ld.DR, placing reliance on the findings recorded in the assessment order as well as the order of the Ld.CIT(A) submitted that the AO has rightly made the impugned addition. It was, therefore, prayed that the order of the Ld.CIT(A) be upheld and the appeal preferred by the assessee be dismissed.

We have considered the rival contentions and perused the material on record. The sole issue that arises for our consideration is the addition of Rs.73,70,235/- made by the AO treating the cash deposits in the bank account of the assessee during the impugned assessment year as unexplained money u/s.69A of the Act. We find that the lease agreement between the assessee and Cheran Foundation Trust was executed on 20.03.2017, wherein it was stated that interest free security deposit of Rs.75,00,000/- was agreed upon. Upon perusal of the Balance Sheet of the assessee, we find no such security deposit was disclosed as on 31.03.2017. Further, the purpose of lease is for residential and not for commercial. The Ld.CIT(A) has rightly pointed out that no lease rent appears to have paid to the assessee and no lease rentals have been reflected in the financials of the assessee. In view of this, we are of the considered

Upon perusal of the bank account statement of the assessee, we note that starting from April 2017 till the end of the financial year, there are cash deposits at various places in the range of Rs.16,500/-. The assessee claims that these cash deposits made by hostel residents by mistake in the bank account of the assessee. We are not convinced with the explanation of the assessee for the reason that how the hostel residents are aware of the bank account of the assessee and how the mistake was allowed to continue for the entire year. In fact, the assessee not being the intended owner has never returned the entire money immediately. Further, we notice from the bank account of the assessee that cash deposits were utilized by the assessee for certain payments. We also note that the lease agreement entered into with the Trust by giving the land owned by the assessee on 20.03.2017. The pertinent question is that how the rent was due to the trust by the occupants of hostel without having built the building from May 2017 itself.

In light of the above, we are of the considered opinion that the assessee had failed to satisfactorily substantiate the source for cash deposits of Rs.73,70,235/- in its bank account during the assessment year under consideration. Thus, we find that the AO has rightly made the addition u/s.69A of the Act. Accordingly, we uphold the order of the Ld.CIT(A) in confirming the :-7-: ITA. No.:635 /Chny/2025 addition made by the AO. Thus, the grounds of appeal raised by the assessee are dismissed.

In the result, the appeal of the assessee is dismissed.