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Facts
The assessee company did not file its return of income for AY 2017-18. It later filed a return after a notice u/s 142(1). The case was reopened u/s 148 due to cash deposits exceeding turnover. The AO made additions u/s 69A for unexplained cash deposits.
Held
The Tribunal held that the additional evidences (audited financials and cash book) filed by the assessee were essential for adjudication. For substantial justice, these were taken on record. The matter was restored to the AO for a fresh opportunity to the assessee.
Key Issues
Whether the cash deposits made during the demonetization period are unexplained money, and whether additional evidence produced before the Tribunal should be admitted.
Sections Cited
142(1), 143(3), 148, 144, 69A, 250, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 24.02.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
2. Brief facts of the case are as follows: The assessee is a company. For the assessment year 2017-18, assessee did not file its return of income. The Department had information that assessee company had made cash deposit in various bank accounts during the demonetization period. Hence, notice u/s.142(1) of the Act dated 14.02.2018 was issued calling for filing of the return of income for the relevant assessment year namely 2017-18. In response to notice issued u/s.142(1) of the Act, assessee filed its return of income on 19.03.2018. Thereafter there was no proceedings u/s.143(3) of the Act. The case was reopened by issuance of notice u/s.148 of the Act on 08.05.2019 for the reason that cash deposits made of Rs.15,50,000/- exceeded the total turnover of Rs.13,80,000/- which was shown in the ITR. In response, the assessee company filed return of income on 07.05.2019 showing gross receipts of Rs.13,80,000/- and arrived at a net profit of Rs.76,817/- which was set-off against brought forward depreciation loss of earlier years. During the course of reassessment proceedings, the AO issued letter u/s.133(6) of the Act to the bank, where the assessee company had maintained its bank account calling for the copies of bank statements for the relevant assessment year. From the bank statement received it was noticed that assessee had made cash Rs.15,50,000/- during the demonetization period and assessee was asked to explain the source of the cash deposits. Since assessee did not respond to the notices issued calling of the source of cash deposits, the AO issued show-cause notice proposing best judgment assessment u/s.144 of the Act. Since there was no response to show-cause notice issued, assessment was completed u/s.144 of the Act vide order dated 18.09.2019. In the said assessment order, the AO added entire cash deposits made during the demonetization period as unexplained money u/s.69A of the Act.
Aggrieved by the assessment completed u/s.144 of the Act, assessee preferred appeal before the First Appellate Authority (FAA). Before the FAA, assessee raised grounds on merits as well as on legal contention that reopening of assessment is bad in law. Though the grounds were raised both on legal contentions as well as on merits, the Ld.AR candidly admitted that before the FAA submissions were made only with regard to legal grounds raised and not on merits. The FAA rejected the grounds of the assessee both on legal issue and on merits.
4. Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. Before the Tribunal, assessee has filed the petition for admission of additional evidence under Rule 29 of the Income Tax Appellate Rules, 1963. The additional evidence filed before the Tribunal is audited financials of the assessee company and cash book for the relevant assessment year. The Ld.AR submitted that the assessee company was incurring losses and the financials of the assessee company was very bad. It was submitted that management of assessee company omitted to take note of the notices issued from the office of the AO. Therefore, the proceeding before the AO culminated in a best judgment assessment u/s.144 of the Act. The Ld.AR submitted that before the FAA though written submissions were given with reference to legal grounds raised before him, assessee company had omitted to furnish evidences with regard to cash deposits. The Ld.AR submitted that additional evidences now filed before the Tribunal is essential to prove that the addition made by the AO is wholly unjustified and erroneous and prayed that the documents now produced as additional evidence may be taken on record for substantial cause and justice.
The Ld.DR strongly relied on the order of the FAA.
6. I have heard rival submissions and perused the material on record. The assessee had not furnished any evidence regarding the source of cash deposits made during the demonetization period. Before the FAA, though assessee had given written submission with regard to legal grounds raised however has omitted to furnish the evidences with regard to the source of cash deposits. The assessee before the Tribunal has furnished the additional evidences namely the audited financials and cash book for the relevant financial year 2016-17. The additional evidences now produced goes to the root of the matter and are essential for adjudication of the issue raised. Hence, for substantial justice and equity, the additional evidences now produced before the Tribunal are taken on record. The assessee has not given effective representation before the AO and the FAA. I strongly deprecate the nonchalant attitude of the assessee in not appearing or giving effective representation before the AO and the FAA. However, in the interest of justice and equity, as a last opportunity, I deem it appropriate to restore the matter to the files of the AO. All the contentions raised before the Tribunal both legal and on merits is restored to the files of the AO. The AO shall afford a reasonable opportunity of hearing to the assessee. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 11th September, 2025 at Chennai.