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Facts
The assessee, engaged in business, filed returns for AY 2017-18. The Assessing Officer (AO) selected the case for limited scrutiny regarding cash deposits during demonetization. The AO found cash deposits of ₹.7,11,000/- and a closing balance of ₹.4,95,448/-, with a difference of ₹.2,15,500/-, which was treated as unexplained cash credit.
Held
The Tribunal noted that the AO rejected the assessee's explanation that cash deposits were from sales without proper verification. Therefore, in the interest of justice, the matter was remanded to the AO for fresh verification.
Key Issues
Whether the addition of ₹.2,15,500/- as unexplained cash credit was justified without proper verification of the assessee's explanation regarding cash deposits from sales, and whether the CIT(A) rightly dismissed the appeal for non-compliance to hearing notices.
Sections Cited
68, 143(1), 133(6), 143(3)
AI-generated summary — verify with the full judgment below
Before: Shri S.S. Viswanethra Ravi & Shri Jagadish
Year: 2017-18 Sethu Pillai Nagalingam, Vs. The Income Tax Officer, No. 6, Anna Square, Ward 1, Thiruvarur 610 001. Tiruvarur. [PAN:AADPN3943J] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri J. Saravanan, Advocate ��थ� की ओर से/Respondent by : Shri Vijay Kumar, JCIT सुनवाई की तारीख/ Date of hearing : 18.06.2025 घोषणा की तारीख /Date of Pronouncement : 30.06.2025 आदेश /O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order dated 19.02.2025 passed by the Addl. JCIT(A)-7, Delhi for the assessment year 2017-18.
The assessee raised 8 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the addition made by the Assessing Officer on account of treating cash deposits during demonetization period as unexplained cash credit under section 68 of the Income Tax Act, 1961 [“Act” in short].
Brief facts relating to the case are that the assessee derives income from doing business in the name of M/s. Ponvandu Agencies and filed his return of income for AY 2017-18 on 21.09.2017 admitting total income of ₹.4,09,020/-. The return was processed by the CPC under section 143(1) of the Act. Subsequently, the case was selected for limited scrutiny to verify cash deposit during the year. Against statutory notices, the assessee filed the details as called for. The Assessing Officer also obtained bank statement under section 133(6) of the Act. On verification of the bank statement, the Assessing Officer asked the assessee to explain the source for cash deposits of ₹.3,39,72,710/- and the assessee also filed explanation. On verification of bank accounts, the Assessing Officer found that the assessee made cash deposits of ₹.7,11,000/- in SBN during demonetization period. On verification of the cash book, the Assessing Officer noted the closing balance/cash in hand on 08.11.2016 was only ₹.4,95,448/- and thus, the assessee was asked to explain the difference of total cash deposits and closing cash balance of ₹.2,15,500/-. The assessee filed detailed explanations, which is reproduced at page 2 of the assessment order that the cash deposits were out of sales, duly recorded in the books and corresponding GST also paid in respect of such sales. Since the assessee could not furnish the details of customers/client, the Assessing Officer did not accept the explanations of the assessee and the amount of ₹.2,15,500/- is treated as unexplained cash credit under section 68 of the Act and added to the total income of the assessee. On appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer and dismissed the appeal of the assessee for non- compliance to the hearing notices issued by the ld. CIT(A).
The ld. AR Shri J. Saravanan, Advocate submits that non- compliance to the hearing notices issued by the ld. CIT(A) is neither wilful nor wanton. He further submits that the assessee is not an educated person and solely depend on office assistant, who failed to inform about the hearing notices issued by the ld. CIT(A). The ld. AR argued that though the assessee is an illiterate, he fully co-operated with the Department during the course of assessment proceedings by furnishing complete details before the Assessing Officer. Since the assessee has prayed to afford an effective opportunity by raising specific ground, the ld. AR prayed that the assessee may be afforded one more opportunity to substantiate his case before the before the authorities below.
The ld. DR Shri Vijay Kumar, JCIT drew our attention to page 11 & 12 of the impugned order and argued that the ld. CIT(A) afforded ample opportunities to the assessee, but there was no compliance from the assessee and supported the order of the ld. CIT(A).
Heard both the parties and perused the material available on record. In this case, the Assessing Officer completed the assessment under section 143(3) of the Act by making addition under section 68 of the Act, against which the assessee preferred an appeal before the ld. CIT(A). As per page 11 & 12 of the impugned order, we note that the ld. CIT(A) issued hearing notices on various dates, but, however, neither any reply was furnished nor any adjournment was sought for by the assessee. On perusal of the assessment order, we note that without verifying the explanations offered by the assessee that the cash deposits were out of sales, duly recorded in the books and corresponding GST also paid in respect of such sales, the Assessing Officer rejected the above explanation, is incorrect. Accordingly, in the interest of justice, we deem it proper to afford one more opportunity and remand the matter to the file of the Assessing Officer to verify and decide the issue afresh by affording one more opportunity to the assessee and pass order in accordance with law. The assessee is at liberty to furnish documentary evidence, if any, to substantiate his claim before the Assessing Officer. Thus, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 30th June, 2025 at Chennai.