THIMMAIYA GOPALUDU,KRISHNAGIRI vs. ITO, WARD-1,, HOSUR

: 2. The effective ground of appeal in this appeal of assessee is against the confirmation of an addition of Rs. 29,50,000/- u/s. 69A of & 2774/Chny/2024 :- 2 -: the Income-tax Act, 1961 (hereinafter “the Act”) towards cash deposits in the assessee’s bank account.

On the other hand, the Ld. Departmental Representative (DR) has submitted that assessment order was passed within the statutory period. The Ld DR submitted that although the notice u/s. 148 of the Act was issued on 28.03.2019, it was returned unserved and the A.O has subsequently served the notice by way of affixture through the Inspector on 03.10.2019. The Ld. DR produced the report of the Inspector in this regard and argued that the assessment order dated 28.09.2021 was passed within the time limit prescribed u/s. 153(2) of the Act.

We have heard the rival submissions, and perused the materials available on record. We note that the A.O has issued notice u/s. 148 of the Act on 28.03.2019, which was returned unserved. The AO then effected service through affixture at the assessee’s address as given in the return of income, and subsequently passed the assessment & 2774/Chny/2024 :- 4 -: order on 28.09.2021. Accordingly, in view of the provisions of Section 153(2) of the Act, read with TOLA Act the assessment order passed is within the prescribed time limit. Therefore, the legal ground raised by the assessee is rejected.

The A.O has made addition of Rs.29,50,000/- in the order passed u/s. 144 of the Act on account of cash deposits. The assessee before the Ld. CIT(A) has explained that the deposits were made from past savings, which was not accepted. The assessee before us has submitted summery of cash deposit and withdrawal as under:

The AO has made the addition of the entire amount of cash deposits without considering the withdrawals made from the same bank account, which were available for redeposit. We find merit in the submission of the Ld. AR that only the peak credit should have been considered, which comes to Rs.16,00,000/-. The Ld AR has explained the source of the deposit as arising from his past savings and & 2774/Chny/2024 :- 5 -: retirement benefits received upon retiring as a VAO. We note that the assessee has retired as VAO during the relevant financial year and assessee must have received gratuity, leave encashment, and provident fund benefits ordinarily receivable by a government servant on retirement. However, the assessee has not been able to submit evidence in support of his contention that deposits were out of past saving and retirement benefit. Therefore, it is reasonable to presume that Rs.8,00,000/- could have come from such retirement benefits.

In this appeal, the A.O has levied penalty u/s. 271(1)(c) of the Act for concealment of income in respect of addition of Rs. 34,18,011/- made in the assessment order. On appeal, the Ld. CIT(A) has reduced the penalty corresponding to the addition of Rs.29,50,000/-, which had been confirmed in the quantum appeal. The assessee is now in appeal before us against the confirmation of the penalty.

At the outset, the Ld. AR has submitted that penalty order is Void ab-initio, as the A.O had failed to clearly specify in the notice u/s. 274 & 2774/Chny/2024 :- 6 -: of the Act whether the penalty was initiated for concealment of income or for furnishing inaccurate particulars of income. On merits, the Ld. AR has submitted that the penalty should be restricted to the amount of income sustained by the Tribunal.

On the other hand, the Ld. DR has submitted that the A.O in para 12 of assessment order had clearly stated that penalty u/s. 271(1)(c) of the Act were initiated for concealment of income. The Ld. DR further pointed out that notice issued u/s. 274 r.w.s 271(1)(c) of the Act, the additional remarks specifically mentioned that the penalty was being initiated for concealment of income.

We have heard the rival submissions, and perused the materials available on record. We find that the A.O had initiated penalty proceedings for concealment of income, and this is evident from the assessment order as well as the notice issued u/s. 274 of the Act.

On merits, in the quantum proceedings, we have already sustained the addition to the extent of Rs.8,00,000/- in respect of cash deposits made in the assessee’s bank account during the Financial Year 2011–12. The assessee has not been able to explain the source & 2774/Chny/2024 :- 7 -: of cash deposit, which represented the concealed income. We therefore upheld the order of Ld CIT(A)/AO to the extent of concealment of Rs.8,00,000/-. Accordingly, we direct the AO to re- compute the penalty u/s.271(1)(c) of the Act on the concealment of income of Rs.8,00,000/-. In view of the above, the appeal filed by the assessee in is partly allowed.

In the result, both the appeals filed by the assessee are partly allowed. Order pronounced on 08th May, 2025.