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Facts
The assessee made unexplained cash deposits totaling ₹29,07,242/- during the demonetization period and the remainder of FY 2016-17. Despite notices under Section 142(1) and 133(6), the assessee failed to file an Income Tax Return or provide supporting evidence for the deposits, which the Assessing Officer added under Section 69A, a decision confirmed by the Ld. CIT(A).
Held
The Tribunal remitted the matter back to the Assessing Officer for fresh adjudication, granting the assessee another opportunity to provide submissions and documentary evidence. The AO is directed to consider the Madras High Court decision regarding the applicable tax rates (30% for transactions prior to 01.04.2017 and 60% thereafter).
Key Issues
Whether the Ld. CIT(A) was justified in confirming the addition of unexplained cash deposits under Section 69A without adequately considering the assessee's fresh evidence, and the correct tax rate applicable for the period of deposits.
Sections Cited
250, 69A, 142(1), 133(6), 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K., VICE- & SHRI S.R. RAGHUNATHA
O R D E R
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 06.11.2024 and pertains to assessment year 2017-18 under section 250 of the Income Tax Act, 1961 [“Act” in short].
The only effective ground raised in the appeal of assessee for our consideration as to whether the ld. CIT(A) is justified in confirming the addition of ₹.29,07,242/- made under section 69A of the Act being cash
:-2-: ITA. No: 295/Chny/2025 deposited during demonetization period in the facts and circumstances of the case.
Brief facts of the case are that the assessee is an individual and as per the information received by the Department, the assessee made cash deposits of ₹.11,44,000/- during the demonetization period in the bank account maintained with the South Indian Bank. Since the assessee did not file the return of income for the AY 2017-18, the Assessing Officer issued notice under section 142(1) of the Act requiring the assessee to file the return of income. Since there was no response from the assessee, by issuing notice under section 133(6) of the Act, the Assessing Officer obtained bank statement and observed that during the demonetization period, the assessee made cash deposits of ₹.11,44,000/- and the cash deposits for the remaining period of FY 2016-17 was ₹.17,63,242/-. Since there was no response/reply from the assessee and the deposits remain unexplained, the Assessing Officer treated the same as unexplained money under the provisions of section 69A of the Act and assessed the income of the assessee under “income from other sources”.
The assessee carried the matter in appeal before the ld. CIT(A) and furnished additional grounds/fresh evidence. In order to satisfy the provisions of Rule 46A of the Income Tax Rules, the ld. CIT(A) sought for the remand report from the Assessing Officer. The Assessing Officer
:-3-: ITA. No: 295/Chny/2025 submitted remand report and the same is reproduced at para 6 of the impugned order. Moreover, the remand report was confronted with the assessee and in response to that, the assessee filed his reply and the same is reproduced in pages 7 to 9 of the impugned order. However, since the assessee could not file any documentary evidence to substantiate the claim of the assessee, the ld. CIT(A) confirmed the addition made by the Assessing Officer.
On being aggrieved, the assessee carried the matter in appeal before the Tribunal.
The ld. AR Shri J. Saravanan, Advocate, submits that the ld. CIT(A) erroneously sustained the addition being the entire cash deposits made in assessee’s bank account. He further submits that during the course of remand proceedings, the assessee filed the reply on various dates, which are neither accepted not rejected by the Assessing Officer. The ld. AR vehemently contended that the cash deposits, both during demonetization period and the remaining period, were from earlier cash withdrawals from the same Bank account, jewel loans borrowed, agricultural income and p proceeds from his tyre business. He further submitted that though the ld. CIT(A) duly noted the fresh evidences/written submissions of the assessee and obtained remand report and counter reply of the assessee, the ld. CIT(A) confirmed the addition made by the Assessing Officer is not :-4-: ITA. No: 295/Chny/2025 justified. By producing copy of bank statement, which consists both deposits and withdrawals, the ld. AR prayed that the matter may be remanded to the file of the Assessing Officer for fresh adjudication.
Per contra, the ld. DR Shri A. Sasi Kumar, CIT drew our attention to page 6 of the impugned order and submitted that the assessee was given fair opportunities to furnish supporting evidence to substantiate his claim, but, however, the assessee was silent after seeking adjournment.
Having heard both the parties, we note that the assessee is doing tyre puncture pasting business, second hand tyre sales and also an agriculturist. Before us, the AR filed detailed written submissions with break-up of cash deposits during demonetization period totaling to ₹.11,44,000/-. It was the submissions of the ld. AR that the assessee’s main source of income was from agriculture, which is exempt from taxation, but, however, could not brought on record any documentary evidence to substantiate the claim of the assessee either before the Assessing Officer or before the ld. CIT(A) or even before this Tribunal.
In his written submissions, the ld. AR made an alternative plea that if the cash deposits to the tune of ₹.29,07,242/- is to be assessed under section 69A of the Act in respect of cash deposits made in the FY 2016-17, the Assessing Officer ought to have been applied the rate at 30% only, whereas, the Assessing Officer made the addition under section 69A of the :-5-: ITA. No: 295/Chny/2025 Act by applying the tax rate at 60% plus applicable surcharge and cess. By relying upon the decision of the Hon’ble High Court of Madras in the case of S.M.I.L.E. Microfinance Ltd. v. ACIT in W.P. (M.D) No. 2078 of 2020 dated 19.11.2024, wherein, it was held that the revenue is empowered to impose 60% rate of tax for transactions from 01.04.2017 and not prior to the said cut-off date and for prior transaction, the revenue is empowered to impose only 30% rate of tax, the ld. AR prayed that the matter may remitted to the file of the Assessing Officer for fresh consideration.
Admittedly, the assessment was completed under section 144 of the Act. On perusal of the assessment order, we note that there was no assistance from the assessee to the notices issued by the Assessing Officer. The ld. CIT(A) passed exparte order without considering the written submissions filed by the assessee, bank statements, rejoinder to the remand report filed before the ld. CIT(A).
Under the above facts and circumstances and in the interest of justice, we deem it proper to remit the matter to the file of the Assessing Officer to decide the issue afresh by affording one more opportunity of being heard to the assessee to consider his submissions as may be filed and pass order in accordance with law keeping in mind the above decision of the Hon’ble High Court of Madras in the case of S.M.I.L.E. Microfinance
:-6-: ITA. No: 295/Chny/2025 Ltd. v. ACIT (supra). Thus, the grounds raised by the assessee are partly allowed for statistical purposes.
In the result the appeal of the assessee is allowed for statistical purposes. Order pronounced in the court on 17th April, 2025 at Chennai.