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Facts
The Assessing Officer (AO) made an ex-parte addition of Rs. 1,09,82,690/- as unexplained money under Section 69A for cash deposits during the demonetisation period, as the assessee failed to file a return of income or comply with notices. The Commissioner of Income Tax (Appeals) deleted this addition after the assessee submitted fresh evidence (audit report, P&L account, balance sheet, and bank statements) that had not been presented to the AO.
Held
The Tribunal ruled that the CIT(A) erred by admitting fresh evidence without obtaining a remand report from the AO, thereby violating Rule 46A(3) of the Income Tax Rules, 1962. Given the assessee's complete non-compliance before the AO and failure to file a return, the Tribunal set aside the CIT(A)'s order. The matter was remanded back to the AO to provide the assessee an opportunity to file the computation of income and justify the cash deposits.
Key Issues
1. Whether the CIT(A) was justified in admitting fresh evidence without obtaining a remand report from the AO, violating Rule 46A(3) of the Income Tax Rules, 1962. 2. Whether the addition of cash deposits during demonetisation as unexplained money was justified given the assessee's non-compliance with the AO and non-filing of income tax return.
Sections Cited
250, 144, 142(1), 69A, Rule 46A(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH”, KOLKATA
ITO, Siliguri, Aayakar Bhawan, Paribahan Nagar, Matigara, West Bengal – 734010 ……..…...…………….... Appellant vs. Shubhasish Dey, 503 Pati Colony, Road No. Pradhan Nagar, West Bengal - 734003 [PAN: AODPD7287F] ................................. Respondent Appearances by: Assessee represented by : Promit Majumdar, Adv. Department represented by : Sanat Kumar Raha, CIT-DR S.B. Chakraborthy, Sr. DR Date of concluding the hearing : 22.07.2025 Date of pronouncing the order : 24.07.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER
This is Revenue’s appeal which arises from order dated 07.09.2023, passed u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. In this case, the Ld. AO passed an order dated 20.12.2019 through which an addition of Rs. 1,09,82,690/- was made through proceedings u/s 144 of the Act. It has been recorded by the Ld. AO that neither did the assessee file any return of income nor did he comply with notices issued by the Ld. AO and hence the cash deposit during demonetisation period was added to his income as unexplained money u/s 69A of the Act.
“4.3 The appellant also filed copies of tax audit report, P&L a/c and Balance Sheet. Though the appellant claimed that tax audit report along with P & L a/c and balance sheet filed on 28/03/2018, return of income was not filed for relevant AY 2017-18 in spite of receipt of notice issued u/s 142(1) of the I.T Act. Hence the AO completed the assessment u/s 144 vide order dated 20/12/2019. During the course of appellate proceedings, the appellant submitted the audit report, P & L a/c, balance sheet and the bank account maintained for the purpose of business in Union Bank of India, Pati Colony Branch, Siliguri. Perusal of the documents revealed the fact that the appellant was a petty trader of mobile recharge vouchers of IDEA Cellular Ltd. Appellant carried out the business in the name and style of M/s P.M. Traders. The said bank account revealed that cash was deposited regularly into bank account and immediately remitted back to IDEA Cellular Ltd. through NEFT. 4.4 Perusal of the documents filed by the appellant revealed the fact that the e- recharge voucher sold by the appellant is only credited in his bank account and immediately remitted back to IDEA Cellular Ltd regularly on day to day basis. The appellant earned commission income and that was duly reflected in the audited financials. The AD without verifying these facts treated entire cash credit of Rs.1,09,82,691/- as unexplained money. The AO is directed to delete the addition of Rs. 1,09,82.691/- made as unexplained money u/s 69A of the IT Act. In view of the above, the grounds of the appellant are allowed.” 1.2 The Revenue has filed the present appeal with the following grounds:
“1. Whether the CIT(A) is right in admitting fresh evidences filed before him which was not produced before the Assessing Officer. The CIT(A) erred by admiting fresh evidences without calling remand report from the AO in contravention of Rule 46A(3) of the Income Tax Rule, 1962.
2. That the Ld. CIT(A), has not discussed in his appellate order the reasons of accepting additional evidences and the situation which prevented the assessee from producing such evidence before the AO. Therefore, the appellate authority has erred to accept additional evidence without discussing the sufficient cause.
3. That the Ld. CIT(A) has failed to appreciate the fact that even though the assessee has failed to file ITR in response to notice u/s 142(1) of the Act, he went ahead to accept the net profit shown in audited Profit and Loss account without filing valid return.
4. That the department reserves the right to add, delete, review, change or modify any ground in the course of hearing.”
The Ld. DR pointed out that this was a case where there was no return of income and there was absolutely no compliance made before the Ld. AO. Thereafter, the Ld. CIT(A) is seen to have perused the tax audit report, P & L Account and balance sheet and copies of the bank statement to hold that the claim of the assessee for “zero” tax was justified. The Ld. Subhasish Dey DR elaborated on this issue and stated that since no return of income was filed hence it was clear that the assessee had not disclosed any taxable income or loss. Thereafter, in case the addition made by the Ld. AO was to be deleted then the assessee would we allowed to get away by not declaring even a single rupee of income or loss. The Ld. DR also emphasised that since no compliance was made before the Ld. AO then there was a good chance that the material used by the Ld. CIT(A) to grant relief was fresh evidence which was not in the knowledge of Ld. AO, in violation of Rule 46A of the IT Rules.
2.1 Per contra, the Ld. AR vehemently argued that the audit report was filed and was available with the Ld. AO and in case he had wanted to examine the same he could have done so. He also stated that no new documents were filed before the Ld. CIT(A) and thereafter, on a justified appraisal of facts, the Ld. CIT(A) has given relief. The Ld. AR stated that since no new documents were filed hence there was no reason why there could be any ground for invoking rule 46A of the IT Rules. On a query from the Bench regarding not filing of return of income and thereby not declaring any income or loss in spite of there being a profit and loss account in which by the assessee’s own admission some profit was there, the Ld. AR stated that even though this P&L account is there but still the Ld. AO was not justified in making the impugned addition.
We have carefully considered the rival submissions and have also gone through the records before us. It is obvious that in this case, the assessee never made any compliance before the Ld. AO. Also, no return of income was filed and thus, the Ld.AO was prevented from analysing whether the deposits in the bank account were considered for the purposes of determining taxable income by the assessee or not at all. In the light of a situation where there was no return of income and there was no compliance by the assessee then the only option left with the AO was to assess in a manner that he actually did. We are not sure of what prompted the Ld. CIT(A) to arrive at a conclusion that the cash deposits etc. were duly Subhasish Dey considered for the purposes of determining taxable income by the assessee, since no return of income was filed. Considering these facts, the impugned order is set aside and the matter is remanded back to the file of Ld.AO for providing an opportunity to the assessee to file his computation of income and also give justification for the amounts deposited during demonetisation period. It is also evident that there would be cash deposits all through the year and even these would need to be verified for the purposes of determining the taxable income of the assessee. It would be expected from the assessee to present all the facts and documents before the Ld. AO for this purpose.
With these remarks, appeal of the Revenue is allowed for statistical purposes.
Order pronounced on 24.07.2025