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Facts
The assessee, a pensioner, made cash deposits of Rs. 15,00,000/- during the demonetization period. He claimed Rs. 13,50,000/- of this was repayment of loans from 8 individuals, which he had advanced from his retirement benefits. The AO and CIT(A) rejected this explanation due to inconsistencies in statements, lack of PANs for the alleged lenders, failure to produce them for verification, and evidence that retirement funds were intact without prior cash withdrawals.
Held
The Tribunal found that the AO had passed the order and made additions without providing a reasonable opportunity to the assessee to explain his case and produce the creditors for verification, despite the assessee's indication of readiness to do so. Therefore, the matter was set aside and restored to the AO for a 'de novo' consideration, granting the assessee another chance to prove the source of the cash deposits.
Key Issues
Whether the cash deposits during demonetization constituted unexplained money under Section 69A of the Income Tax Act, and whether the assessee was afforded sufficient opportunity to substantiate the source of these deposits.
Sections Cited
69A
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Income Tax Appellate Tribunal, Hyderabad “SMC” Bench, Hyderabad
करदाता का प्रतततितित्व/ : Mr. S. Venkateswarlu, Tax Assessee Consultant Represented by राजस्व का प्रतततितित्व/ : Ms. B.K. Vishnu Priya, Sr. Department Represented by A.R. सुिवाई समाप्त होिे की ततति/ : 11.12.2025 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 19.12.2025 Date of Pronouncement O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Addl/Joint Commissioner Income Tax (Appeals), Mumbai, dated 15.07.2025, pertaining to the assessment year 2017-18. 2 Ramesh Addu
The brief facts of the case are that, the assessee is a pensioner, filed his return of income for A.Y. 2017-18 on 11.07.2017, admitting total income of Rs. 4,37,810/-, which consists of income from salary/pension, income from house property, and income from other sources. The case was selected for scrutiny under CASS to verify cash deposited made during demonetization period. During the course of assessment proceedings, the A.O. noticed that, the assessee has made cash deposits of Rs. 15,00,000/- into SBI, UCO Bank, SBI/SPH, and Kotak Mahindra Bank during the demonetization period. The A.O. called upon the assessee to submit relevant evidences including source for cash deposit during the demonetization period. In response, the assessee submitted that, source for cash deposit was out of current year income and also repayment of loans of Rs. 13,50,000/- by 8 persons. The assessee has further contended that, he had given advances to various persons out of his retirement benefits and the same has been received back before the demonetization period and after announcement of demonetization period, the cash available with the assessee has been deposited in the bank accounts.
3 Ramesh Addu
The A.O. after considering the relevant submissions of the assessee called upon the assessee to file relevant details of loans received back from 8 persons including confirmations and also their identity and also to prove the credit worthiness. In response, the assessee has filed confirmation letters from all 8 persons along with their name and addresses, however, failed to furnish PAN number and other details. The A.O. after considering the relevant submissions, once again called upon the assessee to produce the persons for examination, for which the assessee has failed to produce the persons. However, on 11.12.2019, the assessee claimed before the A.O. that the parties are ready to present before the A.O. on 13.12.2019. The A.O. after considering the relevant submissions of the assessee and also taking note of various details, rejected the explanation of the assessee and made additions of Rs. 13,50,000/- towards cash deposits into the bank account during demonetization period, as unexplained money under Section 69A of the Act by holding that, the assessee has changed his arguments right from the beginning, whereas in the initial stages, the assessee has furnished certain names and claimed that, he has received back loan amount from the above 4 Ramesh Addu persons, however, at later stage the assessee has given different names except in one case of Mr. Bharath Reddy. However, even in the case of Mr. Bharath Reddy, the assessee has failed to prove the identity and creditworthiness of the parties. Therefore, rejected the explanation of the assessee and made addition of Rs. 13,50,000/- towards cash deposits under Section 69A of the Income Tax Act, 1961.
Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has reiterated the arguments made before the A.O. claimed and that assessee being a retired pensioner had advanced loans to various persons out of his retirement benefit and the same has received back during the financial year under consideration which is a source for cash deposited into bank account. The Ld. CIT(A) after considering the relevant submissions of the assessee and also taken note of the reasons given by the A.O. to make addition towards cash deposits, observed that, the explanations given by the assessee have been inconsistent and contradictory. Initially, the source of cash deposits was claimed to be retirement benefits, however, later, the assessee stated that, the deposits were from 5 Ramesh Addu recovery of earlier loans from 8 individuals. Yet again, a third version was submitted where the names and figures did not match the earlier explanation and only one person overlapped between the two lists. Such contradictory and shifting stance wear away the credibility of the explanation offered by the assessee. It is also significant to note that, as per the A.O.'s detailed verification, the assessee's retirement benefits were intact and available in his UCO Bank account. The bank statements produced show no substantial cash withdrawals prior to the demonetization period from any of the four bank accounts. Most transactions in these accounts were carried out through NEFT/RTGS. This indicates that the assessee did not withdraw any corresponding amounts in cash to support the alleged cash loans. Therefore, taking note of the relevant reasons given by the A.O., rejected the explanation of the assessee and sustained addition of Rs. 13,50,000/- as unexplained money under Section 69A of the Income Tax Act, 1961.
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
6 Ramesh Addu
The learned counsel for the assessee, Shri S. Venkateswarlu, referring to the submissions made by the assessee before the A.O., dated 15.03.2019, submitted that, the assessee has filed confirmation letters from all the persons and claimed that, he has received back advances given to 8 persons out of 10. The assessee has also furnished other details such as loans given to 6 persons out of retirement benefits from his bank account and the same has been received back from the above persons. Further, the assessee has also given amount received back from 6 persons to 8 persons as hand loans for short period and the same has been received back by the assessee for the year under consideration. Although these evidences furnished before the A.O. and further, the assessee was ready to produce the persons for verification, but the A.O. has made additions by ignoring all the evidences filed by the assessee. Therefore, he submitted that, the matter may be remanded back to the A.O. to give one more opportunity to the assessee to explain his case and also to prove the source for cash deposited into bank account.
The learned Senior A.R. for the Revenue, Ms. B.K. Vishnu Priya, on the other hand, supporting the order of the learned 7 Ramesh Addu CIT(A), submitted that, the assessee has taken different stand at different levels, which is evident from the facts brought on record by the A.O., where the assessee has initially claimed that, he has received back loans from 8 persons and the same has been subsequently changed and claimed that, he has received back amount from 6 persons. Further, the assessee has also failed to prove how the loans has been advanced to the above persons going by the bank statements of the assessee, where the A.O. has recorded categorical finding that, the retirement benefits of the assessee are available with the UCO Bank, without drawing any amount from the bank account. Since the assessee has failed to prove the loans given to 8 persons and also failed to prove the receipt of said amount from 8 persons with relevant details, the A.O. has rightly rejected the explanation of the assessee with regard to source of cash deposits. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. Therefore, she submitted that, the order of the learned CIT(A) should be upheld.
We have heard both parties, perused the material available on record and had gone through the orders of the authorities below.
8 Ramesh Addu There is no dispute with regard to the amount of cash deposit into bank account and explanation of the assessee with regard to the source for said cash deposit. In fact, the A.O. has made additions for Rs. 13,50,000/- towards cash deposit into different bank accounts during demonetization period. The assessee has explained the source for cash deposit out of advances received from 8 persons and further claimed that, the said advance has been given to above persons out of his retirement benefits, for which the assessee has furnished confirmation letters from the above persons. We have gone through the relevant arguments of the assessee in light of evidences filed in support of his contentions and we find that, the confirmation letters filed by the assessee from 8 persons are without any PAN number and other credentials. Further, the assessee has also failed to produce the persons before the A.O. for verification when the A.O. asked the assessee to produce the above persons for verification. Further, the arguments of the assessee that out of retirement benefits, he had given advances to the above persons and the same has been received back is also proved to be wrong going by the reasons given by the A.O. in the assessment order where the A.O. claims 9 Ramesh Addu that the retirement benefits of the assessee were intact in UCO Bank account. From the details filed by the assessee, it cannot be said that the assessee has satisfactorily explained the source for cash deposit of Rs. 13,50,000/- into bank accounts. However, the only fact that needs to be considered is the arguments of the assessee that he was ready to produce the persons for verification of the A.O. during the assessment proceedings and the A.O. has not given sufficient time to produce the persons. We find that, the assessee, by way of a letter dated 11.12.2019 addressed to the A.O., categorically stated that, the parties are ready to present before the A.O. at 2 p.m. for verification. Although the assessee was ready to produce the persons for verification along with the details, but the A.O. without providing an opportunity to the assessee has passed the order and made addition towards cash deposits. Since the A.O. has passed the order without providing a reasonable opportunity of hearing to the assessee to explain his case, in our considered view, the matter needs to be restored to the file of the A.O. Thus, we set aside the order of the Ld. CIT(A), and restore the issue back to the file of A.O. , with a direction to reconsider the issue ‘de novo’ after providing one more opportunity 10 Ramesh Addu of hearing to the assessee to produce the creditors for verification and also any other evidences that may be filed to explain source for cash deposit.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 19th December, 2025. श्री विजय पाल राि (मंजूनाथ जी) (VIJAY PAL RAO) (MANJUNATHA G.) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER