Loading judgment…
Facts
The assessee, an individual businessman, filed a return of income disclosing Rs.4,13,570/- for AY 2017-18. The assessment was completed at Rs.22,27,070/- with an addition of Rs.18,13,500/- on account of cash deposits during demonetisation, which the assessee claimed were from realization of debtors. The Assessing Officer rejected this explanation for lack of substantiation.
Held
The Tribunal held that the CIT(A)'s approach was arbitrary and unreasonable. When debtors did not respond to notices, the Assessing Officer should have called the assessee to produce the debtors for examination, which was not done. Therefore, the matter requires remand.
Key Issues
Whether the Assessing Officer was justified in rejecting the assessee's explanation for cash deposits made during demonetisation without further inquiry, and whether the CIT(A)'s decision upholding the addition was proper.
Sections Cited
143(3), 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘SMC’ Bench, Hyderabad
Before: SHRI INTURI RAMA RAO
(निर्धारण वर्ा/Assessment Year:2017-18) Shri Ramalingaiah Karnati, Income Tax Officer, Vs. Ward-1, Nalgonda. Nalgonda. PAN: ASYPK1824C (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri Mohd. Afzal, Advocate रधजस् व द्वधरध/Revenue by: Dr. Sachin Kumar, DR सुिवधई की तधरीख/Date of hearing: 06/10/2025 घोर्णध की तधरीख/Pronouncement: 09/10/2025 आदेश/ORDER This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 16.12.2024 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the assessee is an individual deriving income from the business. The Return of Income for the Asst. Year 2017-18 was filed on 15.12.2018 disclosing income of Rs.4,13,570/-. Against the said Return of Income, the assessment was completed by ITO vide order dated 18.12.2019 passed order u/s. 143(3) of the Act at a total income of Rs.22,27,070/-. While doing so, the Assessing Officer made addition of cash deposit in the bank account made during the demonetisation period of Rs.18,13,500/- rejecting the explanation offered by the assessee that the said cash deposits were made out of realisation of debtors before demonetisation. The assessment was completed by the Assessing Officer as the assessee allegedly failed to substantiate the explanation with the evidence in support of sources of cash deposits made during the demonetisation period.
Being aggrieved by the order of Assessing Officer, the assessee filed an apepal before the Ld. CIT(A) who vide impugned order dismissed the appeal by holding that mere filing of confirmation letters from the debtors would not absolve the assessee from the burden of proof. The Ld. CIT(A) also rejected the explanation offered by the assessee that some of the cash deposits were made out of cash received from debtors and also partly withdrawn from NRE bank account of assessee’s son, as there was no supporting evidences produced by the assessee.
At the outset, I find there is a delay of 4 days in filing of the present appeal before the Tribunal. The assessee filed explanation. Having regard, the explanation offered for the delay, I am of the opinion that it is a fit case for condonation of delay, the delay in filing of the appeal is condoned and appeal is admitted for adjudication on merits.
The only issue that arises for my consideration is whether the Assessing Officer was justified in rejecting the explanation offered by the assessee in support of the cash deposits made during demonetisation period. On mere perusal of the assessment order, it would be evident that the assessee offered explanation in support of the sources of cash deposits of Rs.18,13,500/- made during demonetisation period by stating that the said cash deposits were made out of realisation from debtors and also partial amount withdrawn from NRE bank account of assessee’s son. The assessee filed confirmation letters from the debtors. The Assessing Officer made the addition of the cash deposit during demonetisation as unexplained money solely for the reason that the debtors had not responded to the notices issued u/s. 133(6) of the Act. On appeal, the Ld. CIT(A) also rejected the claim of the assessee that merely by filing confirmation letters from debtors and withdrawal of part of money from his son NRE account does not prove the source of the cash deposits. The approach adopted by the Ld. CIT(A) is arbitrary and unreasonable, in case, in the event debtors not responded to summons the notices issued, it is incumbent upon the Assessing Officer to call upon the assessee to produce the debtors before him for due examination which the Assessing Officer failed to do so. In the circumstances, I am of the considered opinion that the matter requires remand to Assessing Officer for verification of facts. I am of the considered view that the matter requires to be remanded to the file of the Assessing Officer with the direction to dispose of the appeal de novo on merits in accordance with law after affording reasonable opportunity of hearing to the assessee.