PURVA,HYDERABAD vs. ITO, WARD-8(1), HYDERABAD

Aggrieved, the assessee carried he matter in appeal before the ld. CIT(A). The assessee submitted that the subject cash deposits were sourced out of the sufficient cash balance that was available with her out of her accumulated savings of the earlier years, and supported her said claim by placing on the record statement of affairs, return of income and cash flow statement. It was submitted by the assessee that she had an opening cash balance of Rs. 21,24,570/- available with her on 01.04.2016, which, in turn, was primarily sourced out of the cash withdrawals of Rs.11,65,000/- made by her from the bank account held with Indian Overseas Bank account. The assessee submitted before the CIT(A) that as Section 69A vested a discretion with the A.O and could not be mechanically invoked, therefore, the entire amount of cash deposits made in her bank account during the subject year could not be held as her income, and placed reliance on the decision of the Hon’ble Supreme Court in CIT v. P.K. Noorjahan (1999) 237 ITR 570. 4 Purva, Hyderabad vs. ITO 5. The CIT(A), however, did not find favour with the assessee’s explanation. It was observed by him that it was improbable for any prudent person to keep a substantial amount of cash withdrawals at home for nearly two years without utilization, and that the assessee had not substantiated the availability of the claimed opening cash balance as on 01.04.2016 based on any supporting evidence. The CIT(A) pressed into service the principle of preponderance of human probability as was emphasised by the Hon’ble Supreme Court in the case of CIT Vs. Durga Prasad More (1971) 82 ITR 540 (SC) and Sumati Dayal Vs CIT(1995) 214 ITR 801 (SC), and upheld the addition of Rs. 21,90,000/- made by the A.O. u/s 69A of the Act.

The assessee being aggrieved with the CIT(A) order has carried the matter in appeal before us.

Mrs. S. Sandhya, Ld. Authorised Representative (for short, “A.R”) for the assessee, at the threshold of hearing of the appeal, submitted that the same involves a delay of 209 days. Elaborating on the reasons leading to the delay, the Ld. A.R submitted that the same had crept in for no fault on the part of the assessee. The Ld. AR submitted that though the assessee had in the memorandum of appeal i.e “Form No. 35” filed before the CIT(A) opted out of service of notices/communications through e-mail, 5 Purva, Hyderabad vs. ITO but no hard/physical copy of the CIT(A) order was ever served upon her. The Ld. AR submitted that as the assessee who was not conversant with the on line proceedings had thus, for the said reason specifically opted out of receipt of notices/communications through e-mail was however never served with any hard/physical copy of the CIT(A) order. The Ld. AR submitted that the assessee had learnt about the disposal of her appeal only when her brother in law, viz. Shri Sharman Aggarwal who used to look after her income tax matters had come to know about the order of penalty u/s 271AAC(1) passed in his own case during the month of July, 2025, had thereafter garthered about the dismissal of the assessee’s appeal by the CIT(A) vide his order dated 25.10.2024. The Ld. AR submitted that the assessee had thereafter involving no further loss of time filed the present appeal, which, by the time involved the aforesaid delay. The Ld. AR to buttress her aforesaid claim had drawn our attention to the condonation petition supported with an “affidavit” filed by the assessee, wherein the aforesaid facts were deposed by her. The Ld. AR submitted that as the delay in filing the present appeal had crept in because of bonafide reasons, therefore, the same in all fairness be condoned.

We have given a thoughtful consideration to the contentions of the Ld. Authorized Representatives of both parties regarding the delay involved in filing of the present appeal. We are of the view that as the delay in filing the present appeal had crept in due to bonafide reasons, therefore, the same in all fairness merits to be condoned.

On merits, the Ld. AR submitted that the assessee had duly furnished the return of income, cash flow statement, bank statements and other details explaining the cash deposits made in her bank account during the demonetization period. The Ld. A.R submitted that the AO had completed the assessment ex-parte without considering the aforesaid documents. Further, it was submitted by her that the CIT(A) had also erred in summarily rejecting the explanation of the assessee regarding the source of the subject cash deposits made in her bank accounts during the demonetization period. The Ld. A.R emphasized that the assessee was consistently disclosing her income from declared sources, and that no contrary material had been brought on record by the Revenue to demonstrate any undisclosed source of income. The Ld. A.R to support 7 Purva, Hyderabad vs. ITO her aforesaid contention had relied on the judgment of the Hon’ble Supreme Court in the case of CIT v. P.K. Noorjahan (1999) 237 ITR 570 (SC).

Per Contra, the ld. Departmental Representative (for short, “D.R”), on the other hand, supported the order of the CIT(A). The Ld. D.R, contended that as the assessee had failed to substantiate the claim of opening cash balance or explain the improbability of holding such large sums in cash for two years, therefore, the AO as well as CIT(A) had rightly made the addition by invoking Section 69A of the Act.

We have heard the Ld. Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the assesse’s counsel.

Admittedly, it is an undisputed fact that cash deposits of Rs.21,90,000/- were made in the bank accounts of the assessee during the demonetization period. On being queried, it was the assessee’s claim that the same were sourced from the earlier cash withdrawals and opening cash balance as on 01.04.2016. On a careful consideration, we find that the assessee had placed on record a cash flow statement and also referred to the cash withdrawals that were made by her in the earlier 8 Purva, Hyderabad vs. ITO years. However, we find that neither the AO nor the CIT(A) had examined these details in depth or called for reconciliation with the returns of income and the capital account of the assessee for the earlier years.

We are of the firm conviction that as per the settled position of law the burden of proving the nature and source of cash deposits is upon the assessee. Our aforesaid view is fortified by the judgments of the Hon’ble Supreme Court in the case of Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC). At the same time, it is equally settled that Section 69A uses the expression "may be deemed to be income", thereby conferring a discretion on the AO, which has to be exercised judiciously. Our aforesaid view is fortified by the judgment of the Hon’ble Apex Court in the case of CIT v. P.K. Noorjahan (1999) 237 ITR 570 (SC). Thus, the authorities are required to examine whether the explanation is bona fide and supported by material.

We find that in the present case, the CIT(A) had summarily rejected the claim of opening cash balance primarily on probabilities, without confronting the assessee with specific defects in the statement of affairs or reconciliation with her earlier year’s income-tax return. In our considered opinion, the matter requires fresh examination at the level of the AO by properly verifying (i) the cash flow statement, (ii) withdrawals 9 Purva, Hyderabad vs. ITO claimed in earlier years, (iii) opening cash balance as on 01.04.2016 with reference to the return of income for A.Y. 2016-17, and (iv) the possibility of redeposits of earlier withdrawals. We, therefore, deem it fit to set aside the orders of the authorities below and restore the matter to the file of the AO for de novo adjudication after providing due opportunity of being heard to the assessee. Needless to say, the assessee shall in the course of the set aside proceedings be at liberty to substantiate her claim based on fresh documentary evidence, if any.

In the result, the appeal of the assessee is allowed for statistical purposes.