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Facts
The assessee, an individual, did not file an income tax return for AY 2017-18. Substantial cash deposits of Rs.12,67,000/- were made during the demonetization period. The Assessing Officer added Rs.4,90,500/- as unexplained money under Section 69A read with Section 115BBE after the assessee failed to provide sufficient explanations and evidence for all sources, despite claiming various sources including ATM withdrawals, father's income, amount returned by a builder, and cash in hand for medical emergencies. The CIT(A) dismissed the appeal ex-parte due to non-compliance.
Held
The Tribunal accepted the assessee's explanation that Rs.2,90,500/- was from cash in hand available with the family for emergency medical requirements, directing its deletion from the addition. However, the explanation for Rs.2,00,000/- received from a builder was rejected due to lack of evidence, and this portion of the addition was sustained. The matter was not remitted back to the AO.
Key Issues
Whether cash deposits made during the demonetization period were adequately explained, specifically concerning cash in hand for medical emergencies and funds received from a builder without evidence.
Sections Cited
142(1), 69A, 115BBE, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “SM-A” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “SM-A” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.387/Hyd./2025 Assessment Year 2017-2018 Khaja Mohammed Ghousuddin, The Income Tax Officer, Hyderabad – 500 072. vs. Ward – 11 (1), PAN APGPG1040M Hyderabad. Telangana. (Appellant) (Respondent) For Assessee : CA, Mohammed Faisal Pasha For Revenue : Sri Suresh Babu KN, Sr. AR Date of Hearing : 26.08.2025 Date of Pronouncement : 04.09.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the assessee against the Order dated 03.01.2025 of the learned Addl/ Joint Commissioner of Income Tax-(Appeals)-1, Nashik, relating to the assessment year 2017-2018.
Brief facts of the case are that, the appellant is an individual and did not file any return of income for the 2 ITA.No.387/Hyd./2025 assessment year 2017-2018. On verification of the data relating to 'Cash deposits during the demonetization period available in AIMS Module of ITBA, it was noticed that, substantial cash deposits were noticed in the case of assessee during the period of demonetization from 09.11.2016 to 30.12.2016. The Assessing Officer noted that, the appellant had made cash deposits of Rs.12,67,000/-in his saving bank account and withdrawn of Rs.3,86,500/- and Rs.1,90,000/- through ATM during the demonetization period. Therefore, the Assessing Officer issued notice under section 142(1) of the Income Tax Act, 1961 [in short “the Act”] dated 13.03.2018 calling the assessee to file return of income for the assessment year 2017-18. However, the assessee has failed to comply with the notice. Thereafter, the Assessing Officer issued notices u/sec.142(1) of the Act on 08.08.2019. Since, there were no response from the appellant, the Assessing Officer has issued show cause notices dated 22.08.2019 and 31.08.2019 calling the assessee to explain as to why all credits in the bank account maintained with Central Bank of India, Gudimalkapuram 3 ITA.No.387/Hyd./2025 Branch, Hyderabad, amounting to Rs.29,17,498/- during the year under consideration, as per the information available with the Office, should not be treated as unaccounted income and be treated as total income of the appellant for the year under consideration. In response to the show cause notice, the assessee appeared before the Assessing Officer and submitted that, he and his father, Sri Khaja Rafiuddin Mohammed, have maintained joint account with Central Bank of India bearing account No.xxxx1017 and during the F.Y. 2016-17 his father was constructing a house at Kukatpally and for that purpose he transferred money regularly to the joint account out of the salary income earned by him in Canada and also borrowed from neighbors through cheques. He also submitted that during the financial year 2016-2017, he came to India and brought some Canadian Dollars, which were exchanged to Indian Rupees and deposited in the joint account for the purpose of using the same for construction of house. With regard to the source for cash deposits of Rs.12,67,000/- during the demonetization period, the assessee has submitted before 4 ITA.No.387/Hyd./2025 the Assessing Officer during the course of assessment proceedings that, there were cash withdrawals made by him through ATM amounting to Rs.3.86,500/- and also cash withdrawals of about Rs.1,90,000 through ATM from his Canadian Account during the period 01.04.2016 to 07.11.2016 and further his father has earned income from consultancy works of about Rs.2,00,000/- and deposited cash frequently in the bank account jointly held by them. The assessee further submitted that one builder, Mr. Mohd. Shah Ghouse Khan, has returned Rs.2,00,000/- in cash, which was paid to him through cheque on 13.01.2016 towards construction of house, as he failed to execute the work and the balance amount was kept in cash at home towards medical emergency of his aged parents. The Assessing Officer has verified the information furnished by the assessee along with supporting evidences and observed that, since the assessee has failed to explain the sources of cash deposits amounting to Rs.4,90,500/- another show cause letter dated 06.11.2019 was issued to the assessee asking him to show cause as to why Rs.4,90,500/- should 5 ITA.No.387/Hyd./2025 not be treated as unreported income u/sec.69A of I.T. Act, 1961. Since, there were no response from the assessee, the Assessing Officer has completed the assessment by treating the cash deposits of Rs.4,90,500/- as unexplained money u/sec.69A read with Section 115BBE of the Income Tax Act, 1961 of I.T. Act, 1961.
On being aggrieved, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), on 4 occasions i.e., dated 18.01.2021, 15.07.2021, 28.07.2021 and 27.11.2024, the learned CIT(A) has issued notices u/sec.250 of the Income Tax Act, 1961. Since, there were no response from the assessee, the learned CIT(A) dismissed the appeal of the assessee and sustained the addition made by the Assessing Officer.
CA, Mohammed Faisal Pasha, Learned Counsel for the Assessee submitted that, the assessee could not file complete details before the Assessing Officer to explain source for cash deposit during the demonetization period. Further, before the learned CIT(A) also, ex-parte order was 6 ITA.No.387/Hyd./2025 passed because, the notices issued by the learned CIT(A) were not responded to with relevant evidences. Therefore, he submitted that, the matter may be remitted to the file of Assessing Officer to give one more opportunity of hearing to the assessee to explain his case.
Sri Suresh Babu KN, learned Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, before the Assessing Officer the assessee could not explain source for balance amount of cash deposits which is evident from the findings of the Assessing Officer, where he has allowed relief in respect of cash withdrawals on earlier occasions. Before the learned CIT(A), the assessee could not file any details. Therefore, he submitted that, since the assessee could not explain the source for cash deposit, the addition made by the Assessing Officer should be sustained.
We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that, the 7 ITA.No.387/Hyd./2025 appellant has made cash deposit of Rs.12,67,000/- into his bank account during the demonetization period. The assessee has explained the source for cash deposit out of cash withdrawals from ATM amounting to Rs.3,86,500/- and also cash withdrawals of Rs.1,90,000/- through ATM from his Canadian Account and further, out of his father consultancy income of Rs.2,00,000/-. The assessee further submitted that, one Mr. Mohd. Shah Ghouse Khan, has returned Rs.2,00,000/- in cash which has been paid to him through cheque on 13.01.2016 towards construction of house, as he has failed to execute the work and balance amount was kept in cash at home towards medical emergency of his aged father. The Assessing Officer accepted the source of cash deposit to the extent of cash withdrawals and consultancy income of his father. However, rejected the explanation with regard to amount received from Mr. Mohd Shah Ghouse Khan of Rs.2,00,000/- in absence of relevant evidences and also balance cash in hand available with his father. Before us, the assessee except stating that, he has received Rs.2,00,000/- from Mr. 8 ITA.No.387/Hyd./2025 Mohd Shah Ghouse Khan, but, could not file any evidence. Therefore, the arguments of the assessee with regard to the amount received from Mr. Mohd Shah Ghouse Khan cannot be accepted. In so far as the balance amount of cash deposit of Rs.2,90,500/-, it was the argument of the assessee that, the same was out of cash in hand available with the family including his father and in our considered view, going by the preponderance of human probability, it is common to keep some cash for emergency requirements. Therefore, considering the amount of cash deposit out of cash in hand, in our considered view, the argument of the assessee needs to be accepted. Thus, we direct the Assessing Officer to delete addition of Rs.2,90,500/- which has been explained out of cash in hand available with the appellant and his father for emergency medical requirements and the same is source for cash deposit into bank account. To sum-up, the assessee gets relief of Rs.2,90,500/- and the balance amount of Rs.2,00,000/- is sustained.
In the result, appeal of the Assessee is partly allowed.
9 ITA.No.387/Hyd./2025 Order pronounced in the open Court on 04.09.2025.