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Facts
The assessee filed his return for AY 2017-18 declaring Rs. 6,50,000/- as income from other sources. The Assessing Officer (AO) added Rs. 35,77,400/- as unexplained money and Rs. 3,85,480/- as undisclosed business receipts. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal noted that the assessee's grounds of appeal pertained to the addition of unexplained money and undisclosed business receipts. The assessee claimed that the business receipts were already offered to tax and the cash deposits were explained by withdrawals, but this material was not placed before lower authorities.
Key Issues
Whether the additions made by the AO for unexplained money and undisclosed business receipts were justified, and if the assessee should be given another opportunity to present evidence.
Sections Cited
69A, 144, 234, 234B, 115BBE, 143(2), 142(1), 133(6), 80C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2017-18) Shri Syed Zahed Ali, Income Tax Officer, Vs. Ward-14(1), Hyderabad. Hyderabad. PAN: AIFPA6433J (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri Y.V. Bhanu Narayan Rao, C.A. रधजस् व द्वधरध/Revenue by: Sumitha Parmata, SR-DR सुिवधई की तधरीख/Date of hearing: 22/07/2025 घोर्णध की तधरीख/Pronouncement: 25/07/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Syed Zahed Ali (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 05.02.2025 for the A.Y. 2017-18.
The assessee has raised the following grounds of appeal :
“ 1. On the facts and in the circumstances of the case, the order passed by the learned CIT (A), NFAC, Delhi u/s. 250 of the Act for the AY 2017-18 is erroneous and bad in law.
2. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the erroneous addition made by the learned A.O. of Rs. 39,62,880/- comprising of cash deposits of Rs.35,77,400/- as unexplained money u/s. 69A of the Act and Rs.3,85,480/- as undisclosed business receipts for the AY 2017-18.
On the facts and in the circumstances of the case, it is submitted that, the cash deposits of Rs. 35,73,400/- were made out of earlier cash withdrawals from the bank accounts of the assessee during the AY 2017-18 from out of business receipts. Hence, the addition of Rs. 35,77,400/- as unexplained money u/s. 69A of the Act needs to be deleted.
On the facts and in the circumstances of the case, the learned CIT(A), NFAC, Delhi erred in upholding the act of the learned AO who assessed Rs. 35,77,400/- to income u/s. 69A of the Act in the assessment order u/s. 144 of the Act but mentioned in the computation sheet attached therewith, the addition u/s. 69A of the Act as Rs. 71,54,800/- instead of Rs. 35,77,400/- and hence, taxing the same amount twice, i.e., Rs. 35,77,400/- once as per slab rates and again as per special rates of section 115BBE of the Act resulting in an erroneous and high pitched demand for the AY 2017-18.
On the facts and in the circumstances of the case, the erroneous addition of Rs. 3,85,480/- (being 8 percent of service receipts of Rs.48,18,500/- appearing in Form 26AS) as undisclosed business receipts needs to be deleted as the income from the said business
receipts is already disclosed in the ROI filed for the AY 2017-18 under the head Income from Other Sources. 6. On the facts and in the circumstances of the case, the learned CIT (A), NFAC, Delhi erred in upholding the erroneous demand of Rs. 50,70,265/- (inclusive of interest u/s. 234 of Rs. 1,84,500/- and interest u/s. 234B of Rs. 11,80,800/-) raised by the learned A.O. for the AY 2017-18. 7. Any other ground or grounds of appeal your appellant may urge at the time of hearing.”
3. The brief facts of the case are that, the assessee is an individual who filed his return of income for the Assessment Year 2017–18 on 01.12.2017, declaring total income of Rs.6,50,000/- under the head “income from other sources”. The case of the assessee was selected for limited scrutiny under CASS for the purpose of examining the sources of cash deposits, services fee received and cash withdrawals from bank. Accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued to the assessee on 08.08.2018. Subsequently, notice under section 142(1) of the Act was issued to the assessee seeking information regarding the source of cash deposits in bank accounts and reconciliation between service fee receipts reflected in Form 26AS. However, there was no compliance by the assessee to the notices issued by Learned Assessing Officer (“Ld.
AO”). Consequently, the Ld. AO issued notice under section 133(6) of the Act to Canara Bank and Karur Vysya Bank and obtained bank statements of the assessee. Upon perusal of the bank statements, the Ld. AO noted that cash of Rs.35,77,400/- had been deposited in the assessee’s bank accounts during the year, for which no explanation was furnished. The same was treated as unexplained money under section 69A of the Act and added to the assessee’s income. Further, on the basis of Form 26AS, the Ld. AO found that the assessee had business receipts of Rs.48,18,500/- during the year under consideration. However, the return of income filed by the assessee did not disclose any income under the head “business or profession”. Accordingly, the Ld. AO estimated business income at 8% of Rs.48,18,500/-, which amounted to Rs.3,85,480/-, and added the same under the head “business income”. Finally, the Ld. AO passed the assessment order under section 144 of the Act on 14.11.2019 determining the total income of the assessee at Rs.46,12,880/-.
4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). However, before the Ld. CIT(A), the assessee did not make any compliances to the notices issued by the Ld. CIT(A). Consequently, the Ld. CIT(A) dismissed the appeal of the assessee.
5. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Learned Authorised Representative (“Ld. AR”) submitted that two issues are involved in the appeal of the assessee i.e. (i) the addition of Rs.3,85,480/- on account of business receipts and (ii) addition of Rs.35, 77,400/- on account of unexplained money in the bank account of the assessee.
As far as the addition of Rs.3,85,480/- is concerned, the Ld. AR submitted that, the assessee had inadvertently disclosed the total income of Rs.8,00,000/- under the head “income from other sources”, which was actually a combined figure of his business income and interest income. After claiming deduction of Rs.1,50,000/- under section 80C, the returned income came to Rs.6,50,000/-. It was explained that the mistake occurred due to lack of tax knowledge on the part of the assessee. The Ld. AR further submitted that the total business receipts during the year were Rs.91,71,990/- and not Rs.48,18,500/- as assumed by the Ld. AO. The assessee had computed business income on presumptive basis at 8%, resulting in business income of Rs.7,33,760/-. Including the bank interest income, total income of the assessee came to Rs.7,99,518/-, which was rounded off to Rs.8,00,000/- in the return. Accordingly, the business income was already offered to tax, and the addition of Rs.3,85,480/- made by the Ld. AO resulted in double taxation.
With regard to the addition of Rs.35,77,400/-, the Ld. AR placed before the Bench copies of bank statements and a cash summary showing cash withdrawals of Rs.54,76,920/- and cash deposits of Rs.35,73,400/-, thereby demonstrating that cash deposited was more than the cash withdrawals. It was argued that the assessee had filed sufficient material now, which could not be placed earlier before the lower authorities.
The Ld. AR prayed that, in the interest of justice, both the issues may be restored to the file of the Ld. AO for proper adjudication after granting an opportunity to the assessee to furnish supporting evidences.
The Learned Departmental Representative (“Ld. DR”) opposed the plea for remand and submitted that the assessee was granted sufficient opportunities during assessment as well as first appellate proceedings but failed to avail the same. It was submitted that the case does not deserve another opportunity and the orders of lower authorities should be upheld.
We have heard the rival contentions and perused the material available on record. As far as the addition of Rs.3,85,480/- is concerned, the Ld. AR has submitted that, the assessee had inadvertently disclosed the total income of Rs.8,00,000/- under the head “income from other sources”, which was actually a combined figure of his business income and interest income. After claiming deduction of Rs.1,50,000/- under section 80C, the returned income came to Rs.6,50,000/-. It was explained that the mistake occurred due to lack of tax knowledge on the part of the assessee. The Ld. AR further submitted that the total business receipts during the year were Rs.91,71,990/- and not Rs.48,18,500/- as assumed by the Ld. AO. The assessee had computed business income on presumptive basis at 8%, resulting in business income of Rs.7,33,760/-. Including the bank interest income, total income of the assessee came to Rs.7,99,518/-, which was rounded off to Rs.8,00,000/- in the return. As the evidences and the explanation are filed first time before this Tribunal, in our view, the same are required to be verified by the Ld. AO in detail.
As far as the addition of Rs.35,77,400/- is concerned, the Ld. AR placed before us copies of bank statements and a cash summary showing cash withdrawals of Rs.54,76,920/- and cash deposits of Rs.35,73,400/-, thereby demonstrating that cash deposited was more than the cash withdrawals. It was argued that the assessee had filed sufficient material now, which could not be placed earlier before the lower authorities. As the evidences and the explanation are filed first time before this Tribunal, in our view, the same are required to be verified by the Ld. AO in detail.
Therefore, under the facts and circumstances and in the interest of justice, we are inclined to provide one more opportunity to the assessee to present his case before the Ld. AO. Accordingly, we set aside the assessment order and restore both the issues to the file of the Ld. AO for denovo adjudication after affording reasonable opportunity of being heard to the assessee. The assessee is also directed to file all necessary evidence to substantiate his claims during the remand proceedings.
In the result, appeal of the assessee is allowed for statistical purposes.