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Facts
The assessee's assessment was reopened under Section 147 after information revealed cash deposits totaling Rs.8,39,634/- in three chit funds during the demonetization period. The Assessing Officer added this amount under Section 69A as unexplained money. The CIT(A) dismissed the assessee's appeal for non-prosecution and sustained the addition.
Held
The Tribunal set aside the CIT(A)'s order, finding that the assessee was not given a reasonable opportunity of hearing to explain the source of cash deposits. The case was remanded back to the CIT(A) with a direction to re-consider the issue after providing the assessee with such an opportunity.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal for non-prosecution and sustaining the addition under Section 69A without providing a reasonable opportunity of hearing to the assessee to explain the source of cash deposits during demonetization.
Sections Cited
147, 148, 69A
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Income Tax Appellate Tribunal, HYDERABAD “B” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.44/Hyd./2025 Assessment Year 2017-2018 Suman Takkallapalli, The DCIT, Circle-3(1), HANAMKONDA– 506 001. vs. Hyderabad. Telangana. PAN AGRPT1784H (Appellant) (Respondent) For Assessee : CA M Poornachandra Rao For Revenue : Shri Waseem UR Rehman, Sr. AR Date of Hearing : 03.07.2025 Date of Pronouncement : 08.07.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the Assessee against the order dated 26.11.2024 of the learned CIT(A)- National Faceless Appeal Centre [in short the “NFAC”], Delhi, relating to the assessment year 2017-2018.
Brief facts of the case are that, the assessee is an Individual, filed his original return of income for the assessment year 2017-2018 on 27.10.2017 declaring Rs.NIL
2 ITA.No.44/Hyd./2025 income, after arriving current year loss of Rs.23,81,932/-. The assessment has been subsequently reopened u/sec.147 of the Income Tax Act, 1961 [in short “the Act”] for the reasons recorded, as per which, the information available with the Department shows that, the assessee had deposited cash (old denomination notes) during demonetization period in three Chit Funds viz M/s Akshara Chit Fund, M/s Pinninti Chits and Kapil Chits, amounting to Rs.5 lakhs; Rs.2,95,134/- and Rs.44,500/- respectively, totaling Rs.8,39,634/-. Accordingly, notice u/sec.148 of the Act dated 31.03.2021 was issued to the assessee. In response, the assessee filed his return of income on 16.04.2021 declaring Rs.NIL income, which was income declared in the original return of income filed for the year under consideration. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer called-upon the assessee to explain source for cash payment made to chit funds in Specified Bank Notes [in short SBNs] during the demonetization period. In response, the assessee claimed that, source for cash deposit is out of 3 ITA.No.44/Hyd./2025 professional receipts and the same has been recorded in the regular books of accounts. To support the arguments, the assessee has filed relevant details. The Assessing Officer after considering the relevant details, has rejected the explanation of assessee and made addition of Rs.8,39,500/- u/sec.69A of the Income Tax Act, 1961 as unexplained money on the ground that assessee could not offer proper explanation/evidence in respect of cash payments to chit funds in SBNs during the demonetization period.
On being aggrieved, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee challenged the additions made by the Assessing Officer towards cash payments to chit funds in SBNs u/sec.69A of the Act. During the appellate proceedings, the learned CIT(A) posted the case for hearing on many occasions and the assessee has sought adjournments without furnishing any explanation/ evidences to support his case. Therefore, the learned CIT(A) dismissed the appeal filed by the assessee for non- prosecution by following certain judicial precedents
4 ITA.No.44/Hyd./2025 including the decision of Hon’ble Supreme Court in the case of CIT vs., B.N. Bhattacharya [1977] 118 ITR 461 (SC). The learned CIT(A) had also discussed the issue on merit and sustained the addition made by the Assessing Officer towards cash payments to chit funds during the demonetization period.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
CA, M. Poornachandra Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) has erred in dismissing the appeal filed by the assessee for non- prosecution without providing reasonable opportunity of hearing to the assessee, even though, the assessee has sought adjournment on all the occasions when the case was posted for hearing. Further, referring to various evidences including bank statements of the assessee for the year under consideration submitted that, assessee has explained the source for cash payment to chit funds in SBNs during the demonetization period, out of his professional receipts. For this purpose, the assessee has filed relevant cash book
5 ITA.No.44/Hyd./2025 and other details. The Assessing Officer without considering the relevant details, simply made the addition towards cash payment to chit funds. The learned CIT(A) without providing reasonable opportunity of hearing to the assessee, simply sustained the addition made by the Assessing Officer. Therefore, he submitted that, the addition made by the Assessing Officer should be deleted.
Shri Waseem UR Rehman, learned Sr. AR for the Revenue, on the other hand supporting the order of the learned CIT(A) submitted that, assessee did not furnish any evidences before the Assessing Officer which is evident from the observation of the Assessing Officer in the assessment order. Before the learned CIT(A), the assessee seeking adjournments on all the occasions and has not furnished any evidences or explanation in support of his contentions. Therefore, the learned CIT(A) dismissed the appeal filed by the assessee for non-prosecution and also on the basis of material available on record. Therefore, he submitted that, the order of the learned CIT(A) should be upheld.
6 ITA.No.44/Hyd./2025 7. 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 appellant has made cash payment of Rs.8,39,500/- to three chit funds during the demonetization period starting from 07.11.2016 to 16.12.2016 in SBNs. The appellant claimed to have explained the source out of his professional receipts and claims that, he has furnished relevant cash book extract to the Assessing Officer. The Assessing Officer made the addition towards cash payments to chit funds in SBNs on the ground that assessee could not offer any explanation with regard to source for cash deposit. Before the learned CIT(A), the assessee did not get any opportunity to explain it’s case because, the learned CIT(A) disposed of the appeal filed by the assessee for non-prosecution. The assessee now filed certain evidences including cash book from 01.11.2016 and up-to 31.12.2016. As per the cash book filed by the assessee, there is an opening cash balance of Rs.4,81,374.52/-. The cash balance available as on 08.11.2016 was at Rs.5,21,651.52/-. Out of this opening
7 ITA.No.44/Hyd./2025 cash balance, the assessee has made cash payment of Rs.5 lakhs to M/s. Akshara Chit Fund on 08.11.2016. The remaining payments to other two chit funds has been paid on various dates in SBNs. There is no details as to whether the said payment is out of opening cash in hand as on 08.11.2016 or out of cash receipts in SBNs during the demonetization period. Further, these evidences were not placed before the learned CIT(A). Since the assessee could not file these evidences before the learned CIT(A) and further, the learned CIT(A) dismissed the appeal filed by the assessee for non-prosecution without considering the adjournment letter filed by the assessee seeking adjournment, in our considered view, the matter needs to set-aside to the file of learned CIT(A) to give another opportunity to the assessee. Thus, we set-aside the order of the learned CIT(A) and restore the issue back to the file of learned CIT(A) with a direction that the learned CIT(A) should re-consider the issue after providing reasonable opportunity of hearing to the assessee to explain his case.
8 ITA.No.44/Hyd./2025 Accordingly, the grounds of appeal of the assessee are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 08.07.2025.