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Facts
The assessee filed an appeal with an 11-day delay against the CIT(A)'s order which sustained an addition of Rs. 60,42,500/- made by the Assessing Officer under Section 69A. This addition was for cash deposits made into the bank account during the demonetization period, which the assessee claimed were from regular business sales of explosives. The assessment year in question is 2017-18, and the original assessment was reopened under Section 147.
Held
The Tribunal condoned the 11-day delay, following the Supreme Court's lenient approach for delay condonation. On merits, the Tribunal ruled that the addition under Section 69A was unwarranted as the Assessing Officer failed to establish if the cash deposit consisted of demonetized notes (SBNs) or regular currency, and there was no abnormal deviation in sales or cash deposits compared to previous financial years. Citing judicial precedent, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the addition.
Key Issues
1. Whether the 11-day delay in filing the appeal should be condoned. 2. Whether the addition under Section 69A for cash deposits during the demonetization period was justified when there was no evidence of SBNs or abnormal deviation in sales/deposits from previous years.
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.604/Hyd./2024 Assessment Year 2017-2018 Ambabhavani Jettem, The Income Tax Officer, JADCHERLA – 509 301. vs. Ward-1, MAHABUBNAGAR. MAHABUBNAGAR. PAN AIUPA1668G (Appellant) (Respondent) For Assessee : Shri T. Chaitanya Kumar, Advocate. For Revenue : Dr. Sachin Kumar, Sr. AR Date of Hearing : 01.07.2025 Date of Pronouncement : 07.07.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the Assessee against the order dated 27.03.2024 of the learned CIT(A)- National Faceless Appeal Centre [in short the “NFAC”], Delhi, relating to the assessment year 2017-2018.
At the outset, Shri T. Chaitanya Kumar, Advocate-Learned Counsel for the Assessee submitted that, there is a delay of 11 days in filing the appeal before the 2 ITA.No.604/Hyd./2024 Tribunal. The assessee has filed an affidavit seeking for condonation of delay in filing the appeal by explaining the reasons. He submitted that, his business premises was situated at Jadcherla. After NFAC has dismissed it’s appeal, he approached his CA Isireddy Krishna Reddy at Jadcherla for filing of appeal before the Tribunal. Since, he does not have prior experience in filing appeal before the Tribunal, his Counsel consulted few of his professional peers and after taking advice, the instant appeal has been filed before the Tribunal on 06.06.2024 with a delay of 11 days. He, therefore, submitted that, the impugned delay of 11 days in filing the appeal before the Tribunal is neither intentional nor wanton, but, due to the circumstances beyond his control. The Learned Counsel for the Assessee accordingly, pleaded that, the delay of 11 days in filing the appeal before the Tribunal be condoned in the interest of justice as the assessee has got fair chances to succeed in it’s appeal.
Dr. Sachin Kumar, learned Sr. AR for Revenue did not strongly opposed for condonation of delay taking into consideration of smallness of delay.
3 ITA.No.604/Hyd./2024 4. We have perused the affidavit filed by the assessee for condonation of delay of 11 days in filing the appeal before the Tribunal. We find that, the Hon’ble Supreme Court in the case of Collector, Land Acquisituon vs., MST Katiji [1987] 167 ITR 471 (SC) has laid down certain principles for condoning the delay and also directed the lower courts to follow a lenient approach for condoning the delay. Going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra), there is no dispute if an appeal is dismissed on account of technicalities, a meritorious case may be thrown-out of judicial review. Therefore, while condoning the delay, the courts must have a liberal approach or lenient approach considering the reasons given by the petitioners or appellants. Therefore, going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra) and also considering the reasons explained by the assessee in her affidavit, we condone the delay of 11 days in filing the appeal before the Tribunal and admit the appeal for adjudication.
4 ITA.No.604/Hyd./2024 5. Brief facts of the case are that, the assessee is an individual and filed return of income for the assessment year 2017-2018 on 03.11.2017 declaring total income of Rs.10,90,820/-. The assessment has been subsequently reopened u/sec.147 of the of the Income Tax Act, 1961 [in short “the Act”] for the reasons recorded, as per which, during the course of assessment proceedings in the case of M/s. Sri Laxmi Bhavani Traders [Firm] for the assessment year 2017-2018, it was submitted by the assessee viz., Smt. Jettem Amba Bhavani that, the Firm M/s. Sri Laxmi Bhavani Traders having PAN ACQFS7227M has not yet commenced it’s business activities, but, this PAN was linked to the bank a/c bearing no.260611100000140 held with Macharam Branch of Andhra Bank and the transactions are related to her proprietary concern business activities and for that, she filed return of income for the assessment year 2017-2018. Based on said admission, the Assessing Officer reopened the assessment on the ground that, the assessee has made cash deposit of Rs.60,42,500/- during the demonetization period. Notice u/sec.148 of the Act dated
5 ITA.No.604/Hyd./2024 31.03.2021 was issued and duly served upon the assessee. In response to notice u/sec.148 of the Act, the assessee submitted copy of acknowledgment of original return filed on 03.11.2017 declaring income of Rs.10,90,820/- and requested to treat the said return as return filed in response to notice u/sec.148 of the Act. During the course of assessment proceedings, the Assessing Officer called-upon the assessee to explain the cash deposit into bank a/c during demonetization period with relevant evidences including comparative cash deposits during the year under consideration and for the last financial year VAT returns, bank a/c etc., In response, the assessee stated that she is the proprietor of M/s. Laxmi Bhavani Traders, Jadcherla and engaged in trading of explosives. The assessee has furnished details such as VAT returns, bank a/c details of Andhra Bank and HDFC Bank. The Assessing Officer after considering relevant details submitted by the assessee observed that, the assessee has shown total sales of Rs.8,33,91,101/- and net profit of Rs.13,00,818/-. However, no details as to how the said cash generated supported by 6 ITA.No.604/Hyd./2024 bills and invoices. Therefore, the Assessing Officer issued one more show cause notice –cum- draft assessment order dated 11.03.2022 and called-upon the assessee to furnish relevant details, including details of cash sales and cash deposit into bank a/c along with bills and vouchers etc., In response, the assessee has failed to file relevant details as called for by the Assessing Officer including comparative sales, cash sales and cash deposit into bank a/c for the 2 financial years. Therefore, the Assessing Officer by taking note of relevant cash deposits into bank a/c during the demonetization period, made addition of Rs.60,42,500/- u/sec.69A of the Act as unexplained money.
Aggrieved by the assessment order passed by the Assessing Officer, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has challenged the additions made by the Assessing Officer towards cash deposit into bank a/c by filing relevant evidences including VAT returns, bank account statements and comparative details of sales for the financial years 2015-2016 and 2016-2017 and also cash deposit for the 7 ITA.No.604/Hyd./2024 above two periods and argued that, the cash deposited into bank a/c is out of sale of explosives and the same has been accounted in the regular books of accounts for the year under consideration. The assessee has also relied upon certain judicial precedents in support of her contention that, if there is no abnormal deviation in the cash deposits during the demonetization period, when compared to earlier period, then, no addition can be made. The learned CIT(A) after considering the relevant submissions of the assessee, has called-upon the assessee to file various details in respect of cash deposits into bank a/c in light of SOP issued by the CBDT for verification of cash deposits into bank a/c during demonetization period. The assessee neither furnished any evidences nor filed any further details for cash deposit into bank a/c. Therefore, the learned CIT(A) after considering the relevant details filed by the assessee observed that, although, the assessee has filed VAT returns, bank statements etc., but, could not file any evidences as to how cash deposit was generated from his business by filing relevant bills and invoices, cash book, bank a/c details of 8 ITA.No.604/Hyd./2024 SBN deposited etc. Therefore, the learned CIT(A) sustained the addition made by the Assessing Officer towards cash deposit into bank a/c. u/sec.69A of the Income Tax Act, 1961.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
Shri T. Chaitanya Kumar, Advocate-Learned Counsel for the Assessee submitted that, the learned CIT(A) has erred in sustaining the addition made by the Assessing Officer towards cash deposit of Rs.60,42,500/- u/sec.69A of the Income Tax Act, 1961, without appreciating the fact that, said cash deposit is out of sales declared for the year under consideration which is supported by necessary bills and vouchers. Learned Counsel for the Assessee further submitted that, the Assessing Officer neither made-out a case that, cash deposit into bank a/c is out of SBNs nor rejected the explanation of assessee that, source for said cash deposit is out of sales. The Assessing Officer made addition only on the basis of cash deposit into bank a/c during the demonetization period, even though, the 9 ITA.No.604/Hyd./2024 assessee has filed relevant details including VAT returns, bank statements to prove source for cash deposit into bank a/c. Even before the learned CIT(A), the assessee has filed relevant details, but, the learned CIT(A) ignored all evidences filed by the assessee and sustained the addition only on the ground that, cash was deposited during the demonetization period. Therefore, he submitted that, the addition made by the Assessing Officer and sustained by the learned CIT(A) should be deleted.
Dr. Sachin Kumar, learned Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the assessee except filing VAT returns and bank statement, could not file cash book / bank a/c, sales bills and comparative statement of cash sales and cash deposits for 2 financial years in order to verify the genuineness of cash deposit into bank a/c in light of SOP issued by the CBDT. In absence of relevant details, the learned CIT(A) has rightly sustained the addition made towards cash deposit into bank a/c during the 10 ITA.No.604/Hyd./2024 demonetization period and, therefore, the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and the orders of the authorities below. The Assessing Officer made addition towards cash deposit of Rs.60,42,500/- during the demonetization period into bank a/c on the ground that, the assessee could not explain the source for said cash deposit. The only reason given by the Assessing Officer to make the addition is cash deposits during the demonetization period. In otherwords, there is no finding from the Assessing Officer about the nature of cash deposit whether it is in SBNs or regular currency. Further, going by the observation of the Assessing Officer himself in his assessment order, the Assessing Officer noted that, the assessee could not file relevant details including details of cash deposit in SBNs. From the above observation of the Assessing Officer, it is undisputedly clear that, there is no details with the Assessing Officer with regard to nature of cash deposits i.e,. cash deposit in SBNs during the demonetization period. Once the cash deposit during the 11 ITA.No.604/Hyd./2024 demonetization period is not in SBNs, then, the source for said cash deposit needs to be examined in light of relevant details filed by the assessee. In the present case, it was the explanation of the assessee before the Assessing Officer and the learned CIT(A) that, source for cash deposit is out of sales declared for the relevant financial year. To support her arguments, the assessee has filed VAT returns and relevant bank statements and as per the details filed by the assessee, the assessee has declared sales to the tune of Rs.8,33,91,101/-. The assessee has also filed relevant details of month-wise sales for the 2 financial years i.e., 2015-2016 and 2016-2017. The assessee had also filed details of cash deposit for the above 2 financial years. From the details submitted by the assessee which is part of order passed by the learned CIT(A), we find that, there is no abnormal deviation in sales declared for 2 financial years and more particularly, during the demonetization period. Further, there is no abnormal deviation in cash deposit into bank a/c during the demonetization period when compared to previous financial year, which is evident from the facts
12 ITA.No.604/Hyd./2024 gathered by the learned CIT(A) that, the assessee has made cash deposit of Rs.58,09,000/- in the month of November, 2016, whereas, the corresponding cash deposit for the month of November, 2015 was at Rs.78,69,688/-. Since there is no abnormal deviation in cash sales or cash deposit during the demonetization period when compared to earlier financial year during the same period, in our considered view, merely for the reason of cash deposit into bank a/c during the demonetization period, the explanation offered by the assessee with regard to source for said cash deposit cannot be discarded. This legal principle is supported by the Judgment of Hon’ble Delhi High Court in the case of PCIT vs., Agson Global Pvt. Ltd., 2022-(1)-TMI-848-Del-HC, wherein it has been clearly held that, in case there is no deviation in cash deposits into bank a/c during the demonetization period when compared to corresponding period of previous financial year, then, no addition can be made towards cash deposit. In the present case, the Assessing Officer without appreciating the relevant facts and also without bringing on record whether cash deposit
13 ITA.No.604/Hyd./2024 into bank a/c during the demonetization period is in SBNs or not, has simply made the addition u/sec.69A of the Income Tax Act, 1961. The learned CIT(A) without appreciating the relevant facts has simply sustained the addition made by the Assessing Officer. Thus, we set-aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete the addition made towards cash deposit made into bank a/c during the demonetization period u/sec.69A of the Income Tax Act, 1961.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 07.07.2025.