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Facts
The assessee firm, which had ceased business in 2014 and became a Non-Performing Asset (NPA), did not file its Income Tax Return. Following reopening of assessment under Section 147 due to a cash deposit of Rs. 1,47,50,000 in its bank account, the Assessing Officer added Rs. 94,35,000 as unexplained cash credits under Section 68, as the assessee failed to provide complete details of debtors. The CIT(A) upheld this addition without providing reasons, despite the assessee's claim that the cash represented realization from old sundry debtors to facilitate settlement with the bank under the Debt Recovery Tribunal process.
Held
The Tribunal observed that the CIT(A) simply sustained the Assessing Officer's addition without providing reasons for decision and adjudication, which is contrary to the mandate of Section 250(6) of the Act. Therefore, the matter is remanded back to the CIT(A) for fresh adjudication on merits, with a direction to provide adequate opportunity of hearing to the assessee.
Key Issues
Whether the CIT(A) was justified in confirming the unexplained cash credit addition under Section 68 without giving reasons for decision, and whether the assessee adequately explained the source of cash deposits.
Sections Cited
147, 148, 142(1), 144, 68, 115BBE, 144B, 250, 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
1 ITA.No.509/Hyd./2025 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “A” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.509/Hyd./2025 Assessment Year 2018-2019 Prathik Steels, The DCIT, Circle – 2 (1), Hyderabad – 500 037. vs. Hyderabad. PAN AALFP7526K (Appellant) (Respondent) For Assessee : Sri A V Raghuram, Advocate For Revenue : Sri Gurpreet Singh, Sr. AR Date of Hearing : 17.06.2025 Date of Pronouncement : 18.06.2025 ORDER PER MANJUNATHA G. :
This appeal has been filed by the Assessee against the order dated 17.02.2025 of the learned CIT(A)- National Faceless Appeal Centre [in short the “NFAC”] Delhi, relating to the assessment year 2018-2019.
Brief facts of the case are that, the assessee is a Firm and engaged in the business of wholesale trading of Iron and Steel like MS Plates, Pipes etc., The assessee firm 2 ITA.No.509/Hyd./2025 had not filed it’s return of income for the assessment year under consideration on account of the fact that, assessee firm had became NPA (Non Performing Account) with City Union Bank. As per the information available with the Department, the assessee’s case is flagged in verification module of Insight Portal under category of “Non-filing of Returns (NMS)”. The Assessing Officer on the alleged ground that, the assessee had deposited cash of Rs.53,15,000 in bank account with City Union Bank. The Assessing Officer was of the view that, income corresponding to the deposits has escaped assessment. Therefore, the Assessing Officer has reopened the assessment u/sec.147 of the Income Tax Act, 1961 [hereinafter “the Act”] and issued notice u/sec.148 of the Act on 07.04.2022 calling for return of income for the impugned assessment year 2018-2019. In response, the assessee had filed it’s return of income on 04.11.2023 declaring total income of Rs.4,25,730/- for the assessment year 2018-2019. Thereafter, the Assessing Officer has issued various statutory notices u/sec.142(1) of the Act calling the assessee to file relevant information, 3 ITA.No.509/Hyd./2025 including show cause notice u/sec.144 of the Act dated 07.11.2023 and requested to show cause as to why the addition of Rs.94,35,000/- on account of unexplained cash credits u/sec.68 of the Act should not be made. In response, the assessee submitted it’s reply on 07.11.2023 and stated that, the cash deposits made in the account during the year are related to the business receipts and again submitted copy of ITR acknowledgment, computation of income, challan payment. In response to the specific queries asked by the Assessing Officer, the assessee stated that, the firm was having huge sundry debtors since past 2013-2014 and the realization of this sundry debtors being done during the impugned assessment year 2018-2019 and because of this, there was a transaction in the firm Bank A/c and no business transaction was made. In response to the various notices issued by the Assessing Officer, the assessee has also furnished copy of balance sheet as on 31.03.2016 and 31.03.2017, list of debtors, City Union Bank Letter, City Union Bank A/c statement, date-wise cash deposit amount.
4 ITA.No.509/Hyd./2025 Further, the Assessing Officer issued notices u/sec. 148/142(1)/144 and specific questionnaire of the Act was issued from time to time. In response to notice u/sec.142(1) of the Act, the assessee submitted it’s reply on 30.03.2023 and stated that the bank account with City Union Bank became NPA in the year March 2014 and the business of the Firm almost closed since 2014. The Firm has decided to approach Debt Recovery Tribunal for settlement of debts of the Firm, for which, the Firm has to pay 10% of the loan amount. As the business of the Firm was closed in 2014, by regular persuasion of debtors personally, certain amount has been recovered in cash and this cash has been utilized to pay the 10% of the loan amount to the City Union Bank i.e. approximately Rs.50 lakhs and with this amount, the Firm is eligible to approach Debt Recovery Tribunal. During the course of assessment proceedings, the Assessing Officer noted that, the assessee was specifically asked to furnish name, PAN number and complete address of the debtors from whom the assessee has received cash during the year. Notice u/s 142(1) was issued on 19.05.2023 and requested 5 ITA.No.509/Hyd./2025 to furnish the information/documents on or before 26.05.2023. Despite various issued to the assessee, the assessee was failed to furnish the above information. Therefore, in absence of concrete evidences, the Assessing Officer made the addition of Rs.94,35,000/- as unexplained cash credits u/sec.68 r.w.s.115BBE of the Act and determined the total income/loss of the assessee at Rs.98,60,730/- as against the returned income of the assessee at Rs.4,25,730/- vide order dated 29.11.2023 passed u/sec.147 r.w.s.144B of the Income Tax Act, 1961.
On being aggrieved, the assessee carried the matter in appeal before learned CIT(A). During the course of appellate proceedings, the learned CIT(A) has issued various 05 notices dated 12.04.2024, 27.05.2024, 27.06.2024, 30.07.2024 and 07.01.2025 u/sec.250 of the Act. However, the assessee has not submitted any submissions/ information/documents. Therefore, the learned CIT(A) observed that, the assessee has no evidence to substantiate the grounds taken in the appeal and it has not even argued with any supporting, relevant and cogent arguments/ 6 ITA.No.509/Hyd./2025 averments in support of the grounds of appeal. Therefore, the learned CIT(A) had sustained the addition made by the Assessing Officer.
4. Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal.
5. Shri AV Raghuram, Advocate-Learned Counsel for the Assessee submitted that, admittedly, the Assessee-Firm is a NPA and therefore, the assessee had not filed it’s return of income. However, in response to notice issued u/sec.148 of the Act, the assessee had filed it’s return of income. The assessee had also filed various submissions and documents during the course of assessment proceedings in response to various notices issued by the Assessing Officer. However, the Assessing Officer without appreciating the submissions and documents furnished by the assessee has simply made the impugned addition of Rs.94,35,000/- as unexplained cash credits u/sec.68 of the Act. The Learned Counsel for the Assessee drew the attention of the Bench that, the assessee firm has closed it’s business in the year 2014 itself and after regular persuasion with various sundry debtors, it 7 ITA.No.509/Hyd./2025 has realized some amounts which has been deposited with City Union Bank. Further, the assessee firm has decided to approach Debt Recovery Tribunal for settlement of debts of the Firm, for which, the Firm has to pay 10% of the loan amount to the City Union Bank i.e., approximately Rs.50 lakhs and with this amount, the Firm is eligible to approach the Debt Recovery Tribunal. He submitted that, although, the assessee has submitted copy of ITR acknowledgment, computation of income, challan payment etc., list of sundry debtors shown at Rs.4,34,84,027/- outstanding, financials for the assessment year 2018-2019, notices issued by the City Union Bank for recovery of loan amount, detailed statement of cash deposits and Bank Statement of City Union Bank, the Assessing Officer without appreciating the same, made the impugned addition which is not sustainable in the eye of law and, therefore, he submitted that, the order of the Assessing Officer be set aside in the interest of justice. In the alternate contention, the Learned Counsel for the Assessee, submitted that, during the course of appellate proceedings before the learned CIT(A), the learned CIT(A)
8 ITA.No.509/Hyd./2025 has simply sustained the addition made by the Assessing Officer without giving any reasons for decision and adjudication thereof. The Learned Counsel for the Assessee, therefore, submitted that, the matter may be set-aside back to the file of learned CIT(A) for fresh adjudication, after giving due opportunity of hearing to the assessee in the interest of substantial justice.
Shri Gurpreet Singh, learned Sr. AR for the Revenue, supporting the order of the lower authorities submitted that, admittedly the assessee had deposited a sum of Rs.53,15,000/- in City Union Bank Ltd., and that, the case of the assessee has been selected by the Department’s Insight portal for verification. Therefore, the Assessing Officer reopened the assessment of the assessee u/sec.147 of the Act and issued various notices u/sec.142(1) including show cause notice u/sec.144 of the Act calling the assessee to furnish it’s reply. In response to the said notices, the assessee firm had filed it’s submissions. The Assessing Officer after considering the submissions of the assessee, specifically asked the assessee 9 ITA.No.509/Hyd./2025 firm to furnish name, PAN number and complete address of the debtors from whom the assessee has received cash during the year. Since the assessee firm had failed to submit the said information, the Assessing Officer had made the impugned addition of Rs.94,35,000/- as unexplained cash credits u/sec.68 r.w.s.115BBE of the Act. Further, during the course of appellate proceedings before the learned CIT(A), despite 05 notices were issued by the learned CIT(A) u/sec.250 of the Act, the assessee did not respond to furnish his reply/submissions. Therefore, the learned CIT(A) sustained the addition made by the Assessing Officer as there was nothing to say by the assessee. The Learned DR accordingly submitted that, the orders of the authorities below are in accordance with law and should be sustained. However, the Learned DR did not oppose strongly for remitting the issue back to the file of learned CIT(A) for adjudication of the matter as requested by the Learned Counsel for the Assessee.
We have heard both the parties, perused the material on record and the orders of the authorities below.
10 ITA.No.509/Hyd./2025 We find that, the assessee is non-filer of return of income as it became NPA and the business of assessee firm was almost closed in the year 2014. However, in response to notice issued by the Assessing Officer u/sec.148 of the Act dated 07.04.2022, the assessee firm filed return of income on 04.11.2023 by admitting total income of Rs.4,25,730/-. The contention of the assessee was that, it has closed it’s business in the year 2014 and the same fact was brought to the notice of Assessing Officer during the course of assessment proceedings that, the City Union Bank initiated recovery proceedings under SARFAESI Act, 2022. Further, the assessee submitted that, the source for cash deposit is the realization amount from sundry debtors and in order to approach Debt Recovery Tribunal for settlement of debts, it has to pay 10% of the loan amount to the City Union Bank i.e., Rs.50 lakhs approximately. In support of this contention, during the course of assessment proceedings, the assessee firm has filed copy of balance sheet as on 31.03.2017 wherein the assessee firm had shown sundry debtors at Rs.4,34,84,027/- outstanding along with debtors, 11 ITA.No.509/Hyd./2025 financials for the year 2018-2019, notices issued by the City Union Bank for recovery of loan amount, detailed statement of cash deposits and Bank statement of City Union Bank. Further, the assessee has deposited an amount of Rs.1,47,50,000/- in the bank account. Therefore, the Assessing Officer after considering the total turnover of Rs.53,15,000/- added the differential sum of Rs.94,35,000/- [i.e., Rs.1,47,50,000 (-) Rs.53,15,000/-] as unexplained cash credits u/sec.68 of the Act in the hands of the assessee. The above submissions are also reflected in Form No.35 filed by the assessee firm before the learned CIT(A). In appeal, the learned CIT(A) has simply sustained the addition made by the Assessing Officer without giving reasons for decision and adjudication thereof as contemplated u/sec.250(6) of the Act, as per which, the learned CIT(A) has to decide the issue on merits even if the assessee did not appear. Since, in the instant case, the learned CIT(A) has simply sustained the addition made by the Assessing Officer without giving reasons for decision, we deem it fit and appropriate to restore the issue back to the 12 ITA.No.509/Hyd./2025 file of learned CIT(A) with a direction to re-decide the issue on merits by giving reasons for decision and adjudication thereof, by providing adequate opportunity of hearing to the assessee. Needless to say, it is the sole risk and responsibility of the assessee to plead and prove it’s case in consequential proceedings before the learned CIT(A). Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
In the result, appeal of the Assessee is allowed for statistical purposes.