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Facts
The assessee, an individual, failed to file his income tax return for AY 2011-12. Based on AIR information, the AO found unexplained cash deposits, property purchase, and credit card payments. The AO made additions under Section 69A of the Income Tax Act, and the CIT(A) upheld these additions.
Held
The Tribunal found that the assessee had failed to provide necessary evidence and explanations to the AO and CIT(A). Despite multiple opportunities, the assessee did not substantiate their grounds of appeal. Therefore, the Tribunal set aside the order of the CIT(A) and restored the matter back to the CIT(A)'s file for fresh adjudication on merits.
Key Issues
Whether the assessee was denied natural justice and proper opportunity by the AO and CIT(A), and if the additions made were justified without specifying the relevant section.
Sections Cited
147, 148, 142(1), 144, 69A, 68
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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
Assessment Year : 2011-12 Ashok Hirachand Shah, Assessing Officer, Plot No. 4, Mangal Bunglow, Ward – 2, Panvel Road No. 5, Sector No. 19, Vs. New Panvel, Tal.-Panvel-410206 PAN : ACDPS4800M अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Ajinkya Shah Department by : Shri Rajesh Gawali Date of hearing : 09-12-2025 Date of 17-12-2025 Pronouncement : आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 20.01.2025 of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Year (“AY”) 2011-12.
The assessee has raised the following grounds of appeal :-
1. Denial of Natural Justice and Proper Opportunity The learned Commissioner of Income Tax (Appeals) erred in dismissing the appeal without considering that the appellant was denied proper opportunity and natural justice during the assessment proceedings. The Assessing Officer called for information at the far end of the assessment proceedings on 19/11/2018, and despite the appellant's Authorized Representative submitting the details on 19/12/2018, the AO failed to discuss or consider the same. The matter ought to have been remanded back for fresh adjudication to allow proper analysis of the transactions.
2. Addition Without Specifying the Section The CIT(A) erred in upholding the addition of Rs. 1,49,05,289/- made by the AO without specifying the section under which the addition was made. The non-mention of the specific section renders the assessment order bad in law, as it violates the principles of natural justice and transparency in taxation.
3. Failure to Discharge Onus Under Section 69A The CIT(A) erred in accepting the AO's opinion that the cash deposits in the appellant's bank accounts were unexplained under Section 69A of the Income Tax Act, 1961. The appellant contends that the AO failed to discharge the initial onus of establishing that the credits were unexplained, and the CIT(A) failed to appreciate that the appellant was not given a fair chance to explain the nature and source of the deposits.
4. Non-Consideration of Business Transactions The CIT(A) erred in not properly considering the business transactions of Rs. 35,52,389/- in the appellant's current account. The AO adopted a net profit ratio of 2% without proper verification of books of accounts, vouchers, or other supporting documents. The CIT(A) failed to direct the AO to conduct a proper examination of these transactions.
5. Interest Addition Without Proper Basis The CIT(A) erred in upholding the addition of Rs. 1,54,107/- as interest income without proper verification or evidence. The appellant contends that the interest was already disclosed in the return of income, and the addition was made without any basis.
6. Reliance on Settled Jurisprudence Without Proper Application The CIT(A) erred in relying on settled jurisprudence without properly applying it to the facts of the appellant's case. The decisions cited by the CIT(A) do not support the conclusion that the appellant failed to discharge the onus under Section 69A, especially when the appellant was not given a proper opportunity to present his case.
7. Non-Consideration of Recent Judicial Pronouncements The CIT(A) erred in not considering recent judicial pronouncements, including the decision of the Hon'ble Supreme Court in Mrs. Rupal Jain Vs C/T(2023) 152 taxmann.com 345 (Allahabad), which emphasizes the need for proper examination of the nature and source of credits. The CIT(A) failed to apply the principles laid down in this judgment to the appellant's case.
8. Failure to Adjudicate Grounds of Appeal The CIT(A) erred in not adjudicating all the grounds of appeal raised by the appellant, particularly the general ground seeking to amend, alter, or delete any of the grounds of appeal. This failure violates the principles of natural justice and fair adjudication.”
3. Briefly stated the facts are that the assessee is an individual. For the AY 2011-12, he did not file his return of income. Based on AIR information, the Ld. Assessing Officer (“AO”) found that during the relevant AY 2011-12 the assessee has deposited the amount aggregating to Rs.1,99,08,005/- and Rs.84,56,245/- by way of cash/bank transfers in his bank account(s) owned by him and the bank account(s) where he was an authorized signatory. The Ld. AO also observed that the assessee has purchased immovable property of Rs.36,50,000/-; paid credit card bills of Rs.1,24,112/-, the source of which has remained unexplained and also received interest of Rs.1,54,107/- which has not been disclosed for AY 2011-12 taxation. Consequently, the case of the assessee was reopened u/s 147 of the Income Tax Act, 1961 (the “Act”) by issue of notice u/s 148 of the Act. Statutory notice u/s 142(1) of the Act was accordingly issued and served upon the assessee on 25.08.2018, followed by issue of show cause notice on 19.11.2018. The assessee filed its reply on 19.12.2018 providing explanation to the above issues raised by the Ld. AO. The Ld. AO, however, did not find the explanation of the assessee satisfactory and proceeded to complete the reassessment proceedings by computing the total income at Rs.1,51,30,444/- thereby making addition(s) of :- (i)Rs.1,49,05,289/- on account of unexplained cash deposits in various banks; (ii) Rs.71,048/- on account of business income emanating from the assessee’s current accounts with HDFC and Canara Bank and (iii) Rs.1,54,107/- on account of undisclosed interest income vide his order dated 10.12.2018 passed u/s 144 r.w.s.147 of the Act.
Aggrieved, the assessee carried the matter before the Ld. CIT(A)/NFAC challenging the above additions made by the Ld. AO. There was non-compliance by the assessee to the various notices issued by the Ld. CIT(A)/NFAC. On merits, the Ld. CIT(A)/NFAC upheld the action of the Ld. AO in respect of various grounds of appeal
raised by the assessee before him and dismissed the appeal of the assessee for statistical purposes by observing as under :
4. In the grounds of appeal, the appellant has contended that Ld. AO had not specified specific sections under which the addition is made. It is now almost settled that non-mention of section is not fatal to the assessment order. Taxation can be done on general principles of taxation. Reliance is placed on the following decisions:
(a) Manoj Agarwal Vs DCIT (2008) 27 CCH 0557 (DelTrib), Special Bench (para 26) (b) A Govind Rajulu Mudaliar Vs CIT (1958) 34 ITR 807 (SC) (c) Shri Arif Vs ACIT ITA No. 976/Bang./2022 (d) Namdev Arora Vs CIT Jalandhar (2016) 72 taxmann.com 124 (P&H) (e) Rajmeet Singh v. Income-tax Officer [2024] 160 taxmann.com 83 (Jharkhand)
(f) Dr. Prakash Tiwari Vs Commissioner of Income-tax [1983] 14 Taxman 252 (MP) Thus, the contention of the appellant wherein it has been contended that addition of Rs. 1,49,05,289/- has been made without specifying the section and hence the assessment order is bad in law is rejected.
5. On merits, it is seen that in the final show cause mentioned on page 2 of the assessment order, AO has mentioned bank accounts owned by the assessee wherein transactions of 1.99 cr. have taken place. In addition, in bank accounts in which assessee is an authorize signatory transactions of Rs. 88,56,245/- have taken place. The assessment order has mentioned and placed response of the assessee in para 4 page 3. In para 5, AO has made an addition of Rs. 1,49,05,289/- as unexplained cash deposits.
As per the provisions of S. 69A it is the onus of the assessee to explain money deposited in his bank account to the satisfaction of the assessing officer. The provisions of Section 69A are amongst the deeming provisions of the Act from S. 68 to S. 69D. The jurisprudence of S. 68 is more or less equally applicable to section 69A. The first onus is on the AO to 'find' any credits which in his opinion is an unexplained credit. When the AO raises a query to the assessee, the onus to explain 'nature and source' of such credit shifts on the assessee. It is a settled jurisprudence that the appellant has to discharge the onus of satisfactorily explaining the identity of the creditors, creditworthiness of the creditors and genuineness of the transactions. The Act provides that in the absence of satisfactory explanation by the assessee, the AO is entitled to form an opinion that such unexplained credits are deemed income of the assessee and thereafter consider the same as taxable income of the assessee during the year.
In the case of CIT Vs P. Mohankala (2007) 161 Taxman 169 (SC), Hon'ble Supreme Court has held that such opinion of the Assessing Officer is 'evidence against the assessee'. The relevant extract from the decision is as follows: "The Assessing Officer found that the gifts were not real in nature. Various surrounding circumstances had been relied upon by the Assessing Officer to reject the explanation offered by the Assessees. The Commissioner (Appeals) confirmed the findings and conclusion drawn by the Assessing Officer. The Tribunal concurred with the findings of fact. The findings were based on the material available on record and not on any conjectures and surmises. They were not imaginary as sought to be contended. [Para 22] The findings of fact arrived at by the authorities below were based on proper appreciation of the facts, the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the Assessees had been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. [Para 23] It is true that even after rejecting the explanation given by the Assessees, if found unacceptable, the crucial aspect, whether on the facts and circumstances of the case, it should be inferred that the sums credited in the books of the Assessees constituted income of the previous year, must receive the consideration of the authorities, provided that the Assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. Section 68 itself provides that where any sum is found credited in the books of the Assessees for any previous year, the same may be charged to income tax as the income of the Assessees of the previous year, if the explanation offered by the Assessees, about the nature and source of such sums found credited in the books of the Assessees, is in the opinion of the Assessing Officer not satisfactory. Such opinion found itself constitutes prima facie evidence against the Assessees, viz., the receipt of money, and if the Assessees fail to rebut the said evidence, the same can be used against the Assessees by holding that it was a receipt of an income nature.
In the instant case, the authorities concurrently found the explanation offered by the Assessees unacceptable. The authorities upheld the opinion formed by the Assessing Officer that the explanation offered was not satisfactory. The Assessees did not take the plea that even if the explanation was not acceptable, the material and attending circumstances available on record did not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the Assessees. No such attempt had been made before any authority. [Para 21]"
It can be seen from the above decision that Hon'ble Supreme Court has attached sufficient weightage to the opinion of Ld. Assessing Officer. Such opinion of Assessing Officer carries evidentiary weight before Ld. CIT(A), Ld. ITAT, Hon'ble HC and even Hon'ble SC. In the instant case the assessee has not even attempted to submit necessary details before the AO. Even in the appellate proceedings before the undersigned the appellant has made no effort to provide books of accounts or other evidences to support his ground of appeal
or to controvert the findings of AO, and/ or the opinion of the AO as per which the AO has held that the deposits in the bank account of the assessee stand unexplained within the meaning of Section 69A of the IT Act. 9. if In a recent decision on interpretation of Section 68 Hon'ble Supreme Court has approved the interpretation of Hon'ble Allahabad High Court and held that even source of credit is proved but the nature of credit is not proved, provisions of Section 68 are applicable and AO is justified in making additions. This has been held in the case of Mrs. Rupal Jain Vs CIT (2023) 152 taxmann.com 345 (Allahabad); SLP dismissed in (2023) 152 taxmann.com 346 (SC). The head note of the judgement is as follows: "Section 68 of the Income-tax Act, 1961 - Cash credit (Bank deposit) - High Court by impugned order held that where assessee though had disclosed source of deposit but could not establish nature thereof, three conditions required to be proved by assessee as per section 68 could not be proved and thus, such deposit was rightly treated as unexplained credit under section 68 - Whether SLP was to be dismissed against impugned order of High Court - Held, yes [Para 2]" [In favour of revenue]
10. In the instant case, the abject failure of the appellant in discharging the onus cast upon it by the legislature is evident. As such, I am inclined to accept the opinion of Ld. AO that the unexplained cash deposits in the bank account of the assessee are required to be added under the deeming provisions of the Income Tax Act, under Section 69A.
11. In para 5.2 of the assessment order, AO has considered transactions of Rs. 35,52,389/- as business transactions owing to the fact that these transactions happened in the current account of the appellant. Though, the AO has not mentioned instance of production of books of accounts, vouchers, etc. I am inclined to not to disturb the findings of the AO and the AO has basically adopted the suggested NP ratio of 2% by the appellant. The appellant is also not aggrieved by this addition.
12. The appellant is further not aggrieved by addition of Rs. 1,54,107/- as interest received which was not disclosed for taxation. I am also inclined to accept the conclusions of the AO for the same.
13. The ground wise adjudication is as follows: 13.1 Ground No. 1: "The Assessing Officer erred in making addition of Rs. 1,49,05,289/- without specifying under which section it has made addition hence the assessment order is bad in law."
Decision on Ground No.1: The contention of the appellant is rejected based on discussion in para 4 of the order. The ground of appeal is dismissed. 13.2 Ground No. 2: 'The assessee was denied proper opportunity and denied natural justice as AO had called for information as late on 19/11/2018 and when the assessee's AR submitted details on 19/12/2018 the AO did not discuss the matter. The matter needs to be remanded back for fresh adjudication as the transaction need to be properly analyzed." Decision on Ground No.2: The appellant has failed to show with evidences as to how proper opportunity was not accorded during assessment proceedings. The appellant has not even utilized the opportunities given by this office during appellate proceedings. From the conduct of the appellant, it is concluded that the appellant has nothing more to say on merits of the matter. The ground of appeal is dismissed.”
Dissatisfied, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
6. The assessee’s son Mr. Ajinkya Shah appeared for the assessee. He submitted that the assessee is suffering from critical medical condition and his authorized representative is also not available due to some personal reason. He submitted that the non-appearance/non-compliance before the Ld. CIT(A)/NFAC was not intentional but owing to the unavoidable circumstances beyond the control of the assessee. He further submitted that the assessee was not provided with proper opportunity to represent its case before the Ld. AO who passed the order hurriedly without analyzing the impugned transactions properly. The Ld. CIT(A)/NFAC has merely upheld the action of the Ld. AO without any independent adjudication the merits of the case due to the assessee’s failure to present and substantiate his case before him with relevant documentary evidences to controvert the finding and conclusion of the Ld. AO. He submitted that the assessee has a strong case on merits and given an opportunity the assessee is in a position to explain all the transactions and substantiate his case by filing all the requisite details/ documentary evidence before the Ld. CIT(A)/ NFAC to his satisfaction. He, therefore, prayed that in the interest of justice, the matter may be restored to the file of the CIT(A)/NFAC to decide the impugned issues afresh on merits, after affording reasonable opportunity of hearing to the assessee.
7. The Ld. DR, on the other hand, supported the order of the Ld. CIT(A)/NFAC and submitted that despite number of opportunities granted, the assessee never bothered to make any submission before the Ld. CIT(A)/NFAC. He accordingly submitted that the order of the Ld. CIT(A)/NFAC dismissing the appeal filed by the assessee should be upheld and the grounds raised by the assessee should be dismissed.
8. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A)/NFAC. It is an admitted fact that despite number of opportunities granted, the assessee failed to make any submission before the Ld. CIT(A)/NFAC. The Ld. CIT(A) / NFAC dismissed the appeal of the assessee for the reasons reproduced in the preceding paragraphs. Before us, the assessee has pleaded that non- compliance before the Ld. CIT(A)/NFAC that was not intentional but resulted on account of the above bonafide reasons. We find that the Ld. CIT(A)/NFAC in para 2 of his appellate order has observed that “assessee was issued hearing notices on 06.01.2021, 26.03.2024, 08.11.2024 and 31.12.2024 requesting to submit details supporting his contention in the grounds of appeal. However, the assessee has chosen not to submit any details with respect to the contentions in the grounds of appeal. Thus, there is an abject failure at the end of the assessee to submit relevant evidences in support of his grounds of appeal, and also, submit relevant evidences to controvert the findings and conclusions of AO in the assessment order. It is a settled jurisprudence that mere pleadings are not evidence. It is the duty of the assessee to substantiate the grounds of appeal” and thus on merits the Ld. CIT(A)/NFAC has upheld the findings of the Ld. AO. The assessee has contended that he has a strong case on merits and given an opportunity, the assessee is in a position to explain and substantiate his case by filing all the details/documentary evidence, as may be required/called upon, before the Ld. CIT(A)/NFAC to his satisfaction. Considering the totality of the facts and in the circumstances of the case and in the interest of justice and without going into the merits of the appeal, we deem it fit and proper to set aside the impugned order of the Ld. CIT(A)/NFAC and restore the matter back to his file with a direction to decide the impugned issues on merits as per fact and law, after giving due opportunity of being heard to the assessee. Needless to say, the assessee shall appear and make submissions before the Ld. CIT(A)/ NFAC on the appointed date without seeking any adjournment under any pretext, unless required for the sufficient cause, failing which the Ld. CIT(A) / NFAC shall be at liberty to pass appropriate order as per law. We hold and direct accordingly. The AY 2011-12 grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.