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Facts
The assessee, an individual, did not file his return for AY 2011-12. Based on NMS and AIR data, the AO noted substantial cash deposits. The assessee explained these deposits as proceeds from selling inherited jewelry, but failed to provide sufficient documentary evidence. The AO treated the deposits as unexplained investment and added them to the income.
Held
The CIT(A) upheld the AO's addition, noting the assessee's failure to prove the source and nature of the cash deposits with corroborative evidence. The Tribunal, considering the substantial addition and the need for fresh examination of factual material and supporting documentary evidence, restored the matter to the AO for de-novo consideration.
Key Issues
Whether cash deposits are unexplained investment or diversion of income, and whether the AO/CIT(A) rightly disregarded the assessee's explanation without sufficient documentary evidence.
Sections Cited
69, 147, 148, 131(1A), 143(3), 271(1)(c), 250
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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2011-12) Varis Mahendrabhai Doshi, Vs. Income Tax Officer, C/o. Divyang Shah & Co., Ward-4(2)(3), Chartered Accountant, 201, Ahmedabad Devashish Complex, Nr. Regenta Central Antarim Hotel, Off. C.G. Road, Ahmedabad-380009 [PAN No.ADPPD4435N] (Appellant) .. (Respondent) Appellant by : Shri Divyang Shah, AR Respondent by: Shri Kamal Deep Singh, Sr. DR 10.12.2025 Date of Hearing Date of Pronouncement 16.12.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 28.11.2024 passed for A.Y. 2011-12.
The assessee has raised the following grounds of appeal:
“1. Whether on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in confirming the addition of Rs. 457,81,200/- as unexplained investment u/s.69 of the act? 2. Whether on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in not accepting the cash deposit of Rs. 457,81,200/- as diversion of income and thus, not chargeable to tax under Income tax act?
Varis Mahendrabhai Doshi vs. ITO Asst.Year –2011-12 - 2– 3. Whether, on facts and in circumstances of the case and in law, Ld. Assessing officer has erred in issuing notice u/s. 148 of the act? 4. Whether, on facts and in circumstances of the case and in law, Ld. Assessing officer has erred in passing order u/s. 147 of the act? Further, appellant craves leave to add, amend, alter or withdraw all or any ground of appeal
.”
3. The brief facts of the case are that the assessee, an individual, did not file his return of income for Assessment Year 2011–12. Based on information available in the Non-Filer Monitoring System (NMS) and AIR data on the ITD system, the Assessing Officer noticed that the assessee had made substantial cash deposits in his bank accounts during the financial year 2010–11. The AIR information showed that the assessee had made cash deposits amounting to ₹8,51,35,700/-. The assessee was asked to explain the source of such cash deposits along with documentary evidence. As there was no response, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment due to non-filing of return. Accordingly, after recording reasons, the assessment was reopened under section 147 and notice under section 148 was issued on 26.03.2018.
4. In response to the notice under section 148, the assessee filed a return of income declaring total income of ₹1,50,000/-, which was subsequently revised on 16.05.2018 declaring income of ₹1,55,800/-. The reasons recorded for reopening were furnished to the assessee, and the assessee objected to the reopening on the ground that the actual cash deposits were less than ₹8,51,35,700/-. The objections were disposed of by the Assessing Officer vide order dated 06.09.2018. During the course of assessment proceedings, the Assessing Officer issued notices asking the Varis Mahendrabhai Doshi vs. ITO Asst.Year –2011-12 - 3– assessee to reproduce details such as bank statements, cash book, explanation of cash deposits and source thereof. On verification, the Assessing Officer found that the actual cash deposits in various bank accounts aggregated to ₹4,57,81,200/-. The assessee explained that these cash deposits were from proceeds from sale of jewellery and valuables belonging to his late father, which were kept in a locker with Dena Bank and were disposed of in accordance with a Will dated 05.09.1991 executed by his father. As per the assessee, the amounts were deposited into his bank account and thereafter paid to the beneficiaries of the Will, namely Shri Ashwin Chinubhai Shah and Smt. Rashmika Ashwinbhai Shah. The assessee furnished a copy of the Will and death certificate of his father but as per the Assessing Officer the assessee failed to produce any documentary evidence regarding ownership of jewellery, quantitative details, sale bills, capital gains computation or wealth-tax records of his father. The Assessing Officer issued various summons under section 131(1A) to the alleged beneficiaries, both at the address provided by the assessee and subsequently at addresses available in PAN records, but none of them appeared. Despite multiple opportunities, the Assessing Officer was of the view that the assessee could not substantiate the source of cash deposits with supporting evidence. Consequently, the Assessing Officer treated the cash deposits of ₹4,57,81,200/- as unexplained investment under section 69 of the Act and added the same to the total income. The assessment was completed under section 143(3) read with section 147 determining total income at ₹4,59,37,000/- and penalty proceedings under section 271(1)(c) were initiated.
Varis Mahendrabhai Doshi vs. ITO Asst.Year –2011-12 - 4– 5. Aggrieved, the assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals). Before the CIT(Appeals), the assessee contended that the Assessing Officer erred in treating the cash deposits as unexplained investment under section 69 of the Act and that the cash deposits were from transfer of inherited assets in terms of his father’s Will and therefore were not taxable as income in his hands. The assessee submitted that the Assessing Officer failed to appreciate the explanation regarding execution of the Will and transfer of amounts to the beneficiaries.
The CIT(Appeals) noted that during appellate proceedings, several notices under section 250 were issued to the assessee calling for supporting details; however, there was no compliance on behalf of the assessee. On merits, while adjudicating Ground No. 1, relating to the addition of ₹4,57,81,200/- as unexplained investment under section 69 of the Act, the CIT(Appeals) observed that the onus to prove the nature and source of cash deposits squarely lay on the assessee. Apart from producing a copy of the Will, the assessee had not furnished any corroborative evidence such as proof of ownership of jewellery by the father, quantitative details of valuables, locker statements, sale bills, details of purchasers, confirmation of beneficiaries, or evidence of payment of capital gains tax. The repeated non-appearance of the alleged beneficiaries despite summons further weakened the assessee’s claim. Relying on the settled legal position that mere explanation without supporting evidence is insufficient, the CIT(Appeals) held that the Assessing Officer was justified Varis Mahendrabhai Doshi vs. ITO Asst.Year –2011-12 - 5– in treating the cash deposits as unexplained. In this context, the CIT(Appeals) placed reliance on the judgment of the Hon’ble Supreme Court in Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC) and Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC), wherein it was held that the burden of proving the source of a sum of money found credited in the books or received by the assessee is on the assessee. Further reliance was placed on PCIT v. NRA Iron & Steel (P.) Ltd. (2019) 412 ITR 161 (SC), wherein the Hon’ble Supreme Court held that the assessee must establish identity, creditworthiness and genuineness of the transaction, failing which the addition is justified.
While dealing with Ground No. 2, relating to the contention that the cash deposits represented diversion of income and were not chargeable to tax, the CIT(Appeals) held that in the absence of any credible evidence establishing the nature of the receipts and their linkage to a valid and executed Will, the argument of diversion of income could not be accepted. The CIT(Appeals) observed that the assessee had failed to demonstrate that the amounts deposited were never his income or that he merely acted as a conduit. In view of these findings, the CIT(Appeals) held that the assessee had failed to discharge the statutory onus cast upon him to explain the nature and source of the cash deposits. Finding no infirmity in the assessment order, the CIT(Appeals) upheld the addition of ₹4,57,81,200/- made under section 69 of the Act and dismissed all the grounds of appeal raised by the assessee.
9. Before us, the Counsel for the assessee submitted that if given another opportunity of hearing in the interest of justice and looking at the huge quantum of additions involved in the hands of the assessee, the assessee would produce relevant supporting material in support of his case. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record.
Considering the totality of facts and circumstances of the case, we note that the addition involved is substantial and the issue relates to examination of the nature and source of cash deposits, which essentially depends upon verification of factual material and supporting documentary evidence. We further take note of the submission of the learned counsel for the assessee that, if one more effective opportunity is granted, the assessee would place on record relevant material in support of his explanation. At the same time, we also note that the authorities below have proceeded to decide the issue primarily on account of non-furnishing of supporting evidence by the assessee. In the interest of justice and fair play, and without expressing any opinion on the merits of the addition, we are of the considered view that the issue requires fresh examination at the level of the Assessing Officer after affording one more effective opportunity to the assessee. Accordingly, the matter is restored to the file of the Assessing Officer for de-novo consideration in accordance with law. The Assessing Officer shall examine the issue afresh after giving adequate opportunity of being heard to the assessee and after considering all such evidence and explanations as may be furnished by the assessee in support of his case. The assessee is also directed to cooperate fully in the set-aside proceedings and to place on record all relevant material and evidence as may be called for by the Assessing Officer.
In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 16/12/2025