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Facts
The assessee, engaged in real estate development, filed his return for AY 2017-18 declaring an income of Rs. 2,63,520. The case was selected for limited scrutiny. The Assessing Officer (AO) noticed cash deposits of Rs. 18,66,500 and sale proceeds of immovable property amounting to Rs. 86,94,000. The assessee failed to provide satisfactory explanation and documentary evidence for these amounts.
Held
The Tribunal restored the matter to the Assessing Officer for fresh verification of the opening cash balance, reconciliation of cash book with bank statements, and verification of the claim regarding sale consideration pertaining to a partnership firm. The assessee was directed to provide necessary evidence. The Tribunal also expressed displeasure with the manner in which an affidavit was filed.
Key Issues
Whether the cash deposits and sale proceeds of immovable property were adequately explained by the assessee, and if not, whether they were correctly treated as unexplained income and taxed accordingly. The procedural issue of proper verification by the AO and the quality of evidence submitted by the assessee were also central.
Sections Cited
143(3), 142(1), 143(2), 69A, 69, 115BBE, 271AAC(1), 270A, 234A, 234B, 129, 133(6), 46A
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Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
आयकर अपीलीय अिधकरण, अहमदाबाद "ायपीठ, “सी“ अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ C ” BENCH, AHMEDABAD सु"ी सुिच"ा का"ले, "ाियक सद" एवं "ी मकरंद वसंत महादेवकर, लेखा सद" के सम"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं / Year : 2017-18 Amitkumar Navnitbhai Patel The ACIT बनाम/ A/1-1, Madhav Apartment Circle 2(1)(1) v/s. Opp. Municipal garden Ahmedabad – 380 015 Vasna Ahmedabad – 390 007 "थायी लेखा सं./PAN: AMPPP 5605 F अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee by : Shri P.F. Jain, CA Revenue by : Shri Atul Pandey, Sr.DR सुनवाई की तारीख/Date of Hearing : 13/08/2025 घोषणा की तारीख /Date of Pronouncement: 14/08/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM:
This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], dated 10.10.2023, for the Assessment Year (AY)2017–18, arising out of the assessment order dated 27.12.2019 passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act”]. Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 2 Facts of the Case: 2. The assessee is an individual stated to be engaged in the business of real estate development and allied activities. The assessee filed his return of income for the A.Y. 2017-18 on 30.10.2017 declaring total income of Rs.2,63,520/-. The case was selected for limited scrutiny. During the course of assessment proceedings, the Assessing Officer noticed cash deposits aggregating to Rs.18,66,500/- in the assessee’s bank account during the period relevant to the demonetization announcement in November 2016. The Assessing Officer required the assessee to explain the nature and source of the said deposits and to furnish supporting documentary evidence, including certified copies of the bank statements, cash book, and other relevant records. The assessee submitted a cash book and bank book, both prepared by himself, along with certain explanations regarding accumulation of cash over earlier years. However, these bank statements were not certified by the bank, and no corroborative evidence in the form of income-tax returns, balance sheets, or computation of income for the earlier years showing such accumulation was produced.
2.1. The Assessing Officer further noticed that the assessee had sold an immovable property during the year, for which sale proceeds aggregating to Rs. 86,94,000/- were received. On being called upon to substantiate the source and accounting of such receipts, the assessee furnished certain balance sheets and profit and loss accounts pertaining to a partnership firm, M/s. Shri Sadan Realtors, in which he was a partner. However, these financial statements were for earlier years, were not relevant to the year under consideration, and, importantly, were not signed either by the assessee, the partners, or any chartered accountant. In respect of the sale Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 3 transaction in question, no books of account or ITR for the relevant year, nor any computation of income reflecting the receipt, were produced before the AO. On these facts, the AO concluded that the assessee had failed to discharge the onus cast upon him under sections 69A and 69 of the Act to prove the nature and source of the impugned amounts. Consequently, the AO treated the cash deposits of Rs.18,66,500/- as unexplained money under section 69A of the Act and the sale proceeds of Rs.86,94,000/- as undisclosed income under section 69 of the Act, both taxable at the special rate under section 115BBE of the Act. The AO also initiated penalty proceedings under sections 271AAC(1) and 270A of the Act and levied interest under sections 234A and 234B of the Act.
In first appeal, the learned CIT(A) examined the contentions of both the assessee and the AO in detail. It was noted that in the written submissions dated 12.11.2021, the assessee claimed that he was illiterate and that all notices were served to his former consultant at his old e-mail ID, due to which he could not appreciate the importance of such notices and failed to respond appropriately. The CIT(A), however, observed from the assessment order that the assessee had in fact replied to certain statutory notices, including those under sections 143(2) and 142(1) of the Act, and had sought adjournments and filed partial details, which belied his claim of complete unawareness. The CIT(A) recorded that despite several opportunities being afforded — including notices of hearing dated 04.02.2021, 08.09.2023, 12.09.2023, 15.09.2023 and 25.09.2023 — the assessee failed to submit the ITR with computation, certified bank statements, or the basic documentary evidence for the relevant year. Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 4 3.1. With respect to the addition of Rs.18,66,500/-, the CIT(A) upheld the AO’s view that the assessee had not produced any certified bank statement to establish the genuineness of the deposits. The self-maintained cash book and bank book were considered unreliable in the absence of corroboration, and the explanation of cash accumulation since 2013 was found unsubstantiated. The CIT(A) concluded that the addition under section 69A of the Act and taxation under section 115BBE of the Actwas justified.
3.2. Regarding the addition of Rs.86,94,000/-, the CIT(A) observed that the assessee had not provided any documentary evidence to show that the said receipt was disclosed in his books or return of income for the relevant year. The partnership firm’s statements provided were not signed and were not for the year under appeal. Despite repeated opportunities, the assessee failed to file the ITR, computation, or books of account for the year. The CIT(A) thus confirmed the AO’s action in treating the said amount as undisclosed income and taxing it under section 115BBE of the Act.
The CIT(A) placed reliance on several judicial precedents, including Chuharmal vs. CIT (172 ITR 250), Smt. Srilekha Banerjee vs. CIT (1964 AIR 697), Smt. S. Sakunthala Sivan (Madras High Court, 2022), K.V. Mathew vs. ITO (Kerala High Court, 2014), and Roshan Di Hatti vs. CIT (2 SCC 378), to hold that unexplained cash deposits and receipts, when not satisfactorily explained, are liable to be taxed as deemed income under section 69A and section 69, respectively, and subject to the special rate under section 115BBE. Ultimately, the CIT(A) upheld the AO’s additions and dismissed the appeal in toto. Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 5 5. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal:
1. The learned CIT(A) has erred in law and facts in upholding addition of Rs.18,66,500/- made by the AO as unexplained investment.
2. The learned CIT(A) has erred in law and facts in upholding addition of Rs.86,94,000/- made by the AO as undisclosed receipt on sale of immovable property without appreciating the explanation of the assessee.
3. He has erred in law and facts in upholding the computation of tax u/s. 115BBE of the Act.
4. He has erred in law and facts in upholding the charging of interest of Rs.2,44,779/- u/s. 234A and Rs.26,92,569/- u/s. 234B of the Act.
5. On the facts of the appellant no such addition ought to have been made.
6. The appellant craves leave to add, to alter, and/or modify any ground of appeal.
6. During the course of hearing before us the learned Authorized Representative submitted that the assessee’s case was selected for limited scrutiny for the specific purpose of verification of (a) cash deposits made during the demonetization period, and (b) purchase/sale of immovable property. The first notice under section 143(2) was issued on 09.08.2018 by the then Assessing Officer. In response, the assessee, through his then counsel, sought adjournment vide letter dated 31.08.2018. Subsequently, notice under section 142(1) dated 11.08.2018 was also complied with vide submission dated 12.09.2018, wherein complete details and explanation regarding cash deposits and sale of property were furnished. In support of the cash deposits, the assessee submitted statement of income, cash book from 01.04.2016 to 31.12.2016, summary for the period 01.04.2016 to 31.12.2016 and specifically for 01.11.2016 to 31.12.2016, explaining the source of the deposits. These submissions were made through the assessee’s earlier counsel. The learned AR pointed out that thereafter, due to change in incumbent Assessing Officer, fresh notices under section 142(1) read with section 129 of the Act were issued, nearly a year after earlier compliance. Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 6 Further notices dated 01.10.2019, 10.10.2019, and 21.10.2019 were issued on the email ID of the previous consultant, without informing the assessee, leading to non-compliance. It was submitted that this non-compliance was not willful but solely due to lack of communication of such notices to the assessee.
6.1. The learned AR also submitted that the Assessing Officer issued a show cause notice on 04.12.2019 proposing additions of Rs.25,80,000/- on account of cash deposits in SBI and Rs.67,55,000/- on account of sale of immovable property. The AO also sought information from SRO-5, Ahmedabad under section 133(6), which revealed registered sale deeds of five offices/shops allegedly sold by the assessee in his individual capacity as well as on behalf of ten others. Thereafter, another SCN dated 26.12.2019 was issued for compliance by 27.12.2019, and on the same date the assessment order was passed making the impugned additions, mainly on the ground of non-compliance of notices.
6.2. It was submitted that before the learned CIT(A), the assessee filed an affidavit explaining the reasons for non-compliance of subsequent notices, pointing out that earlier notices had been duly complied with by his previous counsel. It was explained that the assessee was a person of limited education, suffering from depression, and due to change of counsel and lack of communication, subsequent notices remained uncomplied. Along with the written submission dated 12.11.2021, all relevant documents were filed before the learned CIT(A), together with an application under Rule 46A seeking admission of additional evidence. The AR also pointed out that the learned CIT(A), before passing the impugned order, called for a remand Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 7 report on three occasions on 08.08.2023, 27.09.2023, and 06.10.2023, but no remand report was received from the AO. Despite this, the learned CIT(A) proceeded to decide the matter on 10.10.2023, sustaining the additions with adverse inference based on earlier non-compliance.
On merits, the learned AR submitted that the cash deposit of Rs. 18,66,500/- was made out of opening cash balance, withdrawals from bank and rental income in cash. The AR further submitted that since these documents are produced before CIT(A) the cash deposit stood fully explained with supporting contemporaneous books of account and other documents, and there was no justification to treat the same as unexplained. The AR took us through the Cash Book submitted before CIT(A) which indicated that there is an opening balance of Rs.28,86,601/- as on 01.04.2016. The AR further stated that this closing cash balance was accepted in the summary assessment for the A.Y. 2016-17 and also placed on records copies of financial statements and copy of ITR for the said assessment year.
7.1. In respect of the addition of Rs.86,94,000/-, it was submitted that the sale consideration pertained not to the assessee individually but to a partnership firm, M/s. Sadan Realtors, in which the assessee was a partner. The said firm had sold the relevant properties, duly accounted for the sale consideration in its books, and offered the same for taxation in its return of income, which had been accepted by the Department. Therefore, there was no basis for taxing the same receipts again in the hands of the assessee. Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 8 7.2. Regarding the ground relating to addition of Rs. 86,94,000/- on account of sale of immovable property the AR prayed that the matter be restored to the file of AO as the details were not furnished before him.
The learned Departmental Representative (DR), on the other hand, strongly relied upon the orders of the lower authorities. The DR invited our attention to page 12 of the appellate order and pointed out that, despite claiming to be illiterate and unaware of the importance of statutory notices, the assessee had in fact replied to earlier notices issued under sections 143(2) and 142(1) of the Act and had also filed partial details before the Assessing Officer. This, according to the learned DR, contradicted the assessee’s claim of ignorance and inability to comply. It was emphasized that, notwithstanding repeated opportunities afforded through multiple hearing notices, the assessee did not furnish the most basic documents such as the income-tax return for the relevant year, detailed computation of income, or the certified bank statement for F.Y. 2016-17. The learned DR further highlighted that the audited balance sheet and profit and loss account of M/s Shree Sadan Realtors, as well as the assessee’s own accounts, were filed without any signature or attestation by the assessee, the partners, or a chartered accountant, thereby depriving them of evidentiary value. The assessee also furnished the financial statements for years other than the year under consideration and failed to produce the balance sheet and profit and loss account for F.Y. 2016-17, which alone was relevant to the appeal. It was contended that, even in respect of the banking records, the assessee merely produced a self-prepared cash book and bank book, without submitting a bank-issued or certified statement. Moreover, as noted by the CIT(A), these records revealed a pattern of substantial cash Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 9 withdrawals purportedly retained by the assessee from 2013 up to the period immediately preceding demonetization in November 2016, a conduct raising serious doubts as to the source and purpose of funds. In view of these categorical factual findings, the learned DR argued that the assessee had consistently withheld material particulars and sought to mislead the authorities, and therefore the additions sustained by the CIT(A) called for no interference.
We have carefully considered the rival submissions, examined the orders of the lower authorities, and gone through the material placed before us.
9.1. We have given our thoughtful consideration to the rival contentions, perused the orders of the lower authorities, and examined the material placed before us. It is evident that the Assessing Officer has not undertaken a proper verification of the assessee’s claim regarding the availability of the opening cash balance and the entries in the cash book. There is no discussion in the assessment order to show that the cash book has been reconciled with the corresponding bank statements, nor has the genuineness of the claimed opening balance been tested with reference to earlier years’ records. It is also an undisputed fact that during the appellate proceedings, the learned CIT(A) called for a remand report on multiple occasions (i.e. on 08.08.2023, 27.09.2023, and 06.10.2023) but no such report was submitted by the Assessing Officer. The absence of this verification exercise has resulted in an incomplete factual examination. Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 10 9.2. In these circumstances, and in the interest of justice, we restore the matter to the file of the Assessing Officer with a direction to verify afresh (i) the availability of the opening cash balance as claimed by the assessee, and (ii) the reconciliation of the cash book with the bank statements for the relevant period. The Assessing Officer shall also verify the assessee’s contention that the sale consideration of Rs.86,94,000/- pertains to the partnership firm M/s. Sadan Realtors, has been duly accounted for in its books, and has been offered to tax in its return of income.
9.3. The assessee shall place on record all necessary evidence, including certified bank statements, duly attested financial statements, and supporting documents. The Assessing Officer shall provide adequate opportunity of being heard to the assessee and thereafter decide the issues in accordance with law.
9.4. Before parting, we express our displeasure at the manner in which the affidavit has been filed in the present proceedings. An affidavit is a solemn declaration and must be precise, complete, and supported by proper particulars. The casual and deficient approach adopted in the present case undermines its evidentiary value and the credibility of the explanation. The assessee is advised to ensure that any future affidavit strictly complies with the requirements of law and procedural propriety.
9.5. Accordingly, the impugned order of the learned CIT(A) is set aside, and the matter is restored to the file of the Assessing Officer for fresh adjudication in accordance with law, after carrying out the verifications and Amitkumar Navnitbhai Patel vs. ACIT Asst. Year : 2017-18 11 reconciliations as directed hereinabove, and after affording adequate opportunity of being heard to the assessee.