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Facts
The Assessing Officer (AO) added Rs. 99,50,160/- to the assessee's income as unexplained money from cash deposits, invoking Section 69A of the IT Act. The assessee failed to provide satisfactory explanations and supporting documents for these deposits, some of which were in demonetized currency.
Held
The tribunal restored the matter to the file of the Commissioner (Appeals) for de novo adjudication. The tribunal held that the CIT(A) erred in deciding the appeal without awaiting crucial information from the bank and without calling for a remand report from the AO.
Key Issues
Whether the CIT(A) erred in allowing the appeal without obtaining a remand report from the AO, especially when crucial information from the bank was pending?
Sections Cited
69A, 271AAC, 133(6), 145(3)
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2017-18) Income Tax Officer, Vs. S3 Tradecom Pvt. Ltd., Ward-4(1)(1), A/710, Siddhivinayak Tower, Ahmedabad Nr. Katariya Arcade, Makarba, S.G. Highway, Ahmedabad-380051 [PAN No.AAWCS0852P] (Appellant) .. (Respondent) Appellant by : Shri Abhijit, Sr. DR Respondent by: None 21.07.2025 Date of Hearing Date of Pronouncement 30.07.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Department against the order passed by the Ld. Commissioner of Income Tax (Appeal), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 20.03.2024 passed for A.Y. 2017-18.
The Department has raised the following grounds of appeal:
“(a) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 99,50,160/- made by AO on account of unexplained cash deposit in bank accounts treated as unexplained money u/s 69A of IT Act. (b) The appellant craves leave to add, alter and /or to amend all or any the ground before the final hearing of the appeal.” 3. The Department has also raised the following additional grounds of appeal:
ITO vs. S3 Tradecom Pvt. Ltd. Asst.Year –2017-18 - 2– “Whether on the facts and circumstances of the case and in law the Ld.CIT(A) has erred in allowing the appeal of the assessee on the basis of information called rom Indus Bank by issuing notice u/s 133(6) of the IT act by him, without giving an opportunity of being heard to the AO by calling the remand report”
The brief facts of the case are that in the assessment proceedings, the Assessing Officer issued notices seeking various details / information from the assessee company, including cash book, sales and purchase registers, stock register, and justification for large cash balances and deposits during FY 2016- 17, particularly in the demonetisation period. However, the Assessing Officer noted that the assessee failed to provide satisfactory replies along with supporting documentary evidence in response to notices issued by him. Despite show cause notices asking for details of abnormal cash deposits amounting to ₹1,42,55,660/- (including ₹1,14,76,410/- during the demonetisation period), the Assessing Officer observed that the assessee’s explanation remained vague and uncorroborated. On further examination, the Assessing Officer noted that the assessee failed to clarify whether the cash deposited, especially ₹28,10,245/- claimed to be received from cash sales was in demonetised currency or legal tender. The records indicated that ₹12,57,000/- of the deposits in the YES Bank account were in old demonetised notes and further the assessee could not establish the legal source of ₹99,50,160/- out of the total deposits. Accordingly, the Assessing Officer held that the assessee failed to discharge the burden of proving the nature and source of the cash deposits. Consequently, ₹99,50,160/- was treated as unexplained money and added to the assessee’s income under Section 69A of the Act. Penalty proceedings under Section 271AAC were also separately initiated.
In appeal, CIT(Appeals) deleted the addition made by the Assessing Officer with the following observations:
ITO vs. S3 Tradecom Pvt. Ltd. Asst.Year –2017-18 - 3– “I have considered the submission of the appellant and gone through the AO’s observation & decision in assessment order. I find during the course of assessment proceedings, with the help of submission of the appellant the AO verify the veracity of the accounts and accepted the incident of cash sales except discrepancy of Rs. 23,13,756/- as per column 6 of the table C vide para 4.4 of assessment order. I find the AO opined vide said para 4.4 of the assessment order that “the required details /information are still awaited from the Indusind Bank, Nehru nagar Branch, Ahmedabad till date despite repeated request”. Therefore I find the AO is unable to bring any adverse material on record to treat the said invalid cash sales as unexplained despite taking resort to notice u/s 133(6) of the I.T Act. I also find the appellant has given detailed representation to explain the source of cash deposit and the AO is unable to point out either any specific defects in the books of accounts or any violation of any condition for which the books of accounts could be rejected under section 145(3) of the I.T Act. Moreover how the entire amount of Rs. 99,50,160/- may be treated as without offering any acceptable and cogent explanation regarding the source of cash deposit is not clearly established by the AO in his assessment order vide para4.6 of assessment order, which was added u/s 69A of the I.T Act. In view of above observation I find infirmity in the order of the AO and I am of opinion that AO’s decision of invoking provision of section 69A of the I.T Act is unjustified and not in accordance with law. Accordingly the addition of Rs.99,50,160/- by invoking provision of section 69A of the I.T Act stand deleted. The ground on this issue is allowed. In the result, the appeal of the appellant is allowed.”
The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee. Before us, the Department had taken an additional ground that CIT(Appeals) allowed the appeal of the assessee without calling for a remand report especially in light of the fact that the information was still awaited from Indusind bank in response to notice issued by the Assessing Officer u/s 133(6) of the Act.
We note that the Department is in appeal before us challenging the order passed by the CIT(Appeals), whereby the appeal of the assessee was allowed. During the course of hearing, the Department raised an additional ground to the effect that the Commissioner (Appeals) disposed of the appeal in favour of the assessee without calling for a remand report from the Assessing Officer, despite the fact that crucial information from IndusInd Bank, sought under Section 133(6) of the Act, was still awaited at the time of disposal of the appeal. It is a well-settled principle of appellate proceedings that the first appellate authority, while adjudicating a matter involving disputed facts, particularly with regard to ITO vs. S3 Tradecom Pvt. Ltd. Asst.Year –2017-18 - 4– unexplained cash deposits, should ensure a proper fact-finding process, including verification of bank records and any other relevant evidence. In the present case, the order of the CIT(Appeals) was passed without awaiting the full factual inputs that were being collected by the Assessing Officer and without calling for a remand report to ascertain the veracity of the assessee’s claims in light of those pending responses. Accordingly, we are of the view that the order passed by the Commissioner (Appeals) cannot be sustained at this stage and deserves to be set aside. We therefore restore the matter to the file of the Commissioner (Appeals) for de novo adjudication, with a direction to consider the matter afresh after calling for a remand report from the Assessing Officer and examining the information received from IndusInd Bank in response to the notice issued under Section 133(6) of the Act.
In the result, the appeal of the Department is allowed for statistical purposes. This Order pronounced in Open Court on 30/07/2025
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 30/07/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,