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Facts
The assessee, an individual, failed to file an income tax return for AY 2019-20. Reassessment proceedings were initiated after information showed significant cash withdrawals and deposits in a bank account. The AO made substantial additions for unexplained bank credits, interest income, and disallowed travelling expenses. The assessee claimed these credits were business receipts from fish trading, a claim the CIT(A) rejected due to insufficient documentary evidence, thus confirming the AO's order.
Held
The Tribunal observed that the CIT(A) did not properly address the assessee's contention that the bank credits constituted business receipts already accounted for and offered to tax. Consequently, the Tribunal decided to remand the case back to the Assessing Officer for a de novo assessment, allowing the assessee a fresh opportunity to substantiate their claims.
Key Issues
Whether the CIT(A) was justified in confirming the addition made by the AO regarding unexplained bank credits, especially when the assessee claimed them to be business receipts reflected in audited financials, and if the matter requires a remand for fresh verification.
Sections Cited
139(1), 148, 148A, 147, 144, 144B
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI MANU KUMAR GIRI, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi (NFAC) dated 12.08.2025 for Assessment Year (AY) 2019-20.
Brief facts of the case are that the appellant is an individual. No regular return of income ups- 139(1) of the Income Tax Act, 1961 (the Act) was filed for AY 2019-20. Based on the information that the appellant had made huge cash withdrawals to the tune of Rs. 2,62,21,003/- and cash deposit of Rs. 6,19,130/- in the current Poochiba Valappil Nelliyat Dhanesh account maintained with the Federal Bank during the previous year relevant to AY 2019-20, the Assessment Unit, Income Tax Department (hereinafter called "the AO") formed an opinion that income escaped assessment to tax. Accordingly, a notice u/s. 148 of the Act was issued on 29.03.2023 after complying the procedures prescribed u/s. 148A of the Act. In response to the notice u/s. 148, the appellant filed return of income on 27.04.2023 disclosing income of Rs. 5,40,890/-. Against the said return of income, the assessment was completed by the AO vide order dated 11.03.2024 passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Act at a total income of Rs. 4,91,82,992/-. While doing so, the AO brought to tax the total credits found in the account maintained with Federal Bank aggregating to Rs, 4,86,15,836/- as unexplained money of the appellant for failure of the appellant to offer explanation as to the source of said credit. The AO also brought to tax the interest income of Rs. 3,910/- and also disallowed travelling expenses of Rs. 23,356/-.
Being aggrieved, an appeal was filed before the CIT(A), contending that the appellant is a fish merchant, primarily engaged in trade of inedible/waste fish which is being supplied to chicken feed manufacturing companies/their agents. Edible fishes procured, if any, are traded to local suppliers, on small quantity, primarily on cash basis. It was submitted that the total credits represent business receipts which are reflected in the audited financial statements Poochiba Valappil Nelliyat Dhanesh wherein the total turnover of Rs. 5,38,10,112/- was shown. However, the learned CIT(A) confirmed the action of the AO stating that in the absence of corroborative documentary evidence the explanation cannot be accepted.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned A.R. submits that the CIT(A) ought not to have confirmed the addition of Rs. 4,86,14,836/- without accepting the explanation of the appellant that the said deposits were made out of business receipts of the appellant. The business receipts were shown as turnover of the appellant, which is accepted by the AO. Therefore, no fresh addition can be made.
On the other hand, the learned CIT-DR submits that in the absence of nexus between the business receipts and turnover shown, the addition is justified and no interference is called for.
We have heard the rival contentions and perused the material available on record. The issue that arises for our consideration is whether the CIT(A) was justified in confirming the addition made by the AO in the given facts of the case. The AO had brought to tax the entire credits found in the bank account as unaccounted money of the appellant for the failure of the appellant to discharge the onus of proving the source of credits. However, before the CIT(A) it was contended that the said credits represent the business receipts of the Poochiba Valappil Nelliyat Dhanesh appellant, which are duly reflected in the books of account of the appellant and offered to tax. This explanation was not dealt with by the CIT(A). Therefore, we are of the considered opinion that the matter requires remand to the file of the AO for due verification of the claim of the appellant that the credits were made out of business receipts which are shown as turnover. Accordingly, the matter is restored to the file of AO for de novo assessment in accordance with law after affording reasonable opportunity of hearing to the appellant.
In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 19th November, 2025.