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Facts
The appellant, a partnership firm, filed its return of income for AY 2017-18. The AO made an addition of Rs. 36,74,500/- on account of cash deposits in specified bank notes during demonetisation, rejecting the appellant's explanation of realization from debtors. The CIT(A) upheld this addition, stating the appellant failed to provide confirmation letters.
Held
The Tribunal held that both the AO and the CIT(A) failed to provide the appellant an opportunity to produce further evidence to support their explanation regarding the cash deposits. It is a settled legal principle that such an opportunity must be given before rejecting an explanation.
Key Issues
Whether the CIT(A) was justified in confirming the addition made on account of cash deposits in SBN during demonetisation without affording an opportunity to the assessee to produce evidence.
Sections Cited
143(3), Partnership Act
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
Assessment Years: 2017-18 P.K. Ahammed and Company .......... Appellant 9/510, Big Bazar, Calicut 673001 [PAN: AACFP9677L] vs. Income Tax Officer, Ward - 1(2) .......... Respondent Aayakar Bhavan, Mananchira, Kozhikode Assessee by: Shri Arjun Nedungadi, CA Revenue by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 27.10.2025 Date of Pronouncement: 29.10.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 30.06.2025 for Assessment Years (AY) 2017-18.
Brief facts of the case are that the appellant is a partnership firm duly constituted under the Partnership Act. The return of income for AY 2017-18 was filed on 23.10.2017 declaring income of Rs. 20,57,270/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(3), Kozhikode (hereinafter called "the AO") vide order dated 24.12.2019 passed & 608/Coch/2025 P.K. Ahammed and Company u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 57,31,770/-. While doing so, the AO made addition of cash deposits in specified bank notes (SBN) during demonetisation period of Rs. 36,74,500/-, rejecting the explanation of the appellant that the said cash deposit was made out of realization from debtors on cash as on 08.11.2016.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order dismissed the appeal placing reliance on judicial precedents that the appellant had failed to discharge the onus of filing confirmation letters from the parties from whom cash was realized.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The learned counsel for the assessee submitted that the CIT(A), without meeting the arguments and contentions raised, simply dismissed the appeal placing reliance on irrelevant judicial decisions.
On the other hand, the learned Sr. DR supported the order and submitted that no interference is called for.
I heard the rival contentions and perused the material available on record. The only issue that arises for my consideration is whether the CIT(A) was justified in confirming the addition & 608/Coch/2025 P.K. Ahammed and Company made on account of cash deposits in SBN during demonetisation period. On perusal of the assessment order it would be clear that the AO had made the addition by holding that the explanation offered in support of the cash deposit in SBN was not satisfactory. Even on appeal before the CIT(A), the CIT(A) confirmed the action of the AO by holding that the appellant had failed to discharge the onus of proving the explanation rendered by filing confirmation letters from the debtors from whom cash was collected, etc. However, on perusal of the order of the AO as well as the NFAC it is not evident that the appellant was not called upon to produce further evidence in the form of confirmation from parties from whom cash were realised and also from whom cash were collected on account of realization of debts and also PAN, etc. It is trite law that before rejecting the explanation of the appellant for whatsoever reasons, the AO as well as the appellate authority is bound to give opportunity to the appellant to adduce evidences in support of the explanation rendered by the appellant. In the present case the AO as well as the NFAC had failed to do so. In the circumstance I am of the considered opinion that the ends of justice would be met if the matter is restored to the AO for de novo adjudication after affording an opportunity of hearing to the appellant to adduce evidence in support of the explanation offered for the source of cash deposits made in SBN.
Order pronounced in the open court on 29th October, 2025.