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Facts
The assessee, engaged in business, filed a return declaring income. Subsequently, cash deposits of Rs. 5,77,82,320/- were found in their IDBI bank account, leading the AO to believe income had escaped taxation. The AO completed the assessment, bringing to tax Rs. 5,31,20,260/- from these deposits as unexplained money.
Held
The Tribunal held that the lower authorities erred in presuming that withdrawn money from SBI was used for other purposes without contrary evidence. The Tribunal also found the reasoning that cash deposits could not be made from cash sales to be incorrect, as the assessee did not claim the deposits were solely from cash sales.
Key Issues
Whether the addition of Rs. 5,31,20,260/- as unexplained money based on cash deposits in IDBI bank was justified, considering the assessee's explanation of withdrawal from SBI and the lack of nexus proof by the revenue.
Sections Cited
148, 147, 144B
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Income Tax Appellate Tribunal, COCHIN BENCH
(Assessment Year: 2017-18) Gopalan Nair Sajan .......... Appellant Ashok Tradelines, P.P. Road, Palai [PAN: AHYPG 0629 C] vs. Income Tax Officer .......... Respondent Ward-1, Kottayam. Appellant by: Shri Paulson K P, CA Respondent by: Shri Sanjit Kumar Das, CIT-DR Date of Hearing: 06.08.2025 Date of Pronouncement: 14.08.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of National Faceless Appeal Centre, Delhi [CIT(A)] dated 23.06.2025 for Assessment Year (AY) 2017-18.
Brief facts of the case are that appellant is an individual, engaged in the proprietorship business as distributor for Supreme SA No. 68/Coch/2025 Gopalan Nair Sajan Industries, Everest Industries & ACC Ltd. in the name and style of Ashok Trade Lines. The return of income for the A.Y. 2017-18 was filed on 31/10/2017 declaring income of Rs. 51,89,360/-. Subsequently based on the information that the appellant made cash deposits of Rs. 5,77,82,320/- in the IDBI bank. The AO formed the opinion that the income escaped to tax. Accordingly, a notices u/s. 148 was issued on 18/06/2021. Against the said return of income, assessment was completed by the ITO, Ward-1, Kottayam (AO) vide order dated 17/05/2023 u/s. 147 r.w.s. 144B of the Act at a total income of Rs. 5,83,10,260/-. While doing so, the AO brought to tax the cash deposits made in the IDBI bank of Rs. 5,31,20,260/- as unexplained money of the appellant rejecting the explanation of the assessee that cash deposits were out of withdrawal made from State Bank of India (SBI) by holding that the assessee could have used the money withdrawn from the SBI for some other purposes.
Being aggrieved by the above assessment order, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO by holding that appeal could not have made cash deposits of Rs. 5,31,20,260/- out of cash sales of Rs. 46,62,060/- only.
Being aggrieved, the assessee is in appeal before this Tribunal in the present appeal.
SA No. 68/Coch/2025 Gopalan Nair Sajan 5. It is submitted that the cash deposits were made out of cash withdrawn from the SBI and cash collection entries are duly accounted in the books of account. It is further submitted that NFAC had failed to grant a personal hearing despite requested made by the appellant. It is further submitted that the order of learned CIT(A) was passed without considering the submissions of the appellant from the proper perspective.
On the other hand, learned Sr. DR submits that the appellant had failed to prove that cash withdrawn from SBI was utilized only for the purpose of depositing in IDBI bank. In absence of nexus between the withdrawal from the SBI and deposits in the IDBI bank, learned CIT(A) had rightly confirmed the action of the AO.
We have heard rival submissions and perused the material on record. The issue that arises for our consideration is whether NFAC was justified in confirming the addition of Rs. 5,31,20,260/- being cash deposits made in IDBI bank as unexplained money of the appellant. There is no dispute about the fact that cash deposits made in the IDBI bank account, however, the appellant offered an explanation by stating that the said cash deposits were out of cash withdrawn from SBI on the same day. However, this explanation was rejected by the AO by holding that withdrawn from the SBI would have been utilized for some other purpose. If money was required to be deposited in IDBI bank, the same could have be done through banking channel i.e. through RTGS or NEFT etc. However, SA No. 68/Coch/2025 Gopalan Nair Sajan on appeal, learned CIT(A) confirmed the addition by holding that cash deposits of Rs. 5,31,20,260/- could not have been made only out of cash sale of Rs. 46,62,060/-. We are unable to agree with the reasoning of the lower authorities for the reason that no presumption can be drawn that the money withdrawn was utilized for some other purpose other than the deposits in the bank account in absence of any evidence to the contrary on record especially in view of the fact that the cash withdrawn from SBI was deposited in IDBI bank on the same day. Similarly, the reasoning of the learned CIT(A) that cash deposits of Rs. 5,31,20,260/- could not have been made out of sale made of Rs. 46,62,060/- is also not correct as it is not the case of the appellant that cash deposits were made only out of cash sales. Therefore, we are of the considered opinion that matter requires to remand to the file of the AO for denovo assessment in accordance with law after due verification of fact that nexus between cash withdrawn from the SBI and the deposits in IDBI bank and also taking into consideration the fact that NFAC had failed to grant personal hearing despite request made by the appellant. Accordingly, we set aside the orders of learned lower authorities and remit the matter back to the file of the AO for redoing the assessment on the above lines. Thus, the appeal filed by the assessee stands partly allowed for statistical purposes.
Since the appeal was disposed by us, the stay application filed by the assessee has become infructuous and dismissed accordingly.
Order pronounced in the open court on 14th August, 2025.