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Facts
The appellant, an individual deriving income from business, did not file a regular return for AY 2013-14. An assessment was completed, adding Rs. 4,07,17,830/- for cash deposits in bank accounts and Rs. 1,90,552/- as interest income, treating them as unexplained. The appellant claimed these deposits were from business receipts of a partnership firm whose account was frozen and maturity proceeds of an FD.
Held
The Tribunal condoned the delay in filing the appeal due to the appellant's medical condition. The Tribunal found the appellant's explanation regarding business receipts and FD maturity proceeds to be plausible and not rebutted by the lower authorities with cogent reasons.
Key Issues
Whether the addition of cash deposits and interest income as unexplained money was justified, and if the appellant's explanation for the source of funds was credible.
Sections Cited
148, 147, 144, 144B
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, 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 [CIT(A)] dated 19.11.2024 for Assessment Year (AY) 2013-14.
Brief facts of the case are that the appellant is an individual deriving income from business. No regular return of income for AY 2013-14 was filed by the appellant. The National Faceless Assessment Centre (hereinafter called "the AO") formed an opinion that income escaped assessment to tax for the reason that the Sitaram Thrikkur Subbaraman appellant made cash deposits in the bank account. Accordingly, a notice u/s. 148 of the Income Tax Act, 1961 (the Act) was issued on 31.03.2021. In response to the notice u/s. 148 the appellant filed return of income on 24.12.2021 disclosing income of Rs. 10,63,270/-. Against the said return of income, the assessment was completed by the AO vide order dated 19.03.2022 passed u/s. 147 r.w.s. 144 & 144B of the Act at a total income of Rs. 4,09,08,382/-. While doing so, the AO made addition of Rs. 4,07,17,830/- being aggregate cash deposits made in two bank accounts, rejecting the explanation of the appellant that the cash deposits were made out of the business receipts of the firm in which the appellant is a partner. It was further submitted that the firm’s business receipts were deposited in appellant’s bank accounts as the firm’s bank account was frozen by the bank and the said deposits were utilised for repaying the liabilities of the said partnership firm. It is shown that in the books of the firm, these transactions were duly entered by showing cash deposits as withdrawals from the firm’s account. In support of this, the appellant had filed extracts from the cash book of the firm. The AO also made addition of interest income of Rs. 1,90,552/- earned from the banks.
Being aggrieved, an appeal was filed before the CIT(A), contesting the above addition on the ground that the explanation offered by the appellant in support of the cash deposit in bank account is not genuine and no addition on account of cash deposits is required
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
At the outset we find that there is a delay of 127 days in filing the present appeal. The appellant filed a petition along with an affidavit seeking condonation of delay in filing the appeal, wherein it is stated that the delay had occurred as the appellant was suffering from severe back pain and was undergoing treatment. In support of this averment the appellant filed a medical certificate. Therefore, it is prayed that the delay in filing the appeal may be condoned and the appeal may be admitted for adjudication. Having regard to the averments made in the affidavit seeking condonation of delay, in the absence of any evidence contrary, we are of the considered opinion that the appellant society is prevented by sufficient reasonable cause in filing the appeal within the prescribed limit. Accordingly, we condone the delay and admit the appeal for adjudication.
The learned counsel for the assessee submitted that the learned lower authorities made addition on cash deposits in the bank account treating as unexplained money of the appellant, rejecting the submissions of the appellant in support of the source of cash deposits without assigning any reason. It is submitted that the appellant is a partner in the partnership firm M/s. Sitaram Auto Sitaram Thrikkur Subbaraman Sales and Service, which was engaged in the business of dealing in 2 wheelers and 3 wheelers. The bank account of the firm is frozen by the bank for non repayment of the loans. Therefore, the business receipts are deposited in the bank accounts of the appellant in Axis Bank and City Union Bank. These cash deposits were shown as withdrawals from the firm and these cash deposits were duly disclosed in the hands of the firm and the appellant had correlated each cash deposit made in appellant’s bank account with cash withdrawals made from the firm. The explanation offered by the appellant cannot be rejected without assigning any valid reason. It is submitted that the cash deposits made in the Axis Bank and City Union Bank, aggregating to Rs. 2,46,70,105/- are out of the business receipts of the firm and the balance Rs. 1,23,31,827/- represents the maturity proceeds of fixed deposits (FD) and the FD was made during the previous year relevant to AY 2012-13 and the said FD was originally made out of the proceeds of the immovable property sold vide sale deed No.5198/2022 dated 28.02.2011. Thus, it is submitted that no addition is required to be made.
On the other hand, the ld. CIT-DR submits that the appellant had failed to discharge the onus of proving the source of cash deposits before the learned lower authorities and, therefore, no interference in the order is warranted.
We have heard the rival contentions and perused the material available on record. The only issue that arises for our consideration Sitaram Thrikkur Subbaraman is whether the learned lower authorities were justified in making addition of Rs. 4,09,08,382/- and confirming the same as unexplained money of the assessee. Out of this a sum of Rs. 1,23,92,033/- represents the maturity proceeds of FD made in the earlier previous year. The FD was made during the previous year relevant to AY 2012-13 and, therefore, no addition is required to be made. This is evident from the bank statements of Account No. SB- 13316 held with the City Union Bank, Thrissur Branch and this FD was deposited to bank account on 21.06.2012. The balance cash deposit represents the business receipts of the partnership firm in which the appellant was a partner. The explanation offered by the appellant was not rebutted by the learned lower authorities. The explanation was rejected without giving any cogent reason. The explanation offered by the appellant is a plausible explanation, therefore, no addition is required to be made. Accordingly, we direct the AO to delete the addition made on account of unexplained money of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 31st July, 2025.
Sd/- Sd/- (SONJOY SARMA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin, Dated: 31st July, 2025 n.p.