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Facts
The assessee, an Airtel dealer, underwent scrutiny assessment for AY 2017-18 where the AO made additions for estimated profit on turnover and unexplained cash deposits (Rs.3,43,500/-) under Section 69A during demonetisation. The CIT(A) deleted the turnover addition but upheld the Section 69A addition. The assessee appealed the sustained addition before the Tribunal.
Held
The Tribunal observed that the cash deposit of Rs.3,43,500/- was only marginally above the CBDT's non-enquiry limit for demonetisation deposits and was related to the assessee's cash-based business receipts. Lacking any material from the Revenue to prove the amount represented undisclosed income, the Tribunal held that the addition under Section 69A was not sustainable and directed its deletion.
Key Issues
Whether the addition of Rs.3,43,500/- as unexplained cash deposit under Section 69A for demonetisation period, being marginally above the CBDT non-enquiry threshold, was sustainable in the absence of evidence of undisclosed income.
Sections Cited
143(2), 144, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH ‘SMC’ AT HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Shri Ramesh Potnuru (“the assessee”), feeling aggrieved by the order passed by the Learned ADDL/JCIT (A), Thiruvanantpuram, (“Ld. First Appellate Authority”), dated 28.05.2024 for the A.Y. 2017-18.
At the outset, it is seen that there is a delay of 111 days in filing of the present appeal before this Tribunal. The assessee has filed a condonation petition along with an affidavit explaining the reasons for the delay. The Learned Authorised Representative (“Ld. AR”)
submitted that the assessee had originally filed the appeal before the Cochin Bench of the Tribunal on 27.07.2024, which was well within the statutory limitation period. However, the Cochin Bench, vide its dated 29.01.2025, dismissed the appeal holding that jurisdiction did not lie with that Bench. The Ld. AR further submitted that immediately after receipt of the order from the Cochin Bench, the assessee filed a fresh appeal before this Tribunal on 20.05.2025. It was contended that the delay has arisen solely because of filing before a non-jurisdictional Bench and not due to any deliberate lapse or negligence. He prayed that the delay be condoned and the appeal be admitted for adjudication on merits.
Per contra, the Learned Departmental Representative (“Ld.
DR”), fairly submitted that she does not have any objection if the delay is condoned, since the assessee had indeed filed the original appeal within the limitation period before another Bench, though wrongly.
We have considered the rival submissions and perused the material available on record. It is not in dispute that the assessee had originally filed the appeal within the statutory period, though before the Cochin Bench of the Tribunal which did not have jurisdiction. The appeal was dismissed by that Bench only on jurisdictional grounds.
Immediately thereafter, the assessee pursued the matter and filed the appeal before this Bench. In these circumstances, we are satisfied that the delay of 111 days was occasioned due to a bona fide mistake in jurisdiction and not on account of any deliberate inaction. The explanation offered is reasonable and deserves acceptance. In the interest of substantial justice, we condone the delay in filing the appeal. Accordingly, the delay of 111 days is condoned and the appeal is admitted for adjudication on merits.
The assessee has raised the following grounds of appeal :
“ That on the facts and circumstances of the case and in the law, and in accordance with the assessment, it has been grossly erred in assessing an addition of Rs.3,43,500/- (out of total addition of 6,58,260/-, Ld. Addl./JCIT(A) partly allowed an amount amounting to Rs.3,14,760/- on appeal of assessee ;making the balance addition as Rs.3,43,500/-) as the income of the captioned assessee Sri Ramesh Potnuru (PAN:CPHPP8568N) for the A.Y. 2017-18.”
The brief facts of the case are that, the assessee is an individual engaged as a dealer providing services with respect to Airtel network. The assessee filed his return of income for the Assessment Year 2017–18 on 05.08.2017 and subsequently revised the return on 08.08.2017, admitting income of Rs.3,04,740/- under the head “Profits and Gains of Business or Profession”. The case of the assessee was selected for scrutiny under CASS for examining the cash deposited during the year in his bank account. Accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued on 13.08.2018. However, the assessee did not comply with the notices issued by the Assessing Officer (“Ld. AO”). During assessment proceedings, the Ld. AO noted that the assessee during the year had deposited cash of Rs.1,23,89,998/- (excluding the cash deposited during demonetisation period) in his bank account. In the absence of any compliance on the part of the assessee, the Ld. AO treated the said cash deposits as turnover of the assessee and estimated income at 5% thereof, i.e., Rs.6,19,500/-, as against the returned income of Rs.3,04,740/-. Further, the Ld. AO also treated cash deposits during the demonetisation period in Specified Bank Notes amounting to Rs.3,43,500/- as unexplained money under section 69A of the Act and added the same in the hands of the assessee. Accordingly, the assessment was completed by the Ld. AO under section 144 of the Act on 23.12.2019 making the above additions.
Aggrieved with the order of the Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition made on account of turnover of Rs.1,23,89,998/-, holding that the Ld. AO was not justified in estimating turnover and applying 5% profit rate thereon. However, the Ld. CIT(A) sustained the addition of Rs.3,43,500/- under section 69A of the Act on the ground that the assessee failed to file any satisfactory explanation regarding the source of cash deposits made during the demonetisation period. The observations of the Ld. CIT(A) are contained at para nos. 1 to 3 of his order which is to the following effect :
Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before this Tribunal. The Ld. AR submitted that the assessee was carrying on most of his business transactions in cash and, therefore, cash deposits in the bank during demonetisation period cannot be treated as unexplained. It was further submitted that the deposits of Rs.3,43,500/- made in Specified Bank Notes during demonetisation were very meagre when compared with the overall turnover of the assessee. The Ld. AR also submitted that the CBDT vide Instruction no.3/2017 dated 21.02.2017 had issued standard operating procedure to be followed by the Ld. AO, wherein it was stated that no investigation was to be carried out in respect of individuals who deposited cash up to Rs.2,50,000/- during the demonetisation period. In the present case, the deposit of Rs.3,43,500/- was only slightly above the said threshold. Hence, it was argued that such small deposits, being relatable to business turnover, should not have been brought to tax under section 69A of the Act. Accordingly, the Ld. AR prayed that the addition of Rs.3,43,500/- sustained by the Ld. CIT(A) be deleted in entirety.
Per contra, the Ld. DR relied on the orders of the lower authorities. She submitted that the assessee had not filed any proper explanation or evidence regarding the source of deposits during the demonetisation period despite opportunities being provided. In such circumstances, the Ld. CIT(A) was justified in confirming the addition of Rs.3,43,500/- under section 69A of the Act.
We have carefully considered the rival submissions and perused the material available on record. It is not in dispute that the Ld. CIT(A) has already deleted the substantial addition of estimated profit on turnover of Rs.1,23,89,998/-. The only surviving dispute relates to the addition of Rs.3,43,500/- representing deposits of Specified Bank Notes during the demonetisation period. On perusal of the facts, we find force in the submissions of the Ld. AR that the deposits made are meagre compared to the overall turnover of the assessee and are in the nature of business receipts. Further, the quantum of Rs.3,43,500/- is only marginally above the limit of Rs.2,50,000/- allowed by the CBDT Instruction no.3/2017 (supra) for non-enquiry in the case of individuals during demonetisation.
Considering the smallness of the amount, the business background of the assessee, and in the absence of any material brought on record by the Revenue to show that such deposits represented income from undisclosed sources, we are of the view that the addition of Rs.3,43,500/- under section 69A is not sustainable. We accordingly direct the Ld. AO to delete the said addition.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 19th Sept., 2025.