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Facts
The assessee made cash deposits during the demonetization period (AY 2017-18), leading the AO to add Rs. 5,00,000/- as unexplained income under Section 69A r.w.s. 115BBE. The assessee explained the source as prior withdrawals for property purchase which did not materialize. The CIT(A) dismissed the appeal, disregarding a Remand Report from the AO which found the assessee's explanations genuine and corroborated with evidence.
Held
The Tribunal condoned the delay in filing the appeal. It held that the CIT(A) erred by arbitrarily disregarding the AO's favorable Remand Report without offering specific defects or conducting further verification. Finding the assessee's explanation of redeposited withdrawn funds credible, the Tribunal directed the AO to delete the addition made under Section 69 of the Act.
Key Issues
Whether the CIT(A) could arbitrarily disregard a favorable Remand Report from the AO without material contrary evidence; and the validity of the addition of cash deposits made during demonetization under Section 69A r.w.s. 115BBE when sources were explained as prior withdrawals.
Sections Cited
144, 142(1)(i), 133(6), 250, 69A, 115BBE, Rule 46A, 69
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Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI RAVISH SOOD, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals)/ADDL/JCIT(A)-1, Vadodara, [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/APL/S/250/2024-25/1068721394(1) dated 17.09.2024 for the A.Y.2017-18
I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala arising out of the order passed under section 144 of Income Tax Act, 1961 (in short ‘Act’) dated 30.12.2019.
2. At the outset, it is noticed from the appeal record that there is a delay of 144 days in filing the appeal before the Tribunal. Explaining the reasons for belated filing of the appeal, the Ld. AR drew our attention to the affidavit filed by the assessee along with a petition seeking for condonation of delay and read out the contents of the petition which is as under: - “1. The petitioner is the Assessee in the appeal mentioned above. The Order in dispute, i.e., the Appellate Order of the learned CIT(Appeals), NFAC, Delhi was passed and also served on your petitioner-assessee on 17.9.2024.
The petitioner-assessee is thus obliged to file an appeal against the said order before the Hon'ble Tribunal by 16.11.2024. But, the Appeal Memorandum is being presented in the office of the Hon'ble Tribunal on 9.4.2025, i.e., with a delay of 144 days (estimated date of receipt in ITAT office:9.4.2025- by the time the Appeal Memorandum reaches the Hon'ble Tribunal's Office, the delay would be 144 days).
3. The assessee has neither received the Order u/s.250, nor the Letter dt. 10.6.2024 issued by ITO, Ward-1, Gudiwada referred to in Page.23 of Sec.250 Order to his e-mail ID.
4. As per the Order u/s.250, learned CIT(Appeals) sent my petition for admission of additional evidence to JAO(ITO, Ward-1,Gudiwada) and learned Jao sent a Notice to me calling for my appearance/explanation on the said Rule.46A petition. I submit that I was not in receipt of the Notice and hence couldn't respond. Learned Jao sent his Report to Ld.CIT (Appeals) stating there was no response from my side to the JAO's Notice. Then, learned CIT(Appeals) passed an order dismissing my appeal; I submit that I had no opportunity to explain my additional evidence before the JAO and NFAC.
Thus, the assessee had no knowledge about passing of Order u/s.250 and he recently came to know about the order having already been passed only when he login the income tax e-filing portal to check the status of the appeal filed by him.
Page. No 2 I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala 6. It is humbly and respectfully submitted that the Appeal couldn't be filed in time, view of the above genuine reason. Thus, there is an unintended delay of 144 (One hundred forty-four) days only in filing the Appeal (the Appeal before the Hon'ble Tribunal was due by 16.11.2024).
It is prayed that the Hon'ble Tribunal be pleased to condone the delay and pray that the Appeal be admitted and taken on record, as otherwise great hardship and insufferable injustice will be caused to the petitioner herein. The inconvenience caused in this regard to the Honourable Tribunal is sincerely regretted. The petitioner also hereby undertakes to ensure proper representation before the Honourable Tribunal in the above appeal on its admission and an opportunity of hearing is granted thereafter.”
On perusal of the contents of the affidavit filed by the assessee as well as the submission of the Ld. AR, we find that the assessee is prevented by a reasonable and sufficient cause in filing the appeal beyond the prescribed time limit with a delay of 144 days. Therefore, we hereby condone the delay of 144 days in filing the appeal before the Tribunal and proceed to adjudicate the appeal on merits in the following paragraphs.
Brief facts of the case are that, based on the information available with the department, it was observed that the assessee made cash deposits in Axis Bank, Rajahmundry, HDFC Bank, Worli Sea Face, HDFC Bank, Rajahmundry and Axis Bank, Koramangala amounting to Rs. 10,00,000/- during the demonetization period. Notice dated 13.03.2018 under section 142(1)(i) of the Act was issued to the assessee calling for return of income. Since the assessee did not file any return of income till the end of the assessment year a show-cause notice dated 29.11.2019 was issued to the assessee to explain the sources for cash deposits made during the demonetization period. There was no Page. No 3
I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala response from the assessee for the above said show-cause notice and hence final notice dated 25.12.2019 was issued to show-cause why amount of Rs.10,00,000/- being cash deposits made during the demonetization period should not be treated as unexplained income under section 69A r.w.s. 115BBE of the Act. Meanwhile, the Ld. Assessing Officer [hereinafter in short “Ld.AO"] also obtained information from the banks as per the provisions of section 133(6) of the Act. In response to the notice under section 142(1)(i) of the Act, assessee filed explanation for the sources of cash deposits made during the demonetization period by stating that it is his savings over a period of 19 years which were deposited in Fixed Deposits and Savings Bank Accounts. He also submitted that assessee withdrawn Rs.5,00,000/- on 19.11.2015 from State Bank of India, Rajahmundry and Rs.28,00,000/- on 20.11.2015 from Axis Bank, Rajahmundry. Assessee also produced the bank statements before the Ld. AO. However, Ld.AO not being satisfied of the sources declared by the assessee, proceeded to add an income of Rs.5,00,000/- under section 69A r.w.s. 115BBE of the Act.
5. Aggrieved by the order of the Ld. AO, assessee preferred an appeal before Ld. CIT(A). Ld. CIT(A) considering the additional evidences submitted by the assessee called for the Remand Report from the Ld. AO. Ld. AO submitted his Remand Report stating that the contentions of the assessee appears to be genuine. However, Ld. CIT(A) observed that the assessee has Page. No 4
I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala made cash deposits in several banks situated in remote locations and hence the claim of the assessee remains unverified and therefore dismissed the appeal of the assessee.
On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: -
“1. In the facts and circumstances of case, learned CIT (Appeals) erred in not considering the facts of the case and the Grounds of Appeal before dismissal.
2. In the facts and circumstances of case, learned CIT (Appeals) ought to have approved the Remand Report of the learned AO stating that the assessee's proof of sources for the cash deposits in the demonetisation period were verified and found to be genuine, since the said Report was based on the verification and analysis of the additional evidence filed by the assessee in the appeal proceedings.
3. Learned CIT(Appeals) erred in not considering the written submissions and Case laws cited by the assessee vide his response dt.2.8.2024 uploaded to theportal.
4. Learned CIT(Appeals) erred in not considering the fact shown by submissions alongside the Bank statements filed, that the assessee's earlier withdrawals were utilised for depositing SBNs in the demonetisation period, whereas learned AO made addition by considering the relevant previous year's earnings only, of the assessee, which stand was unjustified.
5. Learned CIT(Appeals) erred in not considering the Sworn Affidavit filed before him to show that the Notices stated to have been issued to him by theITO, Ward-5(3)(2), Bengaluru were not served on him physically, as theassessee left Bengaluru in 2013 and filed his subsequent ITRs with Rajahmundry address.
6. The learned CIT(Appeals)' observation that the assessee deposited cash on16.11.2016 at distant places like Mumbai and Bengaluru and as such the addition was justified, was erroneous as the deposits were made in Gudivada, and he erred in observing that existing Bank Accounts show their place of opening (Home Branch as Mumbai/Bengaluru), but core banking allows their continuance even after customer migrates to other place. Learned CIT(Appeals) confirmed the addition on suspicion than by considering the facts of the case and in ignorance of the core banking concept.”
Page. No 5
I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala 7. The crux of the issue is addition sustenance by the Ld. CIT(A) under section 69A r.w.s. 115BBE of the Act. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee has withdrawn cash earlier form various bank accounts for the purpose of purchasing immovable property. He further stated that assessee being a salaried employee has withdrawn cash both from his own account and his spouse account. Since the purchase of immovable property could not be materialised, he stated that the assessee redeposited the available cash with him into the bank accounts during the demonetization period. He therefore pleaded that since the sources are explained, addition made by the Ld. AO is bad in law.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] placed heavy reliance on the orders of the Revenue Authorities.
We have heard both the sides and perused the material available on record. It is an admitted fact that the assessee has not filed return of income for the A.Y.2017-18. However, in response to the notice under section 142(1)(i) of the Act, assessee filed return of income admitting an income from salary of Rs.6,04,406/-, income from other sources at Rs.3,55,948/- and thereby finally admitting a taxable income of Rs.7,50,354/- for the A.Y. 2017-18. It was also argued by the Ld.AR that assessee has accumulated savings over a period of 19 years and the bank statements disclosing the withdrawals made on 19.11.2015 and 20.11.2015 was also produced before the Revenue Authorities. However,
Page. No 6
I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala we notice that Ld. AO has erred in considering the above evidences without citing any valid reasons for rejecting the same. During the course of appellate proceedings before the learned CIT(A), the assessee had filed additional evidence under Rule 46A, including documents purporting to explain the source of cash deposits made during the demonetisation period. On directions of the Ld.CIT(A), the Assessing Officer (AO) submitted a Remand Report after verification of the said additional evidence. The Remand Report, placed on record, indicated that the AO had verified the bank statements, cash flow statements, and other supporting documents filed by the assessee and found the sources for cash deposits to be explained and corroborated with evidence. Despite the AO's favourable findings in the Remand Report, the Ld.CIT(A) disregarded the same without assigning cogent reasons.
The learned CIT(A) observed that the assessee deposited cash in distant locations such as Mumbai and Bengaluru, which in his view was unusual and suspicious. Based on this, he confirmed the addition made by the AO.
It was demonstrated by the Ld.AR that the assessee has various bank accounts in various places since the assessee is working in a transferable job and opened bank accounts at the place in which he works.
Accordingly, the Ld.AR submission regarding the deposits of cash in the core banking scenario cannot be doubted. However, the assessee clarified that Page. No 7
I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala the actual deposits were made at Gudivada, Andhra Pradesh, and the reference to other cities was only due to the origin of the bank accounts (i.e., home branches in Mumbai/Bengaluru). With the advent of Core Banking Systems (CBS), such anomalies in branch code or home location are common and have no bearing on the physical location of the transaction.
The learned CIT(A) failed to appreciate this explanation or call for any evidence to rebut the assessee's claim. The confirmation of the addition based on mere suspicion without factual basis is unsustainable. The revenue has also not disputed the cash withdrawals made by the assessee during the November, 2015 while partly accepting the sources for the cash deposits amounting to Rs.5,00,000/-.
In our considered view, the addition was upheld based on a misunderstanding of the CBS framework and without establishing that the actual deposits were made in suspicious circumstances.
The Remand Report, placed on record, indicated that the AO had verified the bank statements, cash flow statements, and other supporting documents filed by the assessee and found the sources for cash deposits to be explained and corroborated with evidence. Despite the AO's favourable findings in the Remand Report, the learned CIT(A) disregarded the same without assigning cogent reasons.
Page. No 8
I.T.A.No.214/VIZ/2025 Chandra Bosu Babu Ramesh Yangala 16. The Hon’ble Supreme Court and various High Courts have consistently held that once the AO, after independent verification, accepts the genuineness of evidence in the Remand Report, the CIT(A) cannot arbitrarily disregard such findings without material contrary evidence. In this case, the learned CIT(A) neither pointed out any specific defect in the findings of the AO nor conducted any further verification. The rejection of the Remand Report, therefore, is arbitrary and unsustainable in law.
In these circumstances, we find that there are no reasons recorded by the Revenue Authorities for not accepting the cash deposits on a part basis and hence we are of the considered view that the arguments of the Ld.AR has merits, that the assessee has redeposited the amount withdrawn from the earlier periods. We therefore direct the Ld. AO to delete the addition made on this account under section 69 of the Act. Grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 10th July, 2025.