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Facts
The assessee's case for AY 2011-12 was reopened after information revealed cash deposits of Rs.90,00,000/- in a savings bank account, which were initially undisclosed. The AO treated the entire amount as unexplained under section 69A. The CIT(A) provided partial relief, finding Rs.55,00,000/- explained by withdrawals, but sustained an addition of Rs.35,00,000/-. The assessee appealed this sustained addition and the initiation of penalty.
Held
The tribunal noted the assessee's cash-intensive transportation business and that deposits were recorded in books, making section 69A inapplicable for the bulk amount. It sustained an addition of Rs.10,00,000/- for unexplained cash deposits, granting relief of Rs.25,00,000/- from the CIT(A)'s sustained addition. The ground challenging the initiation of penalty under section 271(1)(c) was dismissed as premature.
Key Issues
1. Validity of reopening assessment and issuance of notice u/s 147/148. 2. Justification of cash deposit addition as unexplained money u/s 69A. 3. Prematurity of penalty initiation u/s 271(1)(c).
Sections Cited
250, 147, 148, 271(1)(c), 143(3), 40A(3), 263, 142(1), 69A
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Before: SHRI DINESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, 'the Act’) dated 18.12.2023 by the Commissioner of Income-tax (Appeals), NFAC, Delhi [in short “the CIT(A)”] for the assessment year (AY) 2011-12.
The grounds of appeal raised by the assessee are as under: “(1) On the facts and in the circumstances of the case as well as the law on the subject, the Ld. AO has erred in reopening the assessment u/s.147 of the I.T. Act and issuing notice u/s.148 of the Income tax Act, 1961.
2011-12 Omprakash Ramnivas Soni (2) On the facts and in the circumstances of the case as well as the law on the subject, the Ld. CIT(A) has erred in confirming the action of the AO in making addition of Rs.35,00,000/- on account of cash deposit in bank account treated as alleged unexplained money u/s.69A of the Income tax Act, 1961. (3) On the facts and in the circumstances of the case as well as the law on the subject, the Ld. CIT(A) has erred in confirming the action of the AO in initiating penalty u/s.271(1)(c) of the Act. (4) It is, therefore, prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. (5) Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”
The appeal filed by the assessee is barred by limitation by 111 days in filing of this appeal. The assessee has filed application for condonation of the delay. In the aforesaid application, it is stated by the assessee that he is a senior citizen and is not aware of the online income tax proceedings. He further stated that due to the sudden and unfortunate demise of his son (Harish Omprakash Soni) on 08.01.2024 due to liver failure, his family was in a state of mental shock and trauma, hence he could not give attention to legal and tax matters concerning his late son. Assessee furnished the copy of death certificate of late shri Harish Omprakash Soni. Assessee has submitted that the delay was not intentional and requested to condone the delay in the interest of justice. Ld. Sr. DR for revenue did not raise objection to the condonation request of the assessee. 3.1 After hearing both the parties, we note that delay in filing appeal by the appellant is unintentional and not deliberate. The appellant, anyway, does not 2011-12 Omprakash Ramnivas Soni seem to benefit from such delay. It is now well settled that when substantial justice and technical consideration are pitted against each other, cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of the non-deliberate delay. Accordingly, the request for condonation of delay is allowed and the appeal is admitted for hearing. Nevertheless, to prevent such laxity in future and to impress upon the assessee the importance of timely filings, we direct the assessee to deposit a fine of Rs.5,000/- in the Prime Minister’s Relief Fund and submit the receipt of payment within 30 days from the date of this order to the Registry.
Brief facts of the case are that the return of income was filed on 27.09.2011 declaring total income at Rs.27,40,873/-. The case was selected for scrutiny under CASS and the assessment was completed u/s.143(3) of the Act on 23.12.2013, assessing total income at Rs.28,15,270/- by making addition on account of payment covered u/s.40A(3) of the Act amounting to Rs.74,400/-. Thereafter, the case was reopened on the basis of information received from the ITO (I & CI), Navsari & Valsad, that the assessee had deposited cash of Rs.60,00,000/- in the savings bank a/c. No.09652011001463, maintained with the Oriental Bank of Commerce, Vapi Branch during the FY 2010-11. Since the assessee had not disclosed this bank account and cash deposits in his balance 2011-12 Omprakash Ramnivas Soni sheet, the case was reopened u/s.147 of the Act. The order u/s.143(3) r.w.s. 147 of the Act was passed on 30.01.2015, after accepting the last assessed income of Rs.28,15,270/-.
Subsequently, the ld. PCIT, Valsad took the case of the assessee for review and observed that the AO had not made proper enquiries about the source of cash deposits in assessee’s savings bank account with the OBC during the course of assessment proceedings. He further observed that the amount of cash deposits was Rs.90,00,000/- and not Rs.60,00,000/- as mentioned in the assessment order by the AO. Besides, it was observed that the AO, without making any enquiries to establish the correctness/incorrectness of the claim made by the assessee, simply accepted the explanation offered by the assessee about the source of cash deposits as from his transport business and from withdrawals from his bank account. Accordingly, the ld. PCIT, after affording opportunity to the assessee to explain his stand, set aside the order of the AO to be made afresh vide his order u/s.263 of the Act dated 28.03.2017. In compliance thereof, the AO, vide notice u/s.142(1) of the Act and show cause notice, requested the assessee to furnish details regarding the nature and source of cash deposits o Rs.90,00,000/- in his savings bank a/c. no. 9652011001463, with the Oriental Bank of Commerce, Vapi Branch. In response thereto, assessee furnished his reply, however, the same was not found acceptable by the AO. Therefore, AO 2011-12 Omprakash Ramnivas Soni treated the aforementioned cash deposits of Rs.90,00,000/- as ‘Unexplained money’ and added the same to the total income of the assessee u/s.69A of the Act. The order u/s.143(3) r.w.s. 263 of the Act was passed on 26.12.2017 assessing total income of the assessee at Rs.1,18,15,270/-.
6. Aggrieved by the assessment order u/s.143(3) r.w.s. 263 of the Act, assessee preferred appeal before CIT(A). During appellate proceedings, CIT(A) that assessee attributed the sources of cash deposits of Rs.90,00,000/- to the earlier withdrawals made from his current account maintained with the Oriental Bank of Commerce. The CIT(A) examined both the accounts of the assessee, i.e., current bank a/c. and savings bank a/c. and observed that simultaneous withdrawals and deposits have been made from and to, in both the bank accounts of the assessee. The withdrawals have coincided the deposits on the same day on most of the occasions or the immediate following day with regard to the sum of Rs.55,00,000/-. Also, the time gap of withdrawals and deposits was nil or negligible and the amounts withdrawn were higher than the deposits made. The CIT(A) further observed that the AO had not rejected the books of account and accepted the profit figures returned by the appellant. In view of the same, the CIT(A) found the explanation of assessee regarding the source and nature of cash deposits to the extent of Rs.55,00,000/- satisfactory and directed the AO to delete the addition of Rs.55,00,000/- out of the addition of Rs.90,00,000/-.
2011-12 Omprakash Ramnivas Soni Accordingly, the addition of Rs.35,00,000/- was sustained and addition of remaining amount of Rs.55,00,000/- was directed to be deleted by the CIT(A).
Aggrieved by the order of CIT(A), assessee filed present appeal before the Tribunal. The Ld. AR of the assessee submitted regarding the source of cash deposits of Rs.35,00,000/- that the assessee had to keep retention money from truck drivers as security deposit till the consignment was completed. Once the transportation consignment was completed, the retention money along with transportation charges billed by the transporter were paid back to the said transporters. The Ld. AR further stated that since majority of the work was done through truck drivers and as transportation sector is part of the unorganized sector of Indian economy, transactions were usually entered through cash, hence the assessee would receive the retention money in form of cash. Besides, the collection of retention money is a work of huge responsibility therefore, any mistake in this respect or loss of funds due to theft would ultimately affect the assessee, since in such case, he would have to return the retention money out of his pocket. Therefore, for security reasons and considering the fact that saving account would provide interest income, the appellant deposited the accumulated cash in the savings bank account. Later, as and when the need to make repayments to the transporters arose, the assessee made cash withdrawals from the bank.
2011-12 Omprakash Ramnivas Soni 7. The Ld. AR submitted that supporting documents viz., bank statements of current account and savings bank account maintained with the Oriental Bank of Commerce, summary of deposits and retention money and cash deposited in savings bank account along with the sample ID proofs of truck drivers have been submitted in the paper book. The Ld. AR contended that the AO has wrongly invoked the provision of section 69A of the Act in the case of assessee since the cash deposits made in the bank account were duly recorded in the books of account which were duly audited and no unaccounted cash was found by the AO in the instant case. Along with this, the Ld. AR submitted that in case the above explanation regarding the source of cash deposits made is deemed unsatisfactory and cash deposits are added back to the total income of the assessee, then in such case, corresponding withdrawals should be considered for telescoping, since such cash withdrawals were made by the assessee to discharge his business liabilities and he did not make any investment of such sum in any other asset. In view of the same, the Ld. AR requested to delete the addition of Rs.35,00,000/- sustained by the CIT(A).
Ld. Sr. DR contended that the retention-money theory is insufficiently evidenced and cash-driven transport sector is prone to unverifiable transactions. The Ld. Sr. DR for the revenue relied upon the orders of the lower authorities and requested to uphold the order of the CIT(A).
2011-12 Omprakash Ramnivas Soni 9. We have heard both the sides and perused the materials available on record. The assessee operates in the transportation sector, an area recognized by courts as largely unorganized, cash-intensive and driven by intermediaries and drivers who often lack formal banking footprints. Retention money/security deposits from drivers are a common feature in this line of activity to ensure safe delivery of consignments. The assessee has placed on record documents viz., summary of deposits and retention money and cash deposited in savings bank account along with the sample ID proofs of truck drivers, bank statements of current account and savings bank account maintained with the Oriental Bank of Commerce, etc. This lends prima facie support to the business explanation. 9.1 Section 69A of the Act applies when the assessee is found to be the owner of money not recorded in the books of account or for which no satisfactory explanation exists. Here, the deposits are recorded in the books and the AO has not rejected books of account. Besides, business receipts/cash flows are broadly verifiable through current-account withdrawals. Thus, the foundational precondition of ‘not recorded in books’ is absent. Therefore, taxing the entire deposits without disproving the business explanation is not legally sustainable. 9.2 We find that explanation regarding majority of deposits is acceptable, however, the assessee has not substantiated the entire balance amount of Rs.35,00,000/- with adequate verifiable evidence. Considering the cash-intensive 2011-12 Omprakash Ramnivas Soni nature of business, human-probability principles, and need to plug revenue leakage in unverifiable areas, an estimate is justified. Upon analyzing the transaction pattern, gaps in documentation and cumulative cash cycles, we consider it fair and reasonable to sustain an addition of Rs.10,00,000/- as unexplained and unsubstantiated component. This would meet the ends of justice and prevent revenue leakage, while avoiding arbitrary taxation of entire deposits. Accordingly, out of the addition of Rs.35,00,000/- sustained by the CIT(A), further relief of Rs.25,00,000/- is allowed, thereby sustaining addition of Rs.10,00,000/-. The AO is, accordingly, directed to further delete Rs.25,00,000/- and sustain the addition of Rs.10,00,000/-. The ground is partly allowed.
We have considered the ground raised by the assessee challenging the initiation of penalty proceedings u/s.271(1)(c) of the Act. At this stage, it is noted that the penalty has only been initiated in the assessment order and no penalty has yet been levied. It is a well-settled judicial position that the ground challenging mere initiation of penalty is premature, as the assessee will get full opportunity to contest the levy, if and when a penalty order is actually passed. In view of the above, the ground raised by the assessee challenging initiation of penalty proceedings is dismissed as premature, without prejudice to his right to contest the penalty on merits in appropriate proceedings, if ultimately levied.
2011-12 Omprakash Ramnivas Soni 11. In the result, the appeal of the assessee is partly allowed in the above terms. Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 03/12/2025 in the open court.