Loading judgment…
Facts
The assessee failed to file his ITR for AY 2017-18. The AO identified cash deposits totaling ₹79,60,305/-, including ₹18,59,000/- during the demonetization period, in the assessee's bank account. Despite notices, the assessee did not adequately explain the source of these deposits, leading the AO to add the demonetization-period cash as unexplained income under section 69A and estimate profit at 8% on the remaining deposits under section 44AD. The CIT(A) dismissed the assessee's appeal due to non-prosecution.
Held
The Tribunal noted the assessee's contention that explanations were filed but not considered by the AO, and the CIT(A) dismissed the appeal without full appreciation of facts. Observing that the AO treated similar deposits differently without clear justification, the Tribunal decided to set aside the CIT(A)'s order. The appeal is restored to the CIT(A) for fresh adjudication, providing the assessee a reasonable opportunity to be heard and follow Rule 46A of the I.T. Rules, 1962.
Key Issues
Whether the addition of cash deposits as unexplained income under section 69A and presumptive income under section 44AD was valid, considering the assessee's claim of submitting explanations and inadequate opportunity of being heard by the lower authorities.
Sections Cited
Income Tax Act, 1961: Section 250, Income Tax Act, 1961: Section 147, Income Tax Act, 1961: Section 143(3), Income Tax Act, 1961: Section 133(6), Income Tax Act, 1961: Section 69A, Income Tax Act, 1961: Section 44AD, Income Tax Act, 1961: Section 142(1), Income Tax Act, 1961: Section 271(1)(b), Income Tax Act, 1961: Section 271(1)(c), Income Tax Act, 1961: Section 234A, Income Tax Act, 1961: Section 234B, Income Tax Act, 1961: Section 234C, I.T. Rules, 1962: Rule 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PATNA ‘SMC BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act') for AY 2017-18 dated 16.10.2024.
The Registry has informed that the appeal is barred by limitation by 171 days. The assessee has submitted a petition for condonation of delay explaining the reasons being the assessee was suffering from severe ailment and there is no deliberate delay in filing of the appeal. On perusal of the petition, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.
The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that the grounds of appeal hereto are all without prejudice to each other.
For that on the fact and in circumstances of the case the order passed by the ld. Income-tax Officer, Ward-3(4), Saharsa (here-in- after known as "the A.O.") and confirmation of the same by the ld. Commissioner of Income-tax (Appeals) NFAC, New Delhi (here-in-after known as "the CIT (A)") are both bad on facts and in law inter-alia being based entirely on mere suspicion, surmises and conjectures.
For that on the fact and in circumstances of the case the orders passed by the AO and confirmation of the same by the CIT (A) are also unstable in law being violative of the settled principles of natural justice.
For that on the fact and in circumstances of the case the ld. Assessing Officer has assessed the income under section 147 r.w.s 143(3) of the Act without giving more opportunity is unjustified.
For that on the facts and in circumstances of the case the determination of the total income at Rs. 26,16,814/- by the ld. Assessing Officer and confirmation by the CIT (A) against the returned income of Rs. 306150/- is wholly arbitrary, unwarranted, wrong, and illegal and at any rate are excessive.
For that on the fact and in circumstances of the case the ld. Assessing Officer has erred in making addition of cash deposited Rs. 18,59,000/- during demonetisation period in the current account of the assessee and confirmation of the same by the CIT (A) as unexplained income on the ground that the assessee had no explanation in respect of cash deposit in his current bank account whereas assesse has submitted the explanation by the written submission filed within time but unfortunately assessing officer not considered the same and mention only allegation in his order after receiving the written submission of the assesse's representative.
For that on the fact and in circumstances of the case the ld. Assessing Officer has erred in making addition of cash deposited Rs. 1859000/- in the account of the assessee and confirmation of the same by the CIT (A) as unexplained income under the provisions of section 69A, while the ld. Assessing Officer without making any provisions of section 69A of the Act in the order of assessment.
For that on the fact and in circumstances of the case the ld. Assessing Officer has erred in making addition of cash deposited Rs. 1859000/- and explanation filed online for information about cash deposit by the assessee has not been considered and confirmation of the same by the CIT(A) as unexplained income under the provisions of section 69A, while the ld. Assessing Officer without making any provisions of section 69A of the Act in the order of assessment.
For that on the fact and in the circumstances of the case, the learned CIT(A) erred in confirming the addition made of Rs. 1859000/- towards cash deposited in bank account without appreciating that the appellant had duly discharged the onus by proving the source of cash deposit in the bank accounts by giving the sufficient opportunity to the assessee and hence, the addition confirmed of Rs. 1859000/- is without any justification and liable to be deleted.
For that on the fact and in the circumstances of the case, the ld. Assessing officer as well as the Ld. CIT (A) failed to appreciate that the transaction is to be looked from businessmen point of view and also that no proper opportunity to be given either by the ld. Assessing Officer the addition confirmed of Rs. 1859000/- is unjustified and liable to be deleted.
For that on the fact and in the circumstances of the case, Ld. CIT (A) failed in confirming action of Assessing Officer taxing deposit of Rs. 1859000/- as Unexplained cash credit U/s. 69A of the IT Act, 1961. 12. For that on the fact and in the circumstances of the case, the ld. Assessing officer as well as the Ld. CIT (A) failed to appreciate that source of deposit in Bank A/c were related to business transaction and reverse entry amount.
For that on the fact and in the circumstances of the case, the ld. Assessing officer as well as the Ld. CIT (A) failed to appreciate that deposit in Bank A/c were from business receipts, out of Opening Cash Balance and out of cash withdrawal from Bank Account.
For that on the fact and in circumstances of the case the ld. Assessing Officer has erred in initiating the penalty proceeding under the provisions of section 271 (1) (b) & 271 (1) (c) of the Act.
For that on the fact and in circumstances of the case the ld. Assessing Officer has erred in charging interest under the provisions of section 234A, 234B & 234C without making any provisions in the order of assessment there on.
For that the observations made by the Assessing officer in the order of assessment are wholly biased, unwarranted and uncalled for and are even without any material available on record and particularly because the same has been made without even giving any opportunity of hearing to the appellant.
For that on the facts and in circumstances of the case the Assessing officer has erred in considering irrelevant materials, which has vitiated the order of Assessment.
For that the impugned order is misconceived and arbitrary in nature.
For that the Appellant craves the right to leave, to amend, to alter or to delete any of the above grounds", if necessarily.
For that other grounds, if any, will be urged at the time of hearing."
Brief facts of the case are that the assessee had not filed his return of income for the AY 2017-18 and the Assessing Officer (hereinafter referred to as Ld. 'AO') had information that the assessee had made cash deposits in the bank accounts maintained with the State Bank of India, to the tune of ₹79,60,305/- out of which ₹18,59,000/- were deposited during the demonetization period. As the assessee had not filed the return of income and there were substantial cash deposits, the Ld. AO issued notices u/s 148 of the Act requesting the assessee to file the return of income. The Ld. AO obtained the bank statement of the assessee's bank account u/s 133(6) of the Act, which revealed that the assessee had received amounts from various parties and the total cash deposits during the demonetization period of ₹ 18,59,000/-were treated as unexplained money as per the provision of section 69A of the Act. Further, the entire credits/deposits in the account, including cash deposits, clearing, RTGS, NEFT aggregating to ₹79,60,305/- also remained verified. Further, a notice u/s 142(1) of the Act was issued to the assessee with detailed questionnaire, in response to which the assessee submitted the computation of income and the ITR form but without the explanation for the nature and source of cash deposits, which remained unexplained. As the assessee failed to offer any explanation about the cash deposits of ₹18,59,000/- during the demonetization period, the Ld. AO treated the same as unexplained money and added the same u/s 69A of the Act. Further with respect to remaining amount of ₹61,01,305/-, the Ld. AO observed that the assessee is in the business of milk product in the name and style of M/s. Pradhan Milk Parlor and the Ld. AO treated the amount as the turnover of the business and estimated the net profit @ 8% on remaining amount which worked out to ₹4,88,104/- and added it to the total income of the assessee. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who went through the records available and the cited judicial pronouncements and dismissed
the appeal of the assessee holding that the assessee has nothing to state against the action of the Ld. AO and also not willing to pursue the appellate proceedings anymore. Therefore, the ground raised by the appellant are treated as baseless. Thus, the ground nos. 2 to 5 raised by the appellant are dismissed and accordingly, the appeal of the assessee is dismissed.
Aggrieved with the order of the Ld. CIT(A), the assessee has filed
the appeal before the Tribunal.
None appeared on behalf of the assessee and the case was heard with the assistance of the Ld. DR.
We have considered the submissions made by the Ld. DR, the facts of the case and perused the record and the order of the Ld. CIT(A). It was noted by the Bench that the assessment order was made ex parte as the assessee did not comply with the notices issued and no response was filed. The payment from the bank accounts were made by cheque while purchases appeared to have been made which gave indication to the Ld. AO that the assessee was running a business. The assessee claims to be running a milk parlour by the name of M/s. Pradhan Milk Parlour. The Ld. AO treated all the credits in the bank account and brought the same to tax by applying the provision of section 44AD of the Act except for those during the demonetisation period which were added u/s 69A of the Act. Before the Ld. CIT(A) as well, in response to the notice issued, the assessee neither sought adjournment nor filed any reply and the appeal was decided on the basis of the grounds of appeal. It was inferred by the Ld. CIT(A) from the conduct of the assessee that the assessee had nothing to say in the matter. However, before us in the Grounds of appeal, the assessee has stated that the explanation by way of written submission was filed within time but the Ld. AO did not consider the same and mentioned only noncompliance in the order despite receiving the written submission of the assessee's representative. It is stated in the grounds of appeal that the transactions have to be looked at from the businessman's point of view and the Ld. CIT(A) failed to appreciate that the source of deposits in the bank account was related to the business transactions and reverse entries amounts. The same was stated to be out of the business receipts, opening cash balance in cash withdrawals from the bank account. Apparently on account of non-prosecution before the appellate authority, the appeal was dismissed and the order of the Ld. AO was confirmed. However, the Bench was of the view that one more opportunity may be provided as the assessee claims to have sufficient evidence and the Ld. AO has not given any justification for treating the money deposited during the demonetisation period as unexplained money u/s 69A of the Act while for the rest of the period, the receipts have been treated as business income without mentioning any reason and the reply claimed to have been filed has not been considered. Therefore, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the appeal to him for disposal of the grounds of appeal taken by the assessee on merits by passing a speaking order. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments and rule 46A of the I.T. Rules, 1962 shall also be followed and an opportunity of being heard may be provided to the Ld. AO, if required. Accordingly, the grounds taken by the assessee in his appeal are partly allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 13th November, 2025. [Sonjoy Sarma] Judicial Member [Rakesh Mishra] Accountant Member Dated: 13.11.2025 (Bidhan (Sr. P.S.)) Page 8 ITA No.: 294/PAT/2025
Assessment Year: 2017-18 Santosh Kumar. Copy of the order forwarded to:
Santosh Kumar, Prop- M/s. Pradhan Milk Parlor, Station Chowk, Supaul, Bihar, 852131. 2. ITO, Ward-3(4), Saharsa.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Patna Benches, Patna.
Guard File. //// By order