Loading judgment…
Facts
The assessee, an individual, did not file her income tax return for A.Y. 2017-18. Information regarding substantial cash deposits during the demonetisation period was available with the AO. The AO initiated assessment proceedings under section 144 of the Act and treated cash deposits of Rs. 9.8 lakh as unexplained income under section 69A.
Held
The Tribunal held that the delay of 334 days in filing the appeal was condoned as the assessee had shown sufficient cause. The Tribunal set aside the addition of ₹3,99,000 and restored the issue to the AO for fresh adjudication, directing the AO to examine the husband's bank statement and verify the cash availability with the family.
Key Issues
Condonation of delay in filing appeal; Addition of cash deposits as unexplained income.
Sections Cited
250, 271AAC, 69A, 142(1), 133(6), 144, 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The present appeal, filed at the instance of the assessee, is directed against the order under section 250 of the Income Tax Act, 1961 (hereafter the Act), dated 28th August 2024 for A.Y. 2017-18 by the learned Commissioner of Income Tax (Appeal) at National Faceless Appeal Centre.
There is a delay of 334 days in filing the appeal before this Tribunal. The assessee has filed an application seeking condonation of the said delay and has explained the reasons for the same.
We have considered the application, the submissions of the assessee and the documents placed on record. The assessee has stated that during the relevant period she was staying with her aged mother-in- law, who was suffering from serious age-related ailments and was under continuous medical treatment. It was submitted that she was personally taking care of her mother-in-law, who was confined to bed for a considerable period. The assessee has further explained that her brother-in-law had undergone heart surgery, and, because of these circumstances, the family had to relocate to Bengaluru for hospitalisation and medical care. Copies of medical prescriptions, test reports and discharge summaries have been produced in support of these submissions.
3.1 The assessee has also explained that during the same period her daughter-in-law delivered a baby and she was occupied in looking after the newborn child as well as her ailing mother-in-law. Because of these peculiar circumstances, she was not aware of the appellate order passed by the learned CIT(A) and the subsequent penalty order under section 271AAC of the Act. She came to know about the same only later through her son. Thereafter, she approached a tax practitioner, who expressed his inability to pursue the matter and advised her to consult the present counsel. After obtaining proper legal advice and collecting the required documents, the appeal was filed before this Tribunal, which resulted in the delay of 334 days.
3.2 The assessee has also relied on various judicial decisions of the Hon’ble Supreme Court, Hon’ble High Courts and coordinate Benches of the Tribunal, wherein long delays were condoned on showing sufficient . cause and it was held that a liberal and justice-oriented approach should be adopted so that substantial justice is not defeated on technical grounds.
3.3 After considering the explanation and the materials on record, we find that the reasons for the delay are supported by documentary evidence and show circumstances which were beyond the control of the assessee. The prolonged illness of close family members, continuous medical treatment, relocation for hospitalisation and responsibility of taking care of a newborn child constitute reasonable cause which prevented the assessee from filing the appeal within the prescribed time. It is well settled that the expression “sufficient cause” should be interpreted in a liberal manner so as to advance substantial justice, particularly when there is no material to show any mala fide intention or deliberate delay on the part of the appellant. In the present case, we do not find any such negligence or lack of bona fides. The assessee appears to have acted honestly and filed the appeal soon after receiving proper legal assistance. Moreover, the ld. DR though opposed the condonation of delay but left the issue at the discretion of the Bench.
3.4 In view of the above facts and in the interest of justice, we hold that the assessee has shown sufficient cause for the delay in filing the present appeal. Accordingly, the delay of 334 days is condoned, and the appeal is admitted for adjudication on merits.
4. The assessee in the appeal memo has raised several grounds of appeal numbered as Ground Nos. 1 to 9 which are interconnected and effectively pertain to addition made on account of cash deposit by . treating the same as unexplained money under section 69A of the Act and consequently levying the interest under section 234A, 234B and 234C of the Act.
The necessary facts are that the assessee, an individual, has not filed her return of income for the A.Y. 2017-18. An information was available with the AO that the assessee has made substantial cash deposit during the demonetisation period i.e. between 9th November 2016 to 31st December 2016. Accordingly notice under section 142(1) of the Act was issued requiring the assessee to file the return but no response was received.
Thereafter, notice under section 133(6) of the Act was issued to the assessee’s bank i.e. Karnataka State Cooperative Bank- Jayanagar Market Branch, Bengaluru and her bank statements for 4 different account numbers were obtained. On perusal of the same, it was found that the assessee during the F.Y. 2016-17 has made total cash deposits of Rs. 9,80,889/- out of which a sum of Rs. 3,99,000/- was deposited into saving bank account and rest were deposited into loan account. A show cause notice dated 17th July 2019 was issued requiring the assessee to explain the nature and source of the deposits.
In the response, the assessee through her authorised representative submitted that she has obtained gold loans on several dates falling during the period 24th February 2015 to 14th June 2016 which was further lent to her sister as interest free hand loan. Her sister over the period returns the loan in cash and such cash whenever received were deposited to bank. It further submitted that the loan . account statement is missing which the assessee is in process of collecting the same from the lender bank.
However, the AO required the assessee to furnish confirmation from the assessee’s sister disclosing the amount of interest free hand loan received and amount returned to bank, her PAN, and her bank statement for F.Y. 2015-16. But the assessee failed to furnish the same. Hence the AO considering the fact that the assessee has not filed the return of income and not provided the requisite detail, proceeded to complete the assessment as per section 144 of the Act and treated the cash deposit of Rs. 9.8 lakh as unexplained money under section 69A of the Act. Thus, the AO assessed the income at Rs. 9.8 lakh vide order dated 25th September 2019.
9. The aggrieved assessee preferred an appeal before the learned CIT(A).
Before the learned CIT(A), the assessee submitted that the assessee is a housewife earning only modest rental income and small professional income by way of consultancy from her home office. The total income was below the taxable limit and therefore no return of income was filed. The cash deposits in the bank account do not represent any undisclosed income and have arisen from explained and genuine sources.
The assessee submits that during the period of financial difficulty, she had availed gold loans from a co-operative society and had lent the same to her younger sister. The sister was periodically returning the . amounts. During demonetisation, the sister deposited old currency notes in the bank and repaid the loan through banking channels. Consequently, when the appellant received the money back, the same was deposited into her bank account, mainly for repayment of the gold loans and partly from savings. These transactions were duly reflected in the bank accounts and were also noted by the AO.
11.1 It is further submitted that apart from the above, the assessee had certain cash savings kept at home for emergency purposes, mostly in large denominations, which represented accumulated household savings over time. Small amounts had also been saved in piggy banks and with close relatives, which were later recovered and systematically deposited into the bank so that the currency would not become obsolete during demonetisation. These amounts were also out of explained sources and cannot be treated as unexplained.
11.2 The assessee states that she had clearly explained before the AO that the primary source of cash was repayment of gold loans and monies received back from her sister. However, the inference drawn that the deposits were unexplained is without proper appreciation of facts and evidence. The assessee reiterated that she is willing to file complete bank statements, loan documents, and any other details required to substantiate that the cash deposits were out of known and legitimate sources. Therefore, the provisions of section 69A of the Act are not attracted to the present case.
11.3 The assessee further submitted that the assessment order was passed in haste, despite there being sufficient time available to complete .
Page 7 of 11 the proceedings. The assessee was not maintaining formal books of account and also did not have timely professional assistance, which resulted in delay in producing documents. This should not be held against her. The manner in which the order was passed has resulted in violation of the principles of natural justice, as adequate opportunity of being heard was not effectively granted.
However, the learned CIT(A) after considering the facts in totality partly allowed the assessee’s appeal by restricting the addition to the extent of Rs. 3.99 Lakh by observing as under: 8. I have considered the facts of the case, assessment order and statement of facts/grounds of appeal. The AO made the addition of Rs. 9,80,000/- after stating that the assessee failed to furnish/explain satisfactorily the sources of cash deposits made in his bank account. As stated above, no written submissions have been filed by the appellant in response to notice u/s. 250 by this Faceless Appeal Unit. However, in the statement of facts, the appellant has submitted that she is a house wife earning rental income and professional income, she availed loans from the co-operative society which were lent to her sister during her time of difficulty, the same were being returned by her sister periodically and the appellant was depositing /repaying the same loans in the loan accounts. It was further submitted that the appellant’s sister, on account of demonetization, received the advances made by her in demonetized currency and consequently the entire loan was repaid by the appellant into the bank account as and when the monies were received back from her younger sister, the deposits were made primarily towards repayment of loans, some amounts were deposited into the savings account of the appellant and apart from the above, the appellant deposited cash which was being maintained for emergency purposes in large denominations, primarily being savings of household expenses. It was also claimed that the appellant made savings of small sums by saving the same in piggy banks and among close relatives and the same were recovered and systematically deposited into the bank account, to avoid then currency to become obsolete. Considering the facts of the case and facts narrated in the statement of facts, I am inclined to agree with the appellant’s claim to some extent. In the instant case, the AO made the addition of Rs. 9,80,000/- after stating that the assessee failed to furnish/explain satisfactorily the sources of cash deposits made in his bank account. However, from the findings recorded in the assessment order at para 3.1, it is clear that the total cash deposits in saving bank account no. 10040000004407 were only Rs. 3,99,000/- and this fact was duly acknowledged by the AO, the rest of the deposits were made in gold loan accounts towards repayment of loans taken earlier. Thus, out of total addition .
Page 8 of 11 of Rs. 9,80,000/-, the cash deposit of Rs. 3,99,000/- in saving bank account is taken as unexplained and sustained accordingly.
As regards the balance deposit of Rs. 5,82,889/-, it is seen from facts narrated in the assessment order and statement of facts that the appellant had availed certain gold loans from Karnataka State Co-operative Apex Bank, details of which are reproduced in assessment order at page no.
The AO himself in the assessment order accepted that out of total deposits, Rs. 5,82,889/- was towards repayment of gold loan in loan account. Thus, it is clear that the gold loans were obtained and the same were repaid into the account. Thus, balance cash deposits of Rs. 5,82,889/- are considered as explained. In view of the facts of the case as discussed in para nos. 8 & 9 above, it is held that the addition of Rs. 9,80,000/- made by the AO is not justified and is restricted to Rs. 3,99,000/- towards cash deposits in saving bank account. The appellant gets partial relief. The grounds of appeal raised by the appellant regarding this issue are partly allowed.
Being aggrieved the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 15 consisting of Bank statement of assessee’s husband Shri Vijaykumar for period of 1st April 2016 to 31st March 2017 and working of peak cash availability. As per ld. AR, the cash withdrawn by the husband of the assessee was utilized for making the cash deposits in the bank. To this effect, the ld. AR drew our attention on the worksheet of the bank statement placed on page 15 of the paper book. Hence, the ld. AR prayed not to treat the amount of cash deposit as unexplained money of the assessee.
On the other hand, the learned DR supported the orders of the lower authorities. He submitted that the cash deposits were made in the assessee’s bank account, and therefore the primary burden to explain the source lies on the assessee. Merely stating that the cash was withdrawn by her husband is not sufficient without clear evidence . showing direct linkage between each withdrawal and the corresponding deposit.
15.1 The learned DR further argued that the working of peak cash availability is only a self-prepared statement and does not conclusively prove that the same cash withdrawn was redeposited. In the absence of proper corroborative evidence, the cash deposits were rightly treated as unexplained money.
We have heard the rival contentions of both the parties and perused the materials available on record. The dispute before us is confined to the addition of ₹3,99,000 sustained by the learned CIT(A) on account of cash deposits made by the assessee in her savings bank account during the year. The assessee’s case before us is that this cash was sourced from withdrawals made by her husband from his bank account prior to demonetisation and that the same was available with the family and was later deposited by the assessee in her own account. In support, the learned AR placed reliance on the husband’s bank statement for the period 1 April 2016 to 31 March 2017 and a working showing peak cash availability.
16.1 From the materials on record, we note that the assessee’s husband had withdrawn an aggregate sum of ₹5,68,000/- between 15 July 2016 and 3 November 2016 and had also redeposited ₹2,05,500/- during the same period. In the working of cash availability, certain cash receipts of ₹1,56,000 are also shown as “fees”, though the nature of such receipts and supporting evidence have not been brought on record at this stage. During the overlapping period i.e. in between 16th August .
16.2 In our considered view, the documents now produced prima facie indicate that substantial cash withdrawals were made by the assessee’s husband before demonetisation and that such withdrawals could potentially explain, wholly or partly, the deposits made by the assessee, subject to verification of actual availability of cash on the dates of deposit and the household utilisation in the intervening period. However, these details were not examined by the AO, as the material has been filed for the first time before the Tribunal. Further, aspects such as the day-to-day cash balance, the redeposits in the husband’s account, and the alleged cash receipts shown as “fees” require factual verification.
16.3 We also find that the learned CIT(A), restricted the addition mechanically to ₹3.99 lakh only on the basis that this amount represented deposits in the savings account, without examining whether the assessee’s explanation regarding family cash availability from her husband’s withdrawals could be accepted. Since the issue goes to the root of factual verification and involves examination of primary evidence, we are of the opinion that the matter deserves to be restored to the file of the Assessing Officer for fresh adjudication.
16.4 Accordingly, in the interest of justice and fair play, we set aside the addition of ₹3,99,000 and restore the issue to the file of the AO with a direction to examine the bank statement of the assessee’s husband, verify the withdrawals made by him prior to deposit by the assessee, compute the actual cash available with the family after considering . intervening utilisation and redeposits, and thereafter determine whether such cash was available on the specific dates on which the assessee deposited money in her savings bank account. The AO shall also call for necessary supporting evidence regarding the alleged cash receipts reflected in the working and afford adequate opportunity of being heard to the assessee.
16.5 The assessee is directed to fully cooperate in the proceedings and furnish all relevant materials as may be called for by the Assessing Officer. With these directions, the grounds raised by the assessee on this issue are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in court on 13th day of February, 2026