THIRUVIAM VIVEKANANDAN,TIRUNELVELI vs. ITO, WARD-5,, CUDDALORE

At the threshold, we observe that there is a delay of 181 days in filing of the present appeal by the assessee. The assessee has furnished an affidavit explaining that the said delay occurred due to delay in co-ordination with the auditor and the advocate. Further, the appeal fees of Rs. 10,000/- was paid on 02.11.2024 itself as per the advice of the consultant. Therefore, the delay in filing the appeal was beyond the control of the assessee. Upon perusal of the affidavit and after affording due opportunity of hearing to both parties, we are satisfied that the assessee has demonstrated sufficient and reasonable cause for not presenting the appeal within the statutory period prescribed under law. Accordingly, in the interest of justice, the delay in filing the appeal is hereby condoned, and the appeal is admitted for adjudication on merits.

The brief facts as per the records are that the assessee is an individual and filed his return of Income under the provisions of section 139 of the Act for the impugned Assessment Year 2017-18 by declaring an Income of Rs.7,97,390/-. The case was selected for complete scrutiny by CASS. Accordingly, the statutory notices were issued to the assessee and as per the information furnished, the AO found that the assessee has deposited cash of Rs.9,94,450/- to his bank account during the F.Y. 2016-17. Further, it is also noticed that the other credits of Rs.20,11,765/- during the said period.

The assessee explained that the said amounts are credited by way of Rs.10,00,000/- from my wife account and Rs.2,52,000/- credited from LIC maturity amount and the other credits are out of my salary.

However, the AO was not convinced with the explanations as the assessee has not provided any details for cash deposits and hence added the entire cash deposits u/s. 69A of the Act as unexplained Income. In respect of other credits the assessee has not provided any details of source of his wife’s account and the LIC maturity records to the tune of Rs.12,52,000/-. However,

Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A) by way of filing of Form 35 on 16.01.2020. During the appellate proceedings, the assessee presented its case by way of written submissions and further submitted documents in support of the same. The assessee explained that Rs.1,00,000/- and Rs.90,000/- have been drawn from the bank on 19.10.2016 and 21.09.2016 respectively which has been deposited back to the bank. Further, the assessee claimed that he is a branch manager in Pallava Grama Bank, Kallakurichi and the Business Correspondent (BC) has deposited the cash out of loan given and collected from the borrowers of the remote villages.

In respect of other credits the assessee submitted the bank account statement of his wife Smt.Revathi.B, wherein the spouse of the assessee has transferred Rs.10,00,000/- on various dates from 18.07.2016 to 31.03.2017 to the assessee’s account. Further, it is noted that the spouse has deposited Rs.4,41,000/- cash to her account before transferring the same to the assessee. The assessee also explained and shown the LIC maturity amount in the bank account. Thereafter, the ld.CIT(A), passed an order u/s.250 of the Act on 24.09.2024 by giving partial relief to the assessee as detailed below; - Deleted the cash deposit by Rs.1,90,000/- and sustained the addition of Rs.8,04,450/- - Deleted the other credits of Rs.8,11,000/- and sustained the addition of Rs.4,41,000/- - Undisclosed interest income of Rs.41,746/- is sustained.

Aggrieved by the order of the ld.CIT(A), the assessee in appeal before us.

Before us, the ld.AR for assessee submitted that the ld.CIT(A) has erred in sustaining the addition of Rs.8,04,450/- and also Rs.4,41,000/-, though the assessee has properly explained the source for the same with evidence. The ld.AR explained that the assessee is a branch manager in Pallava Grama Bank, Kallkurichi. The said deposit of Rs.8,04,450/- has been made by the Business Correspondent (BC) out of loan given recovered. Further the bank account statement of the BC also furnished held in TMB, Kallakuruchi. The ld.AR also explained that the BC have to visit the village which is 20 KM away from Kallakuruchi to get the business to the bank. Under various schemes, Government is crediting the amount of account holders such MNREGA, Gas Subsidy, Pension etc.,. This gets credited to the OD account of BC with Tamilnadu Grama Bank, and BC disburses the same after getting signatures and thumb impression from recipient. The BCs are given small limit of OD of Rs.25,000/- and hence, the assessee (branch Manager) has withdrawn cash and given funds to the BC to cater the same. Once it is collected from the BC, the same has been deposited to the bank account of the assessee.

Further, the ld.AR contended that the assessee’s spouse had deposited the cash into her account to the tune of Rs.4,41,000/- out of her own savings and hence prayed for deleting the addition, which is sustained by the ld.CIT(A).

On the contrary, the ld.DR argued that the assessee has failed to provide for any documents and did not sufficiently discharge its onus to explain the source of the addition before the AO and appellate proceedings as well. Therefore, the order of the ld.CIT(A) must be upheld.

We have heard rival submissions, perused the material available on record and gone through the orders of the authorities along with the documentary evidences furnished by the assessee. The first issue relates to the addition of Rs.8,04,450/- sustained by the ld.CIT(A) out of total cash deposits made in the assessee’s bank account during the relevant financial year.

From the records it is observed that the assessee is working as a Branch Manager in Pallava Grama Bank, Kallakurichi. The assessee has explained that the impugned deposits represent cash handled in connection with activities of the Business Correspondent (BC) attached to the bank branch. As submitted, the BC is engaged in facilitating banking services in remote villages situated around 20 kilometres from the branch and is involved in disbursement and collection of funds relating to various government schemes such as Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) payments, gas subsidy, pension and similar benefits credited to beneficiaries.

It was explained that the BC operates with a limited overdraft facility and requires cash for disbursement to beneficiaries in remote villages. In the normal course of business, the assessee, being the Branch Manager, would withdraw funds and hand over the same to the BC for operational purposes and the amounts collected from beneficiaries or recovered from loans would subsequently be returned and deposited back into the assessee’s account before being accounted for in the banking system.

The assessee has also produced the bank account statement of the BC maintained with Tamilnad Mercantile Bank, Kallakurichi branch, to demonstrate the movement of funds between the assessee and the BC. The explanation thus indicates that the cash deposits were not the assessee’s

The ld.CIT(A), however, sustained the addition mainly on the ground that the explanation was not substantiated with adequate documentary evidence before the Assessing Officer. In our considered opinion, the approach of the ld.CIT(A) is completely technical and does not adequately consider the surrounding circumstances and the nature of the assessee’s employment.

It is not in dispute that the assessee is an employee of a banking institution and functioning as a Branch Manager. The explanation furnished by the assessee regarding the operational mechanism of BC transactions appears plausible and consistent with the functioning of rural banking channels. Once the assessee has provided a reasonable explanation supported by the BC’s bank account statement indicating the flow of funds, the addition cannot be sustained merely on suspicion or for want of further corroboration when the explanation itself remains unrebutted by the Revenue.

The Revenue has also not brought any material on record to demonstrate that the impugned deposits represent the assessee’s own undisclosed income. In absence of such evidence, and considering the nature of the assessee’s professional responsibilities, we are of the view that the explanation furnished by the assessee deserves acceptance. Accordingly, we hold that the addition of Rs.8,04,450/- sustained by the ld.CIT(A) is not justified and the same is hereby deleted. Thus, the assessee succeeds on this ground.

The next issue pertains to the addition of Rs.4,41,000/- sustained by the ld.CIT(A). The facts on record reveal that the assessee had received transfers aggregating to Rs.10,00,000/- from the bank account of his spouse,

Before us, the ld.AR submitted that the said cash deposits were made out of the personal savings of the assessee’s spouse. However, apart from this general explanation, no documentary evidence such as details of past savings, income records, or cash flow statements has been placed on record to substantiate the source of such deposits.

At the same time, it is also a settled principle that transactions between spouses cannot automatically be treated as unexplained if there exists a plausible explanation and banking trail for the transfer. In the present case, the bank statement clearly establishes that the transfers to the assessee were made through proper banking channels from the spouse’s account.

Considering the totality of facts and circumstances, including the existence of the banking trail and the relationship between the parties, we are of the view that sustaining the entire addition of Rs.4,41,000/- would be excessive. However, since the assessee has not been able to fully substantiate the source of cash deposited in the spouse’s account, some degree of estimation is warranted. Therefore, in the interest of justice and fairness, we deem it appropriate to sustain 50% of the addition and grant relief for the remaining portion. Accordingly, the addition of Rs.4,41,000/- is restricted to Rs.2,20,500/- and the balance Rs.2,20,500/- is deleted.

The last issue relates to the addition of Rs.41,746/- towards undisclosed interest income from Fixed Deposits and Savings Bank account. The assessee has not brought any material before us to demonstrate that the said

In the absence of any contrary material, we find no infirmity in the order of the ld.CIT(A) in sustaining the addition. Accordingly, the addition of Rs.41,746/- towards undisclosed interest income is confirmed.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 17th March, 2026 at Chennai.