Loading judgment…
Facts
During Assessment Year 2013-14, the assessee, who had not filed a return of income, deposited Rs. 52,82,320/- in a bank account. The Assessing Officer re-opened the case and added the amount as unexplained money under Section 69A after the assessee failed to respond to notices and substantiate the source of the deposit. The CIT(A) upheld this ex-parte addition due to the assessee's continued non-compliance.
Held
The Tribunal found that both lower authorities passed orders without granting the assessee adequate opportunity to be heard, noting that the non-compliance was not intentional. It remitted the matter back to the AO for fresh adjudication, directing a speaking order after providing the assessee sufficient opportunity of hearing, subject to a cost of Rs. 2,000/- to the "Prime Minister's National Relief Fund".
Key Issues
Whether the addition of cash deposits as unexplained money was valid when the assessee claimed account misuse and alleged a denial of natural justice due to lack of proper opportunity to explain the source of funds.
Sections Cited
Section 69A, Section 147, Section 144, Section 148, Section 274, Section 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH
Before: SHRI DR. A. L. SAINI & SHRI DINESH MOHAN SINHA
आदेश / O R D E R
PER DINESH MOHAN SINHA, JM:
This appeal filed by the assessee pertaining to assessment year (AY) 2013-14, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 20.12.2024, which in turn arises out of an assessment order passed by Assessing Officer (in short, ‘AO’) u/s 147 r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 31.03.2022.
The grounds of appeal
raised by the assessee are as follows:
1. The learned CIT (Appeals), NFAC has erred in law as well as in facts to upheld the decision of learned Assessing Officer has erred in law and on facts by treating the entire cash deposit of Rs.52,82,320/- as "unexplained money" under Section 69A of the Income Tax Act, 1961, without properly investigating the appellant's claim of account misuse.
ITA.54/RJT/2025/AY.2013-14 Jigneshbhai Savjibhai Khorani 2. The Learned CTT (Appeals) as also the learned AO has failed to properly serve the notice to the assessee through other modes provided in the law.
3. The learned CIT (Appeals), NFAC has erred in law as well as in facts to upheld the order of the learned AO who has failed to establish any link between the appellant's known sources of income and the alleged cash deposits. The determination of income is arbitrary and against principles of natural justice.
The appellant was deprived of proper opportunities to explain the nature of transactions and was penalized based on assumptions without concrete evidence of ownership or control over the funds deposited.
The learned AO did not investigate potential misuse or impersonation despite the appellant's limited resources and genuine lack of awareness of such proceedings. The learned CIT (Appeals), NFAC ought to have deleted the said order.
6. The addition ignores the socio-economic background of the appellant, who was a student earning a nominal salary, with no reasonable capacity to deposit such substantial cash amounts.
The principles of justice require that suspicion, however strong, cannot substitute for evidence. Reliance is placed on the Hon'ble Supreme Court judgment in CIT v. P.K. Noorjahan [1999] 237 ITR 570 (SC), which emphasizes that evidence, not suspicion, forms the basis of additions under Section 69A.
The Hon'ble ITAT is requested to consider judicial precedents such as: CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570 (SC): Suspicion cannot replace evidence for additions under Section 69A. o ITO v. Gita Devi Aggarwal [1970] 76 ITR 496 (Cal): Courts must consider the socio-economic status of the assessee in determining whether an explanation for unexplained income is satisfactory. o Kamal Madan v. 170 [2020] (Delhi ITAT): Benefit of doubt must be extended to the assessee when facts suggest a likelihood of account misuse by third parties.”
The facts of the case are that the assessee had not filed any return of income. The information available with the revenue that the assessee had deposited cash of Rs.52,82,320/- in his bank account No. 24992020000566 with HDFC Bank, main branch, Morvi. The case was re-opened u/s 147 of the Act after recording the reasons and ITA.54/RJT/2025/AY.2013-14 Jigneshbhai Savjibhai Khorani obtained the approval of the appropriate authority. The AO issued various statutory and show cause notices on three occasions. In response to the said notices, the assessee was neither made any compliance nor sought any adjournment. The assessee was requested to explain the source of aggregate cash of Rs.52,82,320/- deposited during the year under consideration. Despite of given ample opportunity, the assessee failed to substantiate the source of cash deposited during the subject assessment year. The AO observed that the assessee failed to discharge primary onus caste upon him and not in a position to explain the source of cash deposit during the year under consideration. In absence of relevant details and documents, the AO completed the assessment order u/s 147 r.w.s. 144 of the Act based on the material available on record. The AO made addition of Rs.52,82,320/- u/s 69A of the Act and treated as unexplained money. The AO also initiated penalty proceedings u/s 274 r.w.s. 271(1)(c) of the Act.
4. Aggrieved by the order of AO, the assessee filed appeal before the ld. CIT(A). The appeal filed on 28.05.2022 against the order served upon the appellant on 31.03.2022 was delayed by 28 days. The appellant had not given any specific reasons for delay in filling appeal. In column 14 of Form 35, the reply to the query ‘whether there is delay in filling appeal’, the appellant responded as ‘No’. The appellant had not requested any condonation of delay. The ld. CIT(A) issued three notices of hearing, but there was a complete non-compliance on the part of the assessee. The CIT(A) reproduced the observation of AO is at pages 3 to 4 of the appellant order. The CIT(A) observed that the notice u/s 148 of the Act was issued on 21.04.2020, which was duly
ITA.54/RJT/2025/AY.2013-14 Jigneshbhai Savjibhai Khorani served on the appellant. However, the appellant has neither made any compliance nor file any return of income in response to the notice u/s 148 of the Act. Before the CIT(A), the appellant failed to file any reply or any documentary evidence to substantiate its contentions. The appellant was afforded with ample opportunities to file its submission, but it could not produce any documents explaining unexplained money. Further, the CIT(A) held that it was incumbent upon the appellant to be aware of the statutory provisions, to comply with the requirements of law, and that it should pursue the legal remedied available diligently. The CIT(A) relied upon the decision of Hon’ble Delhi High Court in case of Moddus Media Pvt. Ltd. Vs. M/s Scone Exhibition Pvt. Ltd. (RFA 497/201, dated 18.05.2017) and held that the appellant ought to be vigilant and pursue the appeal filed by him. The CIT(A) concluded that the appellant has failed to remain vigilant and did not avail the opportunity to submit necessary evidence in support of his point of view and contentions, as he did not respond to various notices issued to him, which established total disregarded to the due process of law. Hence, the CIT(A) upheld the addition made by AO and dismissed the appeal of the appellant.
5. Aggrieved by the order of CIT(A), the assessee filed the present appeal before the Tribunal. At the outset itself, Learned Authorized Representative (ld. AR) for the assessee assailed the impugned order by contending that assessee could not represent his case before the CIT(A) as well as the AO and the order being an ex parte order, stood vitiated on account of violation of principle of natural justice. The ld. AR for the assessee submits that the non-compliance to the notices was neither intentional nor deliberate on the part of the assessee. The ITA.54/RJT/2025/AY.2013-14 Jigneshbhai Savjibhai Khorani assessee could not file the documents and evidences before the CIT(A) due to circumstances beyond his control. Therefore, ld. AR requested for another opportunity to plead his case before the lower authorities may be granted to the assessee.
On the other hand, Learned Departmental Representative (ld. DR) for the revenue did not have any objection if the matter is remitted back to the file of the AO for fresh adjudication.
7. Considering the above facts, we note that assessee could not plead his case successfully before the CIT(A). We also note that both the lower authorities have passed the order without giving due opportunities to the assessee, hence assessee remain unheard. Hence, we are of the view that one more opportunity should be given to the assessee to plead his case before the AO. We find that it is a settled law that principles of natural justice and fair play require that the affected party is granted sufficient opportunity of being heard to plead his case. Therefore, without delving deeper into the merits of the case, in the interest of justice, we restore the matter back to the file of AO for fresh adjudication and pass a speaking order after affording sufficient opportunity of hearing to the assessee. Therefore, we deem it appropriate and proper to set aside the order of the CIT(A) and remit the matter back to the file of the AO to adjudicate the issue afresh on merits subject to the cost of Rs.2,000/- (Rupees Two Thousand only) to the credit to the “Prime Minister’s National Relief Fund”. The assessee is directed to be more vigilant and submit all relevant details and documents before the AO by not seeking adjournment without valid reasons. For statistical purposes, the appeal of the assessee is treated as allowed.
ITA.54/RJT/2025/AY.2013-14 Jigneshbhai Savjibhai Khorani 8. In the result, appeal of the assessee is allowed for statistical purposes.
Order is pronounced on 29/08/2025 in the open court.