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Facts
The Revenue and the assessee filed cross-appeals against an order related to Assessment Year 2013-14. The assessee's appeal concerned an addition of Rs. 23,54,560/- made by the AO and sustained by the Ld.CIT(A), treating cash deposits in the bank as unexplained. The Revenue's appeal was dismissed due to the tax effect being below the threshold specified by a CBDT circular.
Held
The Tribunal noted that the assessee's cash book was not accepted by the lower authorities, and the explanations provided were not deemed satisfactory. Due to the unverified nature of the cash deposits and the discrepancies found, the Tribunal decided to set aside the issue for de novo examination by the AO.
Key Issues
Whether cash deposits made in the bank account are unexplained and liable for addition, and whether the assessee's explanation and documentary evidence provided are sufficient to establish the source of these deposits.
Sections Cited
Section 143(3), Section 260, Rule 46A
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S. R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM:
These cross appeals, preferred by the Revenue and the assessee, are directed against the order dated 30.04.2025 passed by the Learned & 2252/Chny/2025 Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “the Ld.CIT(A)”), arising out of the assessment order dated 22.01.2019 passed by the Income Tax Officer, Non- Corporate Ward–13(5), Chennai (hereinafter referred to as “the AO”) u/s.143(3) r.w.s 260 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), relating to the Assessment Year 2013-14. Both these appeals were heard together and disposed off by this consolidated order for the sake of convenience.
It was submitted before us that the tax effect involved in the present appeal is Rs.49,44,000/-, which is below Rs.60,00,000/-. We note that the CBDT, vide Circular No. 09/2024 dated 17.09.2024, has enhanced the monetary limit for filing appeals by the Revenue before the Income Tax Appellate Tribunal to Rs.60 lakhs. The said Circular clarifies that where the tax effect in an appeal proposed to be filed before the Tribunal does not exceed Rs.60 lakhs, such appeal shall not be filed.
In view of the above Circular and considering the fact that the tax effect in the instant appeal is less than Rs. 60 lakhs, the present appeal is liable to be dismissed as withdrawn / not maintainable.
However, it is clarified that the issues raised in the present appeal are kept open, to be examined in appropriate proceedings, if the same arise in future. It is further clarified that if the present appeal falls under any of the exceptions carved out in the aforesaid CBDT Circular, the Revenue shall be at liberty to move an appropriate application seeking recall of this order, if so advised. Accordingly, in the light of CBDT Circular No. 09/2024 dated 17.09.2024, the appeal filed by the Revenue stands dismissed.
In the result, the appeal filed by the Revenue is dismissed.
& 2252/Chny/2 Assessee’s Appeal
The assessee has raised the following grounds of appeal: -
1. That the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [“Ld.CIT(A)”] erred in upholding the validity of the reopening of the assessment.
2. That the Ld.CIT(A) is not justified in sustaining the addition of Rs.23,54,560/- made by the Assessing Officer by treating the cash deposits in the appellant’s bank accounts as unexplained income. 3. That the Ld.CIT(A) failed to appreciate that the cash deposits were adequately explained, thereby rendering the addition made by the Assessing Officer unwarranted. 4. That the Ld.CIT(A) erred in directing the Assessing Officer to re-examine the rental income offered by the appellant.
7. At the outset of the hearing, the Ld.AR for the assessee stated that Grounds Nos.1 and 4 are not pressed. Therefore, the aforesaid grounds are dismissed as not pressed.
The Ld. AR, while adverting to Ground Nos.2 and 3, submitted that the solitary issue in the present appeal of the assessee pertains to the action of the Ld.CIT(A) in confirming the addition of Rs.23,54,560/- made by the AO by treating the cash deposits in the assessee’s bank account as unexplained.
We observe that during the previous year relevant to A.Y.2013-14, the assessee had deposited cash aggregating to Rs.23,54,560/- in the bank account maintained with ICICI Bank, bearing A/c No.027601506249. The AO treated the said cash deposits as unexplained on the ground that the assessee failed to furnish requisite details/evidences in support thereof during the course of assessment proceedings.
We further note that during the appellate proceedings before the Ld.CIT(A), the assessee furnished various additional evidences in accordance with the provisions of Rule 46A of the Income-tax Rules, 1962. Consequently, the Ld. CIT(A) called for a remand report from the AO. We find that in the :-4-:
& 2252/Chny/2025 remand report, with respect to the impugned addition of Rs. 23,54,560/-, the AO has observed as under:-
“3.) The assessee failed to produce cash book hence, it is not possible to verify the cash flow to confirm the source for deposit of cash in the bank from the said sale of property. The assessee claims to have sold immovable property for cash, but there has been no evidence or proof to substantiate the claim. Hence this claim is not acceptable.”
We note that the assessee had filed a rejoinder to the remand report and, after considering the same, the Ld.CIT(A) sustained the addition made by the AO in respect of cash deposits in the bank account, which were treated as unexplained, by observing as under:-
“3.3 Rejection of cashbook: The appellant has presented a cashbook in her response dated 10/01/2021 along with petition in terms of Rule 46A of Income Tax Rules praying for acceptance of additional evidence. In addition, the appellant has also presented vividly the sources of cash as well as funds in her hands. In the rejoinder to remand report dated 30/01/2024, the appellant has tried to explain cash deposit of Rs. 23,54,560/- treated as unexplained by the AO. The explanation simultaneously points out the situation wherein it is seen that despite having substantial cash in hand the appellant is withdrawing money from her bank account and depositing it fully or partially. I will try to explain these observations in the following chart: . . . . These observations are true for throughout the year. The single aged lady having easy access to the bank and having multiple interactions with the bank, as can be seen from the financial statements, manages to hold closing cash in hand of Rs. 26,16,390/- is not natural. It is not the case that the appellant has no known sources of income. She receives rent from two properties. Thus, there remains no case for holding huge cash in hand. The cashbook submitted by the appellant is not correct. The appellant is engaged in either money lending or some other undisclosed business transactions in cash. There are ample indications that several transactions of cash outgo are not reflected in the cash book of the appellant. The same will also be true for multiple cash inflows. The advisers of the appellant are well aware that IT Act prohibits transactions in cash above a certain limit. The cashbook has been prepared and presented to explain cash deposits in bank found by the AO. The cashbook is an afterthought and does not explain as to how a reasonable person carries out financial transactions. The cashbook of the appellant is rejected. . . . As discussed in para. 3.3, in which after elaborate discussions the cash book has been rejected, it may further be seen that the appellant is strangely & 2252/Chny/2025 depositing amounts like 39,600/-; 12,560/-; 13,200/-; 7,250/- while holding substantial amounts in cash as per cash book. Considering the overall picture, since the cash book has been rejected, and the appellant has not been able to explain the reason for withdrawal of substantial cash from bank while simultaneously holding substantial cash in hand, the deposits of cash in bank also become unexplained. The action of the AO is confirmed. The AO shall verify whether the computation of cash deposit of Rs. 23,54,560/- was on account of granting any telescopic benefit or whether it was a mistake of computation because the cash deposits seen from the cash books is Rs. 27,75,110/-. The action of AO is confirmed. The ground of appeal is dismissed.”
Aggrieved, the assessee is in appeal before this Tribunal.
The Ld.AR, appearing on behalf of the assessee submitted that the AO treated the following cash deposits in the bank account maintained with ICICI Bank under account numbering 027601506249 as unexplained cash deposit: -
Date of Deposit Amount of cash deposited (Rs.) 14.08.2012 13,50,000 17.09.2012 9,92,000 12.12.2012 12,560 Total 23,54,560
The Ld.AR explained the source for the above cash deposits are as under: -
Date of Amount of cash Explanation of source Deposit deposited (Rs.) 14.08.2012 13,50,000 On 14.08.2012, the assessee had withdrawn cash of Rs.8,50,000/- from the ICICI Bank account No.630901609272 and this amount was immediately re- deposited in the ICICI Bank account No.027601506249 on the same day.
On 14.08.2012, the assessee was having a opening balance of cash of Rs.25,62,000/-, out of which Rs.5,00,000/- was deposited in the ICICI Bank account No.027601506249.
The Ld.AR submitted that opening balance of cash was accumulated out of :-6-:
& 2252/Chny/2025 Date of Amount of cash Explanation of source Deposit deposited (Rs.) sale proceeds of agricultural land on 17.04.2012 and also from frequent cash withdrawals from the bank accounts.
Thus, the Ld.AR submitted that the source for cash deposit of Rs.13,50,000/- is duly explained. 17.09.2012 9,92,000 On 17.09.2012, the assessee was having a opening balance of cash of Rs.22,25,500/-, out of which Rs.9,92,000/- was deposited in the ICICI Bank account No.027601506249.
The Ld.AR submitted that opening balance of cash was accumulated out of sale proceeds of agricultural land on 17.04.2012 and also from frequent cash withdrawals from the bank accounts.
Thus, the Ld.AR submitted that the source for cash deposit of Rs.9,92,000/- is duly explained. 12.12.2012 12,560 On 12.12.2012, the assessee had withdrawn cash of Rs.30,000/- from the ICICI Bank account No.630901609272 and Rs.12,560/- out of this amount was immediately re-deposited in the ICICI Bank account No.027601506249 on the same day.
Thus, the Ld.AR submitted that the source for cash deposit of Rs.12,560/- is duly explained.
Total 23,54,560
In the aforesaid facts and circumstances, the Ld.AR submitted that the assessee had duly explained and established the source of cash deposits amounting to Rs.23,54,560/- made in the bank account, by placing requisite supporting material on record. It was contended that the impugned addition made by the AO and thereafter sustained by the Ld.CIT(A) towards the :-7-:
& 2252/Chny/2025 unexplained cash deposits is wholly unjustified, misconceived and not tenable in law as well as on facts. Accordingly, the Ld.AR pleaded that the addition so made deserves to be deleted in entirety and prayed for deletion of the same.
Per contra, the Ld.DR submitted that the assessee had failed to furnish any supporting details before the AO either during the course of the assessment proceedings or even in the remand proceedings. It was contended that before the Ld.CIT(A), the assessee sought a direction for calling for a second remand report from the AO; however, the Ld. CIT(A) declined the said request. The Ld.DR further submitted that the cash book entries furnished by the assessee require proper examination and verification at the level of the AO.
The Ld.DR submitted that the assessee has claimed receipt of cash amounting to Rs.22,51,000/- on account of sale of property on 17.04.2012; however, no documentary evidence has been brought on record to establish that the said cash receipt actually emanated from the alleged sale transaction. Accordingly, it was argued that the assessee’s plea seeking telescoping of the said cash receipt against subsequent cash deposits is devoid of merit and liable to be rejected.
The Ld.DR further contended that there were other property purchases made by the assessee which have not been reflected in the cash flow statement prepared and furnished by the assessee. As per the Ld. DR, any cash payments made towards such property transactions, if any, ought to be reduced while determining the available cash balance for explaining the subsequent cash deposits. In view of the above submissions, the Ld. DR prayed that the addition as sustained by the Ld.CIT(A) be confirmed.
In view of the aforesaid facts and rival submissions, we observe that the solitary dispute in the present appeal relates to the addition of Rs.23,54,560/- made by the AO by treating the cash deposits in assessee’s ICICI Bank A/c No.027601506249 as unexplained, which has been confirmed by the Ld.CIT(A).
& 2252/Chny/2025 From the record, it is evident that the assessee has attempted to explain the impugned cash deposits with reference to (i) alleged availability of opening cash balance accumulated from sale of agricultural land on 17.04.2012, and (ii) withdrawal of cash from another ICICI Bank A/c No.630901609272 and re- deposit on the same day, supported by the cash book/cash flow statement furnished during appellate proceedings. However, it is also borne out from the remand report of the AO as well as the findings of the Ld.CIT(A) that the assessee had not produced the cash book during assessment proceedings and that the cash book filed as additional evidence was not accepted by the Ld.CIT(A) for want of reliability and surrounding improbabilities, including repeated withdrawals and deposits and maintenance of large cash-in-hand, apart from allegations regarding non-reflection of certain cash outgo/property transactions. We find that the explanation of the assessee, particularly regarding the cash receipt of Rs.22,51,000/- claimed from sale of property/agricultural land and the availability of cash-in-hand, requires proper verification with cogent documentary evidences such as sale documents, mode of receipt, supporting confirmations, bank statements of both accounts, and a reconciled cash flow after considering all cash inflows and outflows including any property purchases/payments, if any. We also note the observation of the Ld.CIT(A) regarding possible computational mismatch of cash deposits (Rs.23,54,560/- vs. Rs. 27,75,110/-) which also needs factual verification.
Considering the totality of facts and in the interest of justice, we deem it appropriate to set aside this issue to the file of the AO for de novo examination and verification. The AO shall examine the assessee’s explanation in respect of each cash deposit, including the claim of immediate redeposit out of withdrawals, the correctness of opening cash balance, genuineness of cash generated from alleged sale of land/property on 17.04.2012, and the complete cash flow after considering all cash expenses/payments (including any property transactions not reflected). The AO shall verify the supporting documentary evidence and pass a speaking order in accordance with law after affording & 2252/Chny/2025 adequate opportunity of being heard to the assessee. Accordingly, Ground Nos. 2 and 3 are allowed for statistical purposes.
Hence, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 14th January, 2026 at Chennai.