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Facts
The assessee deposited Rs. 26.19 lakhs in cash during the demonetization period, which was treated as unexplained cash credit under Section 68 of the Income Tax Act. The assessee contended that the source of this cash was the unutilized portion of a KCC loan of Rs. 24.40 lakhs, sanctioned by Dena Bank based on his agricultural income of Rs. 18 lakhs per annum, which he then used to repay the loan. The CIT(A) sustained the addition, arguing the assessee failed to provide sufficient documentary evidence.
Held
The Tribunal held that the CIT(A) erred by sustaining the addition without properly verifying the evidence presented by the assessee, including bank statements and Dena Bank's reply confirming the KCC loan and agricultural income. It found that the CIT(A)'s order was based on "guess work and surmises" rather than proper verification, and therefore, directed the A.O. to delete the addition.
Key Issues
Whether a cash deposit during demonetization, claimed as repayment of an unutilized agricultural loan, constitutes an unexplained cash credit under Section 68. Whether the CIT(A) erred in sustaining the addition without proper verification and by violating principles of natural justice.
Sections Cited
Section 68, Section 131, Section 133(6), Section 142(1), Section 250(4), Section 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM
The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 27.05.2025 for the assessment year 2017-18 as per the following grounds of appeal:
1. That the order of Ld. CIT(A) is bad in law as well as on facts and the entire addition of Rs.23,82,220/- so sustained by the Ld. CIT(A) is accordingly liable to be deleted.
2. In the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in sustaining addition of Rs.23,82,220/- under section 68 of the income tax act without considering the facts as well as cash flow summary already submitted on record, which undisputedly justifies the availability' of cash with the appellant.
3. In the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in sustaining addition of Rs.23,82,220/- under section 68 of the income tax act, contrary to the provisions of Law; because maintenance of books of accounts is a sine-qua-non for making such addition and the appellant being a salaried employee is not required by Law to maintain any books of accounts.
4. In the facts and circumstances of the case and in law, the CIT(A) grossly erred in sustaining addition of Rs.23,82,220/- without bringing any evidence on record to substantiate that cash withdrawn from KCC Loan Account was spent by the appellant and therefore, was not available with the appellant.
5. In the facts and circumstances of the case and in law, the CIT(A) has erred in sustaining the addition by relying on the statement recorded under section 131 without providing copy of the same to the appellant in spite of specific request, thereby violating the principles of natural justice.
6. The above grounds are independent and without prejudice to one and another.
7. The appellant craves leave to urge, add, amend, alter, enlarge, modify, substitute, delete or withdraw any of the ground or ground and to adduce fresh evidence at the time of hearing of the appeal.”
The brief facts in this case are that at the assessment stage, it was noticed by the A.O that the assessee had deposited of Rs.26,19,000/- in the bank during demonetization period. The A.O issued notice u/s. 133 (6) of the Income Tax Act, 1961 (for short ‘the Act’) to the Dena Bank on 29.04.2019 and notices u/s. 142(1) of the Act were issued on 03.05.2019 and 14.05.2019. In response to those statutory notices, the assessee replied that he is a salaried employee in a private firm and engaged in agriculture activities at Village : Kumharkhan, Tehsil : Bhatapara. The assesse has also enclosed copy of bank statement, copy of Form 16, Form 26AS and ITRs. According to the assessee, he had deposited Rs.26,97,000/- in cash in HDFC Bank and Dena Bank during demonetization and withdrawn Rs.24,40,000/- cash from KCC loan on 25.04.2016 from Dena Bank. The assessee had contended that since loan amount was not utilized, hence, loan was repaid by depositing cash into KCC loan account of Dena Bank during demonetization period. It is pertinent to mention that during the course of assessment, notice u/s. 133(6) of the Act was issued to the Dena Bank, Sadar Bazar, Bhatapara on 11.07.2019. The reply submitted by the said bank makes it clear that the assessee did have agricultural income to the tune of Rs.18 lacs per annum and on such basis, they had sanctioned KCC loan to the tune of Rs.24 lacs to the assessee. The said reply of the Dena Bank dated 26.07.2019 is made part of this order and extracted as follows:
The Ld.CIT(Appeals)/NFAC had dismissed the appeal of the assessee on the ground that the assessee had not furnished any documentary evidence to prove that the source of such cash deposits was from loan for the development of agricultural land. That when the assessee had submitted all the bank statement, Form-16, Form-26AS and ITRs before the department, and when the A.O himself accepted that the assessee was having agricultural income of Rs.18 lacs per annum, on the basis of which, Dena bank had provided loan to the assessee which is also evident from bank’s reply itself, therefore, it was all the more important for the Ld. CIT(Appeals)/NFAC to conduct enquiry in terms with Section 250(4) & (6) of the Act, if it did not believe those documentary evidences which were placed on record before the said authority. That without conducting any verification, without dismantling the statements given by the bank on summary basis, the Ld. CIT(Appeals)/NFAC had sustained the addition holding that no supporting evidences were furnished by the assessee. But, the facts remain that all the evidences were furnished by the assessee and even bank statement and reply was filed before the Ld. CIT(Appeals)/NFAC and without doubting those statements or without negating those statements, it was not appropriate for the First Appellate Authority to dismiss the appeal of the assessee.
Further, it is very much emanating from facts on record that the assessee was having agricultural income and on that basis, for development purpose of agricultural land, he had procured certain amount as loan, which in fact, was deposited back for repayment purpose in the account of Dena Bank since the same was not utilized. No evidence has been brought on record by the Ld. CIT(Appeals)/NFAC to controvert these facts on record. The order of the Ld. CIT(Appeals)/NFAC pertains to the character of guess work and surmises instead of proper verification which was mandated by the statute. Accordingly, I set aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete the addition from the hands of the assessee.
As per the above terms grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed. Order pronounced in open court on 10th day of September, 2025.