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Facts
The assessee filed her income tax return for AY 2017-18, which was selected for scrutiny. The Assessing Officer (AO) identified unexplained cash deposits of Rs. 10,43,600/-, unexplained capital introduction of Rs. 1,72,54,826/-, and unexplained unsecured loans totaling Rs. 3,57,75,000/- during the demonetization period. Despite notices, the assessee failed to furnish substantive details or satisfactory explanations regarding these additions.
Held
The CIT(A) upheld all additions, finding the cash book fabricated, the plea of 'accountant's mistake' to be an afterthought, and the assessee's failure to establish identity, creditworthiness, and genuineness of the sources. The ITAT noted the assessee's non-appearance and lack of prosecution, deciding the appeal on merits. The ITAT found no infirmity in the CIT(A)'s conclusions, confirming the additions as the assessee failed to discharge the onus under sections 68 and 69A of the Act.
Key Issues
Whether additions for unexplained cash deposits, unexplained capital introduction, and unexplained unsecured loans were justified due to the assessee's failure to provide satisfactory explanations and discharge the onus of proof.
Sections Cited
69A, 143(2), 142(1), 143(3), Rule 46A, 68
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
Date of Hearing 23.02.2026 Date of Pronouncement 26.02.2026 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 12.08.2025 passed for A.Y. 2017-18.
The assessee has raised the following grounds of appeal:
“1. On the facts and circumstances of the case as well as in law on the subject, the learned CIT A has erred in confirming the addition of Rs. 10,43,600 made by ld. Assessing officer on account of alleged unexplained cash deposits under section 69A of the I. T act 1961 despite the fact that cash deposits was outside the scope of Limited Scrutiny under CASS for A.Y. 2017-18.
2. On the facts and circumstances of the case as well as in law on the subject, the learned CIT A has erred in confirming the addition of Rs. 1,72,54,826 made by ld. Assessing officer as alleged unexplained capital introduced in the proprietary concern India Paper House.
On the facts and circumstances of the case as well as in law on the subject, the learned CIT A has erred in confirming the addition of Rs. 3,57,75,000 made by ld. Assessing officer on account of unsecured loans and further enhancing said addition of Rs. 3,58,75,000.
Rachna Dipesh Laddha vs. ITO Asst.Year –2017-18 - 2– 4. The appellant craves leave to add, amend, alter, vary, or withdraw any of the above grounds of appeal at the time of hearing.”
3. The brief facts of the case are that the assessee, an individual, filed her return of income for Assessment Year 2017–18 on 07.11.2017 declaring a total income of Rs. 11,81,489/-. The case was selected for scrutiny under CASS. During the course of assessment proceedings, the Assessing Officer issued notices under section 143(2) and section 142(1) of the Act calling for details relating to unsecured loans, capital introduction and cash deposits during the demonetization period. The assessee sought adjournment on the ground that documents would take time to be collated, however, thereafter no substantive details were furnished despite repeated notices and opportunities, including a final show cause notice.
4. On examination of the material available on record, the Assessing Officer observed that the assessee had shown unsecured loans aggregating to Rs. 3,57,75,000/- from Malde Jessa Impex Pvt. Ltd., Dipesh Laddha and Fagun Manojkumar Chhota, but failed to establish the identity, creditworthiness and genuineness of the lenders. The Assessing Officer further noted that the assessee had introduced capital of Rs. 1,72,54,826/- in her proprietary concern, M/s India Paper House, without explaining the source thereof. The Assessing Officer also noticed that cash of Rs. 10,43,600/- had been deposited in the assessee’s bank account during the demonetization period, for which no satisfactory explanation was furnished. In the absence of any compliance or supporting evidence, the Assessing Officer treated the cash deposit of Rs. 10,43,600/- as unexplained under section 69A of the Act, the unsecured loans of Rs. 3,57,75,000/- as unexplained income, and the capital introduction of Rs. 1,72,54,826/- as unexplained credit, and accordingly completed the Rachna Dipesh Laddha vs. ITO Asst.Year –2017-18 - 3– assessment under section 143(3) of the Act assessing the total income at Rs. 5,50,87,040/-.
5. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) and raised grounds challenging the addition of Rs. 10,43,600/- on account of cash deposits, Rs. 1,72,54,826/- on account of capital introduction and Rs. 3,57,75,000/- on account of unsecured loans. During the appellate proceedings, the assessee filed written submissions along with an application under Rule 46A seeking admission of additional evidence, contending that the assessment was completed ex parte due to non-availability of her husband, who was looking after her financial affairs, and the assessee also claimed that the entries relating to unsecured loans and capital introduction were wrongly made by the accountant.
6. With respect to Ground No. 1 relating to the addition of Rs. 10,43,600/- on account of cash deposits during the demonetization period, the CIT(A) examined the cash book and bank statements produced as additional evidence and forwarded the same to the Assessing Officer for remand report. On detailed analysis, the CIT(A) observed that the assessee had shown an abnormally high cash balance of Rs. 14,77,838/- as on the date of demonetization, whereas in earlier and subsequent years the cash balance remained around Rs. 4 to 5 lakhs. The CIT(Appeals) observed that the month-wise cash position showed a gradual and artificial build-up of cash balance immediately prior to demonetization. The CIT(A) further noted abnormal patterns such as cash withdrawals despite availability of huge cash balance and small cash deposits when allegedly large cash was available, which was not in consonance with normal business conduct. On these facts, the CIT(A) held that the cash book was fabricated and Rachna Dipesh Laddha vs. ITO Asst.Year –2017-18 - 4– unreliable, and therefore upheld the addition of Rs. 10,43,600/- as unexplained cash deposit. The ground was accordingly dismissed.
In Ground No. 2, the assessee challenged the addition of Rs. 1,72,54,826/- on account of unexplained capital introduction. The CIT(A) noted that during the assessment proceedings, repeated opportunities were given to explain the source of capital introduced in the proprietary concern, but no explanation or evidence was furnished. During appellate proceedings, the assessee took a plea that the capital entry was wrongly made by the accountant. The CIT(A), relying upon the remand report, observed that the assessee was fully aware of the capital introduction during the assessment proceedings, had sought adjournments under her own signature, and never disputed the entries at that stage or even in the original grounds of appeal. The capital introduction was consistently reflected in the balance sheet, ITR and audit report not only for the year under consideration but also in subsequent years. The CIT(A) held that the explanation of accountant’s mistake was an afterthought and not acceptable, and since the assessee failed to explain the nature and source of the credit, the addition under section 68 of the Act was justified. Accordingly, the addition of Rs. 1,72,54,826/- was sustained and the ground was dismissed.
8. In Ground No. 3, the assessee challenged the addition of Rs. 3,57,75,000/- on account of unsecured loans. During remand proceedings, it was accepted that the unsecured loan of Rs. 4,00,000/- from Malde Jessa Impex Pvt. Ltd. was an opening balance and not a fresh loan during the year. However, it was noticed that an unsecured loan of Rs. 5,00,000/- from Nemchand Gada was taken during the year, which was not considered in the assessment order. Since the assessee failed to establish Rachna Dipesh Laddha vs. ITO Asst.Year –2017-18 - 5– the identity, creditworthiness and genuineness of the lenders, the CIT(A) held that the unsecured loans aggregating to Rs. 3,58,75,000/- were unexplained. Accordingly, the CIT(A) not only upheld the addition but enhanced the same from Rs. 3,57,75,000/- to Rs. 3,58,75,000/-. The explanation that the entries were wrongly made by the accountant was rejected for the same reasons as discussed in respect of capital introduction.
9. In view of the above findings, the appeal filed by the assessee was dismissed in entirety by Ld. CIT(A).
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
We observe that despite service of notice and grant of several opportunities of hearing, none appeared on behalf of the assessee on the date fixed for hearing before the Tribunal, nor was any application for adjournment moved. In these circumstances, we find that the assessee is not interested in prosecuting the appeal. Accordingly, the appeal is taken up and decided on the basis of material available on record. It is a well settled principle that an appeal does not mean merely filing of the appeal but effectively pursuing the same. Similar view has been taken by the Delhi Bench of the Tribunal in Multiplan (India) (P) Ltd. v. CIT (1991) 38 ITD 320 (Del.), holding that where the assessee does not appear or prosecute the appeal, the same can be decided on merits on the basis of material available on record. In the case of Khyati Chemicals (P.) Ltd. vs. Deputy Commissioner of Income-tax (OSD) [2022] 135 taxmann.com 200 (Ahmedabad - Trib.)/[2022] 193 ITD 446 (Ahmedabad - Trib.)[14- 12-2021], the ITAT made the following observations:
Rachna Dipesh Laddha vs. ITO Asst.Year –2017-18 - 6– 2. When the matter was called for hearing it was noticed that there was none appeared on behalf of the assessee despite the fact that case has been listed for hearing on several occasions. On the previous occasions, the notices intimating the date of hearing were sent to the address of the assessee which were duly served. It is the trite law that assessee after filing the appeal should be vigilant enough to prosecute the same. But, we find that the assessee is not serious in pursuing the appeal filed by it. In the absence of any co-operation from the side of the assessee, we don't find any reason to keep the matter pending before us. Accordingly, we decide to proceed to adjudicate the appeal after hearing the learner DR appearing on behalf of the Revenue.
On merits also, after careful consideration of the orders of the Assessing Officer and the learned Commissioner of Income-tax (Appeals), we find no infirmity in the conclusions arrived at by the learned CIT(A). The additions on account of unexplained cash deposits during the demonetization period, unexplained capital introduction and unexplained unsecured loans have been confirmed by the learned CIT(A) after detailed examination of facts, consideration of additional evidences, remand report of the Assessing Officer and after recording cogent reasons. The assessee has failed to discharge the onus cast upon her under sections 68 and 69A of the Act, to satisfactorily explain the nature and source of the credits and cash deposits. The explanation that the entries were wrongly made by the accountant has rightly been rejected by the learned CIT(A) as an afterthought, particularly when such entries consistently appeared in the books of account, balance sheets, returns of income and audit reports for multiple years.
It is well settled law that mere entries in the books of account do not by themselves establish the genuineness of a transaction and the assessee is required to prove identity, creditworthiness and genuineness to the satisfaction of the tax authorities, as held by the Hon’ble Supreme Court in PCIT v. NRA Iron & Steel (P) Ltd. (2019) 412 ITR 161 (SC). Similarly, the surrounding circumstances and human probabilities are Rachna Dipesh Laddha vs. ITO Asst.Year –2017-18 - 7– relevant in examining the explanation of the assessee, as laid down by the Hon’ble Supreme Court in Sumati Dayal v. CIT (1995) 214 ITR 801 (SC). Applying these settled principles, we find that the learned CIT(A) has correctly upheld the additions and also validly exercised powers of enhancement after affording due opportunity to the assessee.
In view of the above discussion, and considering the totality of facts and circumstances of the case, we see no reason to interfere with the well- reasoned order of the learned Commissioner of Income-tax (Appeals). Accordingly, the appeal filed by the assessee is dismissed on merits.
In the result, the appeal of the assessee is dismissed. 15. This Order pronounced in Open Court on 26/02/2026