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Facts
The assessee, engaged in contract business, made cash deposits totaling Rs.14,80,59,399/- in two Canara Bank accounts during AY 2017-18. The AO added this amount as unexplained cash credit under Section 68 due to lack of explanation. The CIT(A) deleted the entire addition after verifying only a small portion of the deposits (Rs.1,75,000/- and Rs.1,00,000/-) and admitting additional evidence under Rule 46A despite the AO's objections and non-compliance with remand directions.
Held
The tribunal found the CIT(A)'s order perverse, cryptic, vague, and ambiguous, as it deleted the entire substantial addition based on verification of a minor portion of cash deposits without conducting a proper independent inquiry into the source of the remaining large sum. The CIT(A) also failed to follow the mandate of Section 250(4) & (6) of the Act. Therefore, the tribunal set aside the CIT(A)'s order and remanded the matter back for de novo adjudication with a clear direction to conduct necessary verification of facts regarding the source of all cash deposits.
Key Issues
Whether the CIT(A) was justified in deleting the entire addition of unexplained cash deposits under Section 68 by verifying only a small portion and failing to conduct a full inquiry, and the proper application of Rule 46A for admitting additional evidence.
Sections Cited
68, 143(2), 142(1), 143(3), Rule 46A, 133(6), 250(4), 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI ARUN KHODPIA
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM:
This appeal preferred by the revenue emanates from the order of the Ld. CIT(Appeals)/NFAC, Delhi dated 30.01.2025 for the assessment year 2017-18 as per the grounds of appeal on record.
At the time of hearing none appeared on behalf of the assessee. The matter was heard after recording the submissions of the Ld. CIT-DR and on careful consideration of materials available on record.
The sole grievance of the revenue in this appeal is deletion of addition of Rs.14,80,59,399/- u/s. 68 of the Income Tax Act, 1961 ( for short ‘the Act’) by the Ld. CIT(Appeals)/NFAC in respect of alleged cash deposits in Canara Bank by the assessee.
The relevant facts are that the assessee is engaged in the contract business and had filed return of income admitting total income at Rs.36,90,690/-. The case of the assessee was selected for scrutiny assessment under CASS and accordingly, notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. During the course of assessment proceedings, it was noticed that the assessee had made cash deposits in Canara Bank accounts bearing Nos.1188261000270 and 1188201051644 for the period from 01.04.2016 to 31.12.2016 amounting to Rs.14,80,59,399/-. That in absence of proper explanation or documentary evidence, the A.O completed the assessment u/s.143(3) of the Act, dated 16.12.2019 by treating the total cash deposits as unexplained cash credit u/s.68 of the Act and added to the total income of the assessee.
In this regard, the Ld. CIT(Appeals)/NFAC had observed and held as follows: “6.2 Ground No.1 to 8 are raised against addition of cash deposits of Rs.14,80,59,399/- as unexplained cash credit u/s. 68 of the Act 6.2.1 During the assessment proceedings, the AO noticed from the Specified Financial Transactions report that the appellant had made cash deposits in his Canara bank accounts bearing Nos.1188261000270 and 1188201051644 for the period from 01.04.2016 to 31.12.2016 amounting to Rs.14.80,59,399/-. In absence of any proper explanation or documentary evidence, the AO completed the assessment u/s.143(3) of the Act on 16.12.2019 by treating the total cash deposits of Rs.14,80,59,399/- as unexplained cash credit u/s.68 of the Act and added to the total income of the appellant. The AO did not conduct any independent inquiries with the Canara Bank Branch, Jagadalpur regarding the cash deposits made by the appellant. 6.2.2 During the appellate proceedings, the appellant submitted that he had deposited cash of Rs.1,75.000/- on 10.11.2016 in his bank account bearing No.1188261000270 and Rs.1,00.000/- on 28.06.2016 in his account bearing No.1188201051644 with Canara Bank, Jagdalpur. In support of this, the appellant submitted certificates obtained from Canara bank regarding the cash deposits made during the year under consideration as additional evidence to be admitted under Rule 46A of Income Tax Rules. 1962 (the Rules).
6.2.3 The additional evidence submitted by the appellant was forwarded to the AO to file his objections to its admission under Rule 46A of the Rules. The AO vide his report dated 07.11.2024 submitted that the additional evidence shall not be admitted as the appellant's case does not fall under the exceptions enumerated in Sub Rule 46A(1) of the Rules. 6.2.4 Rule 46A of Income Tax Rules, 1962 are read as under: 46A. (1) The appellant shall not be entitled to produce before the Joint Commissioner (Appeals) or, as the case may be the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely: — (a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or (c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving (d) sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. 6.2.5 The AO's objections vide report dated 07.11.2024 against admission of additional evidence have been considered. It is seen from the assessment order that the show cause notice was issued on 11.12.2019 and the appellant was given very little time up to 16.12.2019 to file his reply. Thereafter, assessment order was passed on 16.12.2019. Therefore, the appellant was prevented by sufficient cause from producing the evidence before the AO, which is relevant to the grounds in appeal and the AO made the order appealed against without giving sufficient opportunity to the appellant to adduce such evidence. Accordingly, the additional evidence filed by the appellant had been admitted under exceptions (c) and (d) of Sub Rule 46A of the Rules. The AO was directed on 21.11.2024 to submit his report on the merits of the additional evidence by 05.12.2024. However, instead of submitting a report on merits of the additional evidence, the AO vide his report ITBA/NFAC/F/24/2024-2511070561802(1) dated 22.11.2024 merely reiterated his objections to admit the same disregarding the fact that his objections were overruled and the additional evidence was admitted. The AO was once again directed on 13.12.2024 to submit his report by 20.12.2024 with the following remarks: "However, it is seen that the AO merely uploaded notices issued u/s 142(1) as part of remand report proceedings. The AO has not examined the additional evidences submitted by the appellant. The AO is directed to verify the genuineness of the Bank Certificates submitted by the appellant and submit a remand report on the issues remanded for examination. The report shall be submitted by 20.12.2024. If the report is not submitted by the specified date, it shall be presumed that the Bank Certificates submitted by the appellant are genuine and appeal will be decided accordingly. However, the AO did not submit his report as directed above by 20.12.2024. The AO was once again directed on 06.01.2025 and 10.01.2025 to submit his report by 17.01.2025. So far, the AO has not submitted his report on merits of the additional evidence. It is a travesty of justice that the AO is unwilling to submit a report on the genuineness of the bank certificates by making necessary inquiries with the Canara Bank Brach at Jagdalpur despite several directions to submit his report. Instead of examining the additional evidence on merits the AO adopted a steadfast and pedantic approach to oppose admission of such evidence ignoring the decision of the appellate authority to admit the additional evidence after overruling the objections of the AO. 6.2.6 Be that as it may, considering the recalcitrant attitude of the AO to submit a report on additional evidence and in the interests of justice, a notice u/s.133(6) of the Act vide DIN: ITBA/NFAC/S/133(6)/2024-25/1071665512-(1) was issued on 30.12.2024 to the Canara Bank to ascertain the facts regarding the alleged cash deposits. In its response dated 15.01.2025, the Canara Bank furnished copies of account statements for the accounts bearing Nos. 1188261000270 and 1188201051644 for the period from 01.04.2016 to 31.12.2016. On verification of the bank account statements, it was found that the appellant had deposited cash of Rs.1,75,000/- on 10.11.2016 in his bank account bearing No.1188261000270 and Rs.1,00,000/- on 28.06.2016 in his account bearing No.1188201051644 with Canara bank, Jagdalpur. Hence, in the light of information requisitioned from the Canara Bank u/s.133(6) of the Act, I hold that the addition of Rs. 14,80,59,399/- u/s 68 of the Act in respect of alleged cash deposits in Canara Bank accounts bearing Nos. 1188261000270 and 1188201051644 for the period from 01.04.2016 to 31.12.2016 is not supported by any evidence. Therefore, addition of Rs.14,80,59,399/- u/s 68 of the Act is deleted and Grounds No.1 to 8 are ALLOWED. 7.0 In the result, the appeal filed against the order u/s. 143(3) of the Act for the AY 2017-18 is ALLOWED.”
6. We observe that as evident from Para 6.2.6 of the order of the first appellate authority, the Ld. CIT(Appeals)/NFAC had verified the source of cash deposits only regarding Rs.1,75,000/- on 10.11.2016 in the bank account of the assessee bearing No.1188261000270 and Rs.1,00,000/- on 28.06.2016 in his account bearing No.1188201051644 with Canara Bank, Jagdalpur and on the basis of these two amounts only, he had deleted the entire addition of Rs.14,80,59,399/- even without verifying regarding the balance amount of the cash deposits and its source which in fact are substantial amount of deposits. The Ld. CIT(Appeals)/NFAC had failed to make any enquiry nor had followed the mandate of Section 250(4) & (6) of the Act. Also, there has not been any independent application of mind or any examination of facts conducted by the Ld. CIT(Appeals)/NFAC in this case regarding the balance substantial amount as brought forward by the A.O in the assessment order.
We are of the considered view that the order of the Ld. CIT(Appeals)/NFAC is bereft of facts and is perverse as the same is without addressing the entire issue as brought out by the A.O in the assessment order. The power of the Ld. CIT(Appeals)/NFAC is co-terminus with that of the A.O and therefore, the Ld. CIT(Appeals)/NFAC should have conducted independent enquiry with regard to the verification of the entire cash deposits made by the assessee. The character of the order passed by the Ld. CIT(Appeals)/NFAC becomes cryptic, vague and ambiguous. Accordingly, in the interest of justice, we deem it fit and proper to set-aside the order of the Ld. CIT(Appeals)/NFAC and remand the matter back to its file for denovo adjudication as per law complying with the principles of natural justice with a clear direction that the Ld. CIT(Appeals)/NFAC shall pass a speaking order in terms with Section 250(4) & (6) of the Act after conducting necessary verification of facts regarding source of entire cash deposits as emanated in the assessment order. We order accordingly.
As per the above terms the grounds of appeal of the revenue are allowed for statistical purposes.
In the result, appeal of the revenue is allowed for statistical purposes. Order pronounced in the open court on 05th day of June, 2025.