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Facts
The assessee, who did not file an ITR for AY 2018-19, had their case reopened due to significant cash deposits totaling over Rs. 3.5 crore across multiple bank accounts. Following an ITR filing in response to a notice under Section 148, the Assessing Officer added Rs. 3,55,43,400/- to the assessee's income for unexplained cash sources, which the CIT(A) largely upheld despite a partial allowance on other grounds. The assessee subsequently appealed to the Tribunal.
Held
The Tribunal observed that the assessee failed to provide cogent evidence for the cash deposits to the lower authorities, but also noted the potential applicability of Section 10(26) if substantiated. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the case back to the Assessing Officer. The AO is directed to reframe the assessment after providing the assessee a fresh opportunity to present evidence for their claims, including any potential exemption.
Key Issues
Whether the addition made for unexplained cash deposits was justified given the lack of evidence, and if the assessee is entitled to claim exemption under Section 10(26) of the Income Tax Act, 1961.
Sections Cited
Section 250, Section 148, Section 10(26), Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, : GAUHATI BENCH : GUWAHATI
Before: SHRI MANOMOHAN DAS, HON’BLE & SHRI SANJAY AWASTHI, HON’BLE
ORDER
PER MANOMOHAN DAS, JM
The assessee filed this appeal against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as the (“CIT(A)” dated 27.03.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) and pertains to the Assessment Year 2018-19.
Page 1 of 5 Gwasinlo Kath Rengma -vs- The ITO, Ward-1, Dimapur AY: 2018-19 2. The brief facts of the case are that, the assessee is an individual and did not file his return of income for AY 2018-19. Assessee’s case was reopened for the reason that specific information was received that the assessee made cash deposits (including through bearer cheque) amounting to Rs. 90,36,000/- in his current account (A/c Nos. 686073000000037 / 686073000000073) maintained with the South Indian Bank Ltd. Made cash deposits (including through bearer cheque) amounting to Rs. 1,32,00,000/- in his current accounts Nos. 810101010016268 / 810100301000217) maintained with Vijaya Bank. Made cash deposits (including through bearer cheque) amounting to Rs. 47,57,400/- in his current account (A/c No. 19670200000593) maintained with the Federal Bank Ltd. Made cash deposits (including through bearer cheque) amounting to Rs. 85,50,000/- in his current account (A/c No.201000748299) maintained with Indus Ind Bank Ltd.
Further, the assessee made cash withdrawals (including through bearer cheque) amounting to Rs. 35,00,000/- from his current accounts maintained with Vijaya Bank, Rs. 8,00,000/- from his current account maintained with South Indian Bank Ltd. Rs. 42,00,000/- from his current account maintained with IndusInd Bank Ltd. and Rs. 53,00,000/- from his current account maintained with Federal Bank Ltd.
The assessee filed ITR in response to notice u/s 148admitting a total income of Rs. 1,49,345/-. The ld. Assessing Officer examined the case of the assessee and did not satisfy on the claims of the assessee regarding the deposits of cash in his bank accounts. Accordingly, the ld. AO has made addition of Rs. 3,55,43,400/- to the total income of the assessee. Being aggrieved, the assessee filed 1st appeal before the ld.
CIT(A). The ld. CIT(A) vide order dated 27.03.2025 partly allowed the appeal of the assessee.
Page 2 of 5 Gwasinlo Kath Rengma -vs- The ITO, Ward-1, Dimapur AY: 2018-19 6. Being aggrieved, the assessee filed the present appeal before the Tribunal.
The ld. CIT(A) upheld the addition of cash deposits made by the assessee by citing the reasons that, the assessee has not satisfactorily explained nor substantiated the sources of cash deposits, being from cash balance. The ld. CIT(A) observed that, the assessee has not furnished any details to prove the cash deposits are from genuine sources and the assessee has not made any submissions before the AO to prove the genuineness of cash deposits made in the bank account other than filing cash flow statement.
The ld. CIT(A) vide para No. 8.6 of his order observed as under— “ In view of the above discussion, and bearing in mind the entirety of the case accompanied by fact that appellant has not furnished any satisfactory explanation supported by cogent material evidence either during the course of assessment proceedings or appellate proceedings. Further, the appellant has not proved the nature and source of the cash deposits during the appellate proceedings with clinching evidence. Under the circumstances, it is opined that the order of the Assessing Officer does not suffer from any infirmity to warrant interference. Therefore, the addition made therein is sustained. In view of the above discussion, this appellate authority is of the opinion that these ground of appeal
does not have any leg to stand upon and hence, the Grund Nos. 2 and 4 of the appeal raised by the appellant is dismissed”.
8. Regarding the claim of the assessee under section 10(26) of the Act, the ld. CIT(A) observed that, the ld. AO has not disallowed any claim of the assessee under this section.
9. We observe that, the ld. CIT(A) as well as the ld. AO did not accept the claims of the assessee on account of failure in furnishing cogent evidence on the cash deposits made by the assessee in his bank Page 3 of 5 Gwasinlo Kath Rengma -vs- The ITO, Ward-1, Dimapur AY: 2018-19 accounts. This is a recorded finding of the lower authorities. Secondly, the assessee is bound to disclose the truth with cogent evidence regarding the transactions of cash credit. Further, the assessee can claim exemption from tax under section 10(26) of the Act which is undisputable. The exemption provision under section 10(26) does not mean that, the assessee will automatically get exemption from tax. The assessee has to satisfy the Taxing Authority by submitting proper evidence on the issue of cash deposits made him.
10. We further observe that, if the assessee can satisfy the Taxing Authority on his claim, certainly, the claim of the assessee may be covered under section 10(26). He, the assessee may not be liable to pay tax by virtue of section 10(26). Accordingly, it is our considered opinion that, another opportunity ought to be given to the assessee for substantiating his claims before the ld. AO. Therefore, we set aside the order of the ld. CIT(A) dated 27.03.2025 and remand the case to ld. AO for reconsideration. We direct the ld. AO to reframe the assessment after giving the assessee an opportunity of being heard. At the same time, we direct the assessee to substantiate his claims before the ld. AO. Thus, we allow the appeal of the assessee for statistical purposes only.
In the result, the appeal of the assessee is allowed for statistical purposes only.