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Facts
The assessee, running a proprietorship business, filed returns for AY 2016-17 and 2019-20. The AO initiated reassessment proceedings under Section 147 based on information from the INSIGHT portal regarding cash deposits and investment. The AO made additions for unexplained deposits and investment.
Held
The Tribunal noted that the assessee consistently claimed the deposits were from disclosed business turnover, supported by audited books. The AO had accepted similar explanations in intervening years. The Tribunal found that the additions were made without demonstrating that the deposits exceeded recorded business receipts.
Key Issues
Whether the additions made by the AO on account of unexplained cash deposits and investment were justified, especially when the assessee claimed they were out of disclosed business turnover and similar explanations were accepted in prior years.
Sections Cited
147, 144, 142(1), 68, 69, 251(1)(a), 139, 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, AM:
The captioned two appeals are filed by assessee, the details are as under:
17.03.2025 passed by learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 30.03.2025 passed by learned National Faceless Assessment Unit [“AO”] u/s 147 r.w.s. 144 of the Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2016-17.
Page 1 of 10 & 452 AYs:2016-17 & 2019-20 (ii) is directed against order of first appeal dated 17.03.2025 passed by same CIT(A) which in turn arises out of assessment-order dated 29.03.2024 passed by same AO u/s 147 r.w.s. 144 of the Act for AY 2019-20.
Both of these appeals relate to the same assessee. Further, the basic facts relating to both of these appeals are same as we narrate below:
(i) The assessee is an individual running a proprietorship business named and styled as “M/s Agro Service Centre”.
(ii) For AY 2016-17 & 2019-20 with which we are concerned in these appeals, the assessee filed return of income declaring a total income of Rs. 14,28,900/- & Rs. 20,30,030/- respectively, which were assessed.
(iii) Subsequently, for AY 2016-17, the AO received information of cash deposits of Rs. 6,52,08,395/- made by assessee in bank a/c. Similarly, for AY 2019-20, the AO received information of (i) cash deposits of Rs. 9,02,88,400/- made by assessee in bank a/c, (ii) investment of Rs. 50,00,000/- made by assessee in purchasing an immovable property and (iii) income of Rs. 1,08,75,850/- taxable in the hands of assessee in the form of difference between consideration paid and fair market value of property purchased by assessee. The AO received these information from INSIGHT Portal of Income-tax Department.
Accordingly, to examine and assess these transactions, the AO
Page 2 of 10 & 452 AYs:2016-17 & 2019-20 initiated proceedings of assessment u/s 147 against assessee by issuing notices u/s 148 followed by notices u/s 142(1) and show- cause notices for both years.
(iv) In AY 2016-17, the assessee filed three replies dated 15.01.2024, 22.02.2024 & 01.03.2024 and in AY 2019-20, the assessee filed one reply dated 02.03.2024, against the notices issued by AO. These proceedings are acknowledged by AO in Para 2 of respective assessment-orders.
(v) The AO considered assessee’s replies but, however, made certain adverse observations and rejected assessee’s submission. Ultimately, in AY 2016-17, the AO made additions of Rs. 6,52,08,395/- on account of unexplained deposits in bank a/c. Further, in AY 2019-20, the AO made (i) addition of Rs. 9,02,88,400/- on account of unexplained deposits in bank a/c and (ii) addition of Rs. 49,50,000/- on account of unexplained investment in immovable property.
(vi) Aggrieved, the assessee carried matters in first appeals before CIT(A).
The CIT(A) issued notices of hearing against which the assessee filed adjournment requests. In the end, the CIT(A) dismissed assessee’s appeal for non-prosecution and upheld the additions made by AO. The concluding paras of CIT(A)’s orders for both years are re-produced below:
Page 3 of 10 & 452 AYs:2016-17 & 2019-20 AY 2016-17:
7. In the instance of the case the appellant failed to make any submissions in support of grounds of appeal, this gives rise to an undisputable conclusion that the assessee has got nothing more to say in this regard. I have gone through the record before me and based on the record, it is evident that in the instant case the AO has rightly assessed income of Rs. 6,66,37,295/- in view of the facts of the case and failure of assessee to give any explanation. Even in the appeal proceedings, the appellant has failed to substantiate the grounds taken in the appeal and accordingly, addition made by the Assessing Officer of Rs. 6,52,08,395/- on account of unexplained cash credit is hereby confirmed.
7. In the instance of the case the appellant failed to make any submissions in support of grounds of appeal, this gives rise to an undisputable conclusion that the assessee has got nothing more to say in this regard. I have gone through the record before me and based on the record, it is evident that in the instant case the AO has rightly assessed income of Rs. 9,72,77,430/- in view of the facts of the case and failure of assessee to give any explanation. Even in the appeal proceedings, the appellant has failed to substantiate the grounds taken in the appeal and accordingly, addition made by the Assessing Officer of Rs. 9,02,88,400/- on account of unexplained cash credit u/s 68 of the Act and Rs. 49,50,000/- on account of unexplained investment u/s 69 of the Act is hereby confirmed.
(vii) Still aggrieved, the assessee has come in next appeals before us.
During hearing before us, Ld. AR for assessee made following submissions:
(i) That the assessee-individual has been engaged in proprietorship business named and styled as “M/s Agro Service Centre” for several years.
Page 4 of 10 & 452 AYs:2016-17 & 2019-20 (ii) That, for the relevant AYs 2016-17 & 2019-20, the assessee filed voluntary returns u/s 139 and declared correct taxable income from business, which were assessed by AO.
(iii) That, subsequently the cases of assessee were subjected to proceedings of re-assessment u/s 147 on account of information available in INSIGHT portal of department showing cash deposits in bank a/c but those deposits were related to the turnover/ transactions of proprietory business already disclosed by assessee in original returns and assessed by AO.
(iv) That the accounts of assessee were audited u/s 44AB of the Act and the bank accounts in which cash deposits were made, are duly recorded in audited books of account. The copies of audited financial statements were filed alongwith returns of income and the same were available to AO during proceedings. Further, copies of same are also filed in Paper-Books.
(v) That during assessment-proceedings, the assessee filed replies to the AO, copies of assessee’s replies are available at Pages 18-35 in Paper- Book of AY 2016-17 and at Pages 18-23 in Paper-Book of AY 2019-20.
However, the AO rejected assessee’s submission and made additions treating the entire amounts of bank deposits as unexplained. That, treating and assessing the entire amounts of bank deposits as Page 5 of 10 & 452 AYs:2016-17 & 2019-20 unexplained income of assessee is baseless, incorrect, unfair and high-pitched.
(vi) That, for the intervening AYs 2017-18 & 2018-19, the facts of assessee were exactly same and the AO conducted proceedings of re- assessments u/s 147 for the very same reason to examine the deposits in bank a/c. Ultimately, the AO accepted the bank deposits as coming from disclosed turnover/transactions of assessee’ proprietorship business and did not make any addition while finalising assessments of those years. The copies of assessment-orders dated 31.03.2025 & 16.03.2023 for those AYs 2017-18 & 2018-19 respectively, passed by AO are available at Pages 1-17 of Paper-Books.
Therefore, it is apparent from assessee’s own assessments made for intervening AYs 2017-18 & 2018-19 that the bank deposits cannot be treated as unexplained.
With above submissions, Ld. AR submitted that the present matters of AYs 2016-17 & 2019-20 deserve to be restored at the level of AO for a fresh consideration.
Per contra, Ld. DR for revenue at first carried us to Para 3.5 / 3.5.1 of assessment-order of AY 2016-17 to demonstrate that the AO has considered assessee’s submission and noted adverse findings. He submitted that same is the case of AY 2019-20. Thereafter, he carried us to the order of first- appeal passed by CIT(A) to demonstrate that the CIT(A) has rightly passed
Page 6 of 10 & 452 AYs:2016-17 & 2019-20 ex-parte orders when the assessee only sought adjournments and failed to substantiate the grounds taken before him. In such circumstances, Ld. DR contended, there is no infirmity in the orders passed by both of the lower authorities, those orders must be upheld. Alternatively, he submitted that if the bench takes a view to remand these matters to lower authorities, they must be remanded to the file of CIT(A) with appropriate cost upon assessee.
In rejoinder, Ld. AR made a strong request for remand to AO, citing these reasons:
(i) The assessments-orders are ex-parte u/s 144. The CIT(A) has already concluded that the assessee failed to give any explanation to AO although this finding by CIT(A) is not very correct in as much as the assessee filed replies to AO. Therefore, if these matters are remanded to CIT(A), there is every likelihood that the CIT(A) would in turn remand these matters to AO in terms of proviso to section 251(1)(a).
Ultimately, the matters would go to AO fresh adjudication. This will only multiply the proceedings and wastage of time with no fruitful result to revenue.
(ii) If the Tribunal remands these matters to AO, the AO would be able to examining cases fully and the assessee would be able to file all documents for the satisfaction of AO like books of account, VAT/GST returns, etc. This will enable proper assessments.
Page 7 of 10 & 452 AYs:2016-17 & 2019-20 (iii) The AO has already completed assessments of intervening AYs 2017- 18 & 2018-19 after seeing documents of assessee and for those years there were no appeals before CIT(A). Therefore, the examination of present matters by AO would be more apt.
Replying to re-joinder of Ld. AR, the Ld. DR submitted that the assessee had been non-compliant before CIT(A). He submitted that the CIT(A) can also make a vehement adjudication of assessee’s cases and it is a wrong perception of assessee that the CIT(A) would not make vehement adjudication. Therefore, these matters must be remanded to CIT(A).
We have heard rival submissions of both sides and perused the orders of lower authorities as well as the material placed in Paper-Books. We find that the re-assessments of both AYs 2016-17 & 2019-20 have been framed by the AO primarily on the basis of information of cash deposits in bank a/c and investment available on INSIGHT portal. The assessee’s consistent plea before us is that such bank deposits represent business turnover duly recorded in audited books of account and already offered to tax in original returns. It is also noticed that in the intervening AYs 2017-18 & 2018-19, on identical facts and for the very same reason of bank deposits, the AO himself accepted assessee’s explanation in re-assessment proceedings u/s 147 and did not make any addition. Copies of such assessment-orders are placed on record. We further note that although the assessee filed certain replies before the AO, the additions have been made by treating the entire
Page 8 of 10 & 452 AYs:2016-17 & 2019-20 deposits as unexplained without demonstrating that such deposits were over and above the recorded business receipts. Thus, considering the entirety of facts, particularly (i) the assessee’s claim that deposits are out of disclosed business turnover supported by audited books, and (ii) the acceptance of identical explanation by the AO himself in intervening years, we are of the considered view that these matters must go the file of AO for an apt verification and adjudication. Accordingly, we set aside the impugned appellate orders passed by the CIT(A) for both assessment-years and remand these matters to the file of AO for de novo adjudication, at the risk and responsibility of assessee. The AO shall examine the assessee’s submissions and make assessments de novo in accordance with law after providing reasonable opportunity of being heard to the assessee. The assessee is also directed to extend full cooperation and furnish requisite details promptly.
During hearing, Ld. AR also agreed that to offset the revenue’s efforts in dealing assessee’s cases, the bench may impose suitable cost which shall be paid by assessee. After a careful and judicious consideration, we impose a cost of Rs. 10,000/- in each case upon assessee. The assessee shall pay such cost to “Income-tax Department” through appropriate challan and shall not claim any credit or refund of such payment.
Further, the assessee shall submit proof of payment to the AO during proceeding of fresh assessment.
Page 9 of 10 & 452 AYs:2016-17 & 2019-20 10. Resultantly, these appeals are allowed for statistical purposes, subject to payment of cost by assessee as mentioned above.
Order pronounced in open court on 27/02/2026