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Facts
The assessee made cash deposits of Rs. 2,14,00,000/- which the Assessing Officer added to his income under Section 69 of the Income Tax Act, 1961, as unexplained money. The CIT(Appeals) upheld the addition but re-characterized it under Section 69A of the Act, without providing the assessee an opportunity to be heard on the change in section.
Held
The tribunal held that the CIT(Appeals) erred by changing the section for addition from 69 to 69A without affording the assessee an opportunity of hearing. It set aside the CIT(Appeals) order and remanded the matter for de novo adjudication, ensuring the assessee is given adequate opportunity to make submissions on the applicability of Section 69A.
Key Issues
The key legal issue was whether the CIT(Appeals) could change the section under which an addition was made (from Section 69 to Section 69A) without providing the assessee an opportunity to be heard, thereby violating principles of natural justice.
Sections Cited
Section 69, Section 69A, Section 115BBE, Section 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI AVDHESH KUMAR MISHRA
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 25.06.2025 for the assessment year 2016-17 as per the grounds of appeal on record.
2. In this case, addition has been made by the A.O u/s. 69 of the Income Tax Act, 1961 (for short ‘the Act’) as evident from the findings in the assessment order. The relevant observations of the A.O are extracted as follows: “5. Thus, considering the above facts, it is established that the contention of the assessee regarding source of cash deposits is not correct and acceptable. The assessee could not explain the source of cash deposits and also the plea taken by the assessee was found not correct on verification. These cash deposits are unexplained money of the assesse which has been deposited in the bank account and the assessee is enjoying the benefit of such money by earing the interest income on it. Hence, the total cash deposited of Rs.2,14,00,000/- is added back in the total income of the assessee as per provisions of Section 69 of the Income Tax Act, 1961 read with section 115BBE of the Act. Penalty u/s. 271(1)(c) of the Act is initiated for concealment of particulars of income.
The assessee out of bank interest income of Rs.17,27,225/- has reduced an amount of Rs.3,10,199/- as expenditure which his not allowed and added to the income of the assessee. Penalty u/s. 271(1)(c) of the Act is initiated for furnishing of inaccurate particulars of income.
7. In view of the above discussion and material available on record total income of the assessee is determined as under: Particulars Amount ( in Rs.)
Total income as per return 14,17,030/- Add: As discussed above 2,14,00,000/- (Unexplained investment u/s. 69 of the Act) Add: As discussed in Para 6 3,10,199/- above Assessed Total Income 2,31,27,229/- Assessed Total Income [r/o] 2,31,27,230/-
Similarly, the Ld. CIT(Appeals)/NFAC while upholding the addition made by the A.O had suddenly changed the provisions for addition and had invoked Section 69A of the Act while retaining the addition. The relevant paras of the Ld. CIT(Appeals)/NFAC are extracted as follows:
“4. In view of the above detailed discussion, it is amply clear that the appellant has failed to discharge the burden of proof required under law to explain the nature and source of the substantial cash deposits amounting to Rs.2,14,00,000/- made during April 2015. The explanation offered pertaining to the sale of land in F.Y. 2004-05 is unsupported by any registered sale deed, contemporaneous financial disclosures, or even consistent conduct. The alleged cash transaction is based solely on an unregistered agreement which neither names the appellant as a party nor indicates any proof of consideration having been received by him. Further, the claim that the appellant preserved such a large amount of cash for over a decade, without deploying it in any productive asset or banking channel, is inherently improbable, especially in the case of a retired bank employee who is well-versed with financial practices. This contention does not satisfy the test of human probability as laid down by the Hon'ble Supreme Court in CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) and reaffirmed in Sumati Dayal v. CIT (1995) 214 ITR 801 (SC). These judgments make it clear that tax authorities are 4 Toman Singh Sahu Vs. ITO, Ward-2(1), Raipur (C.G.) not bound to accept self-serving or bald assertions and must look into surrounding circumstances and human conduct to arrive at a logical conclusion. As for the remaining sum of Rs.1.32 crore, the appellant's explanation that four relatives contributed Rs.25 lakh each has been found to be untenable. Two of the individuals examined under oath have categorically denied having made any such cash transfers, and no effort was made to produce the other two despite opportunities being granted. Their financial backgrounds reveal that they were not income tax assessees and lacked the creditworthiness or financial capacity to contribute such large amounts. No bank withdrawals, confirmation letters, or independent documentation has been submitted to substantiate this version. While the AO has technically invoked Section 69 of the Act instead of Section 69A, The substance and character of the addition remain unchanged. The section under which the addition is confirmed is a matter of legal characterization, and it is well-settled that the CIT(A) has co-terminous powers with the AO, as held by the Hon'ble Supreme Court in CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) and further upheld in Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC). These landmark decisions affirm that the CIT(A) can re-characterize the addition under the correct provision if the factual matrix so requires. These landmark decisions affirm that the CIT(A) can re-characterize the addition under the correct provision if the factual matrix so requires. Accordingly, while the AO made the addition of Rs.2,14,00,000/- u/s 69 of the Act, I find that the facts and circumstances more appropriately attract the application of Section 69A of the Act. The change in section does not alter the nature of the income, which remains unexplained cash deposits. Therefore, in exercise of powers vested in me under the Act, the said addition of Rs.2,14,00,000/- is confirmed u/s 69A of the Act. Similarly, addition of Rs.3,10,199/- made by the AO on account of interest income is also confirmed as the appellant did not press this addition during appellate proceeding. Thus, Ground nos. 1 to 4 raised by the appellant is hereby dismissed.”
At the time of hearing, the Ld. Counsel for the assessee vehemently contended that the Ld. CIT(Appeals)/NFAC before changing the provisions from Section 69 to Section 69A of the Act should have provided opportunity of hearing to the assessee which was never provided by the said authority. The entire assessment proceedings have been culminated into the addition u/s.69 of the Act, whereas, the Ld. CIT(Appeals)/NFAC had changed the provision being attracted as Section 69A of the Act without complying with principles of natural justice. Therefore, rights and liabilities of the assessee are prejudiced by the fact that though in the impugned order, the addition had been retained under the different provision but whether the said provision would be attracted in the case of the assessee or not, the assessee is never being provided with any opportunity for making submission on the changed provision before the First Appellate Authority. Accordingly, the Ld. Counsel for the assessee submitted that the matter may be remanded to the file of the Ld. CIT(Appeals)/NFAC for denovo adjudication complying with principles of natural justice.
The Ld. Sr. DR fairly conceded to the submissions raised by the Ld. Counsel for the assessee.
6. Having heard the submissions of the parties herein, we are in agreement with the prayer made before us by the Ld. Counsel for the 6 Toman Singh Sahu Vs. ITO, Ward-2(1), Raipur (C.G.) assessee. Accordingly, we set-aside the order of the Ld. CIT(Appeals)/NFAC and remand the matter back to its file for denovo adjudication as per law providing adequate opportunity to the assessee for making submission whether the addition can be made u/s. 69A of the Act or not. That suppose if the assessee is able to prove the nature and source of the cash deposits, then no addition can be made u/s. 69A of the Act. Similarly, if the assessee is not able to provide evidence and explanation with regard to the nature and source of the cash deposits, in such scenario, addition should be made as per law. Needless to say, the Ld. CIT(Appeals)/NFAC shall provide reasonable opportunity of being heard to the assessee.
As per the above terms grounds of appeal raised by the assessee are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 6th March, 2026.