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2025 Supreme(Online)(ITAT) 25556
INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)
Waseem Ahmed, Accountant Member, Soundararajan K., Judicial Member
John D’ Silva – Appellant
Versus
Income Tax Officer – Respondent
ITA No. 615/Bang/2025
For the Appellants/Petitioners: Ravishankar S V
For the Respondents: Balusamy N.
Additions under Section 68 for cash deposits are unsustainable where an assessee proves the genuineness of business receipts through verified debtor details and turnover reconciliation, and the revenue fails to substantiate the rejection of such evidence with a proper investigation rather than mere surmise.
Headnote:(A) Income Tax Act, 1961 - Sections 68, 115BBE, 142(1), 143(2) and 144 - Unexplained cash credit - Demonetisation period - Addition of cash deposits - Assessee demonstrated source for cash receipts by providing debtor details, ledger accounts, and turnover reconciliation between tax filings and audited figures - Revenue failed to prove that cash sales were non-genuine beyond mere surmise - Assessment order passed under Section 144 without proper investigation and disregarding provided evidence is unsustainable.
(B) Appeal - Condonation of delay - Delay in filing appeal can be condoned even if reasons provided are not exhaustive, provided that deciding the matter on merits causes no prejudice to the department and opportunity is granted at the cost of the assessee - Default in payment of cost results in denial of the condonation.
(C) Appellate Procedure - Remand report - Principles of natural justice demand that a copy of the remand report must be provided to the aggrieved party to allow for a rebuttal before the appellate authority reaches a decision.
(D) Evidence - Admission of additional documents by appellate authority - Once evidence (debtor details, bank statements, turnover reconciliation) is before the court, failing to properly evaluate these submissions to justify an addition leads to an erroneous finding.
Facts of the case:
An individual assessee engaged in business deposited cash into bank accounts during the demonetisation period. The assessing authority treated these as unexplained cash credits under Section 68 and taxed them under Section 115BBE following a best judgment assessment under Section 144. The assessee's return was treated as non-est for late filing. Although the assessee provided debtor details and evidence of business turnover, the authorities below confirmed the addition, relying on an adverse remand report which was not shared with the assessee during the proceedings.
Findings of Court:
The documents and explanations provided by the assessee sufficiently established that the cash deposits arose from regular business operations. The department failed to perform necessary verification of the provided information, relying solely on guesswork. The discrepancy between the show cause notice and the final assessment order further highlighted procedural irregularity.
Issues: Whether the additions under Section 68 for cash deposits during demonetisation were justified and whether the appellate authority followed principles of natural justice in relying on an undisclosed remand report.
Ratio Decidendi: Additions made under Section 68 cannot be sustained where the assessee has provided sufficient documentation of the identity, creditworthiness, and genuineness of transactions, and where the revenue has failed to conduct a proper investigation, relying instead on surmises. Compliance with principles of natural justice, such as providing a remand report to the assessee, is mandatory for a fair adjudication.
Result: Appeal allowed.
ORDER
PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 20/11/2023 in respect of the A.Y. 2017-18 and raised the following grounds:
“1. The order of the learned Commissioner of Income tax (Appeals) passed under Section 250 of the Income Tax Act 1961 (hereinafter referred to as ‘Act’) in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant’s case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in law in confirming the additions made under Section 68 of the Act a sum of Rs. 76,86,822/ - and being taxed under Section 115BBE of the Act by the learned Assessing Officer in the assessment order passed under Section 144 of the Act on the facts and circumstances of the case.
3. The authorities below failed to appreciate that the appellant explained the source of cash deposit and consequently the addition made under section 68 of the Act a sum of Rs. 76,86,822/- is not in accordance with law on the facts and circumstances of the case.
4. The learned Assessing Officer is not justified in law in passing the assessment order under Section 144 of the Act being without jurisdiction on the facts and circumstances of the case.
5. The learned Assessing Officer is not justified in law in holding that the return of income filed by the Appellant on 31.08.2019 being filed after due date prescribed in the notice issued under Section 142(1) of the Act on the facts and circumstances of the case.
6. The Assessment Order passed by the learned Assessing Officer is in violation of principles of natural justice and consequently, the assessment order is liable to be set aside on the facts and circumstances of the case.
7. The learned Assessing Officer failed to appreciate that the provisions of Section 68 of the Act is not applicable on the facts and circumstances of the case.
8. Without prejudice the learned Assessing Officer erred in law in making addition under Section 68 of the Act a sum of Rs. 76,86,822 /- as against a sum of Rs. 44,78,500/- proposed in the show cause notice as unexplained cash credit under Section 68 and taxed under Section 115BBE of the Act and consequently the addition made is in violation of principles of natural justice on the facts and circumstances of the case.
9. The order passed by the learned Commissioner of Income Tax (Appeals) is in violation of principles of natural justice in as much as the copy of the remand report has not been provided to the Appellant for filing his reply on the facts and circumstances of the case.
10. The learned Commissioner of Income Tax (Appeals) fails to appreciate that the written submissions filed and the documents enclosed along with the written submissions during the course of appellate proceedings on the facts and circumstances of the case.
11. The authorities below failed to appreciate that the Appellant explained the source for cash deposit and consequently the addition made under Section 68 taxed under Section 115BBE of the Act is required to be deleted on the facts and circumstances of the case.
12. The learned Commissioner of Income Tax (Appeals) erred in holding that the Appellant failed to prove the identity, creditworthiness of the debtors and genuineness of the transactions, and failed to discharge his onus under Section 68 of the Act on the facts and circumstances of the case.
13. The learned Commissioner of Income Tax (Appeals) erred in holding that the learned Assessing Officer passed the order duly following the provisions of the Act and after providing sufficient opportunity to the Appellant and it was failure on part of the Appellant to avail those opportunities by complying with the notices issued by the learned Assessing Officer on the facts and circumstances of the case.
14. The learned Commissioner of Income Tax (Appeals) failed to adjudicate on the following grounds of appeals:
2A. The order of assessment passed u/s
