Facts of the Case

The assessee’s case was selected for scrutiny due to large cash deposits during the demonetization period. She deposited ₹15,03,000 in her bank account, claiming that ₹13,83,000 was received from sale of old gold jewellery prior to demonetization and ₹1,20,000 represented past savings and current income.

During assessment, the Assessing Officer questioned the genuineness of the jewellery sale, noting inconsistencies between the date of sale and receipt of cash, absence of detailed descriptions in invoices, lack of evidence of payment, and unusual timing of deposits. Similar transactions were also reported in the case of her husband with the same purchaser.

The Assessing Officer concluded that the story of jewellery sale was fabricated and treated the deposits as unexplained money under section 69A, taxable under section 115BBE. The CIT(A), NFAC confirmed the addition.

Issues Involved

  1. Whether cash deposits during demonetization can be treated as unexplained when claimed to arise from sale of jewellery.
  2. Whether discrepancies in timing of receipt and deposit justify rejection of explanation.
  3. Whether an appellate authority can confirm additions without granting proper opportunity of hearing.

Petitioner’s Arguments

The assessee contended that the deposits were from disclosed sources, primarily sale proceeds of old jewellery, and that the transaction had been confirmed by the purchaser. She argued that once the source of funds was explained, addition under section 69A was unjustified.

It was further submitted that the CIT(A) passed the appellate order ex parte without issuing proper notice or providing an opportunity to present evidence and arguments.

 Respondent’s Arguments

The Revenue supported the findings of the Assessing Officer, emphasizing inconsistencies in the explanation, absence of proof regarding receipt of sale proceeds, lack of details typically found in jewellery transactions, and unusual conduct of retaining cash until demonetization.Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the appellate order did not indicate issuance of hearing notices or consideration of submissions from the assessee. No dates of hearing or representation were recorded, suggesting that the appeal had been decided ex parte.

Holding that the assessee had not been given adequate opportunity to present her case, the Tribunal found the order to be contrary to principles of natural justice. Accordingly, the matter was restored to the file of the CIT(A) with directions to provide proper opportunity to the assessee and decide the appeal on merits after considering evidence and arguments.

Important Clarification

The Tribunal did not adjudicate the merits of the addition but emphasized that appellate proceedings must ensure fair hearing before confirming substantial tax liability. Orders passed without opportunity of representation are liable to be set aside irrespective of the strength of the underlying case.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771066070_PREETIGUPTAALLAHABADVS.ITO32MIRZAPUR.pdf

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