Facts of the Case

The assessee deposited ₹12,46,000 during the demonetization period in his Canara Bank account. Despite issuance of multiple notices, he did not respond during assessment proceedings. Consequently, the Assessing Officer added ₹16,41,000 (cash deposits during the year) as unexplained money under section 69A and ₹54,91,837 (cheque/RTGS credits) under section 68, assessing total income at ₹71,32,837.

On appeal, the CIT(A), NFAC granted several opportunities including video conference notices, but due to repeated adjournments and absence of submissions, the appeal was decided ex parte and the additions were confirmed.

Issues Involved

  1. Whether additions for cash deposits during demonetization are sustainable when compliance details were filed on the designated portal.
  2. Whether bank credits can be taxed without verifying their nature, including business receipts and inter-bank transfers.
  3. Whether appellate authorities must consider written submissions even if the assessee does not attend hearings.
  4. Whether ex-parte disposal without examining available material violates principles of natural justice.

Petitioner’s Arguments

The assessee submitted that he was an elderly person engaged in running community centers and had filed details of cash receipts through the “Cash Transaction-2016” compliance facility, including names and addresses of persons from whom cash was received.

It was argued that deposits represented business receipts consistent with turnover of about ₹34.83 lakh during the year. He further contended that a significant portion of bank credits comprised contra entries, inter-bank transfers, or loan funds, not taxable income.

Respondent’s Arguments

The Revenue emphasized persistent non-compliance before both the Assessing Officer and the CIT(A), arguing that failure to explain the sources justified additions under sections 68 and 69A. It also submitted that if another opportunity were granted, strict directions for full compliance should be imposed.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the assessee had submitted details of demonetization deposits on the official compliance portal, including particulars of persons from whom cash was received. These facts did not appear to have been examined by the Assessing Officer.

On Nature of Bank Credits

It was noted that the Assessing Officer had made additions without conducting enquiries with the bank to ascertain the nature of credits, such as business receipts, loans, or inter-account transfers. If the assessee’s claims were correct, many entries might not represent taxable income.

On Appellate Proceedings

The Tribunal held that even if the assessee failed to attend video conferencing, the CIT(A) was obligated to consider written submissions and documentary evidence already on record. Failure to do so resulted in denial of effective hearing.

Direction for Fresh Assessment

Considering the need for proper factual determination, the Tribunal restored the matter to the Assessing Officer with directions to:

  • Examine submissions made on the compliance portal
  • Verify the nature of bank credits through appropriate enquiries
  • Consider documents filed before the CIT(A) and the Tribunal
  • Pass a fresh order in accordance with law

Important Clarification

The Tribunal clarified that additions for unexplained money or credits cannot be sustained solely due to non-compliance when relevant information is already available on departmental systems. Authorities must examine such material before determining tax liability.

Link to download the order –

https://www.mytaxexpert.co.in/uploads/1771066329_SACHIDANANDRAILUCKNOWVS.ITO14BHADOHI.pdf

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