Facts of the Case

The assessee filed her return of income declaring total income of ₹3,54,250. The case was selected for scrutiny on the issue of “cash deposits during the year.”

The assessee was a commission agent for Dainik Jagran newspapers and magazines. During assessment proceedings, she explained that cash deposited in certain bank accounts represented sale proceeds of her business, which the Assessing Officer accepted after examination of cash books and vouchers.

However, deposits of ₹1,54,500 in a savings account with Bandhan Bank and ₹60,000 in a PPF account were not explained to the satisfaction of the Assessing Officer. These amounts totaling ₹2,14,500 were treated as unexplained money under Section 69A and taxed under Section 115BBE.

Issues Involved

  1. Whether deposits claimed as past personal savings could be treated as unexplained money under Section 69A.
  2. Whether the Assessing Officer was justified in taxing such deposits under Section 115BBE.
  3. Whether dismissal of the appeal by the faceless appellate authority without proper consideration of explanation was valid.
  4. Whether the assessee should be granted an opportunity to substantiate the claim of past savings through a cash-flow statement.

 Petitioner’s Arguments (Assessee)

  • The deposits represented accumulated personal savings kept for emergencies and deposited during demonetization.
  • The amount had no connection with her commission business.
  • She regularly filed income tax returns in earlier years and had sufficient withdrawals to generate savings.
  • A cash-flow statement based on prior returns demonstrated availability of funds.
  • The faceless appellate proceedings created difficulty in understanding the exact documentary requirements.
  • She had not been specifically asked during assessment to explain these particular deposits.

 Respondent’s Arguments (Revenue)

  • The assessee failed to provide a satisfactory explanation regarding the nature and source of the deposits.
  • The burden to explain cash deposits lies on the assessee.
  • Lack of response during assessment and appellate proceedings justified confirmation of the addition.

 Court Order / Findings (ITAT Allahabad)

  • The assessee had submitted an explanation in the statement of facts that the deposits represented past savings.
  • A cash-flow statement demonstrating withdrawals and personal expenses was produced before the Tribunal but was not available before the appellate authority.
  • The notice issued by the faceless appellate authority was generic and may have caused confusion regarding required documentation.
  • Since relevant evidence was not examined earlier, the matter required reconsideration.

In the interest of justice, the Tribunal restored the case to the file of the JCIT(A) with directions to examine the cash-flow statement and any supporting evidence produced by the assessee and decide the appeal afresh on merits.

 Important Clarification

  • Additions under Section 69A require proper evaluation of evidence explaining the source of funds.
  • Deposits claimed as past savings must be tested through objective verification such as cash-flow analysis and prior income history.
  • Faceless appellate proceedings must still ensure meaningful opportunity to present evidence.
  • Restoration does not validate the assessee’s claim but ensures fair adjudication.

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1771221674_MANJUSHREEDUBEYALLAHABADVS.ITO13ALLAHABAD.pdf

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