HIMABINDU,BANGALORE V. ITO., WARD-1, CHITTOOR

ITA 799/HYD/2025

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Ms. Himabindu, engaged in the business of distributing mobile recharge coupons, filed her income tax return for the Assessment Year 2017-18, declaring an income of Rs.9,84,970. The case was selected for scrutiny, and during the assessment, the Ld. AO noted unexplained cash deposits of Rs.36,96,420 during the demonetisation period and added this as unexplained money under section 69A of the Act. Additionally, a commission income of Rs.25,14,149 received from Aircel Ltd. was added as undisclosed income due to lack of reconciliation, although the assessee had declared this income. The Ld. AO also disallowed 25% of the claimed expenditure against commission receipts due to lack of supporting evidence. The Ld. CIT(A) upheld the additions except for the commission income, which was already disclosed. The assessee appealed to the Tribunal, which admitted additional evidence and remanded the matter back to the Ld. AO for fresh consideration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775995 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2017-2018
• Appeal Filed On: 08-05-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHIN KUMAR
• Assessee Lawyers: S.RAMA RAO
• Keywords: Set aside; Additional evidence; Business expenditure; Corroborative evidences; Depreciation
• Section: 144; 69

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad श्री विजय पाल राि, उपाध् यक्ष एिं श्री मिुसूदन सािडिया, लेखा सदस् य क े समक्ष । BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.799/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2017-18) Ms. Himabindu, Bengaluru, Karnataka. PAN:AMPPH2760P Vs. Income Tax Officer, Ward-1, Chittoor. (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri S. Rama Rao, Advocate रधजस् व द्वधरध/Revenue by: Dr. Sachin Kumar, SR-DR सुिवधई की तधरीख/Date of hearing: 09/09/2025 घोर्णध की तधरीख/Pronouncement: 12/09/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by Ms. Himabindu (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 18.03.2025 for the A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal : Printed from counselvise.com ITA No.799/Hyd/2025 2 3. The brief facts of the case are that, the assessee is an individual engaged in the business of distribution of mobile recharge coupons of Aircel Ltd. The assessee filed his return of income for AY 2017–18 on 05.08.2017 admitting total income of Rs.9,84,970/-. The case was selected for scrutiny and notice under section 143(2) of the Income Printed from counselvise.com ITA No.799/Hyd/2025 3 Tax Act, 1961 (“the Act”) was issued on 09.08.2018. During the assessment proceedings, the assessee did not comply with notices except on one occasion, wherein he explained that he was carrying on the business of Aircel distribution, where shopkeepers pay in cash and the same is deposited into the bank for onward transfer to Aircel Ltd. During the assesment proceedings, the Learned Assessing Officer (“Ld. AO”) noted that the assessee made cash deposits of Rs.36,96,420/- during the demonetisation period (09.11.2016 to 31.12.2016) without furnishing any explanation, including cash book, cash balance as on 08.11.2016, or source details. Accordingly, he treated the same as unexplained money under section 69A of the Act. He also noted that, the Aircel Ltd. had paid Rs.25,14,149/- to the assessee as commission. Since no reconciliation of commission received was provided by the assessee, he added the same as undisclosed income, despite assessee having already declared commission income. The Ld. AO also found that, the assessee claimed expenditure of Rs.27,11,455/- against commission receipts. In the absence of supporting evidence, the Ld. AO disallowed 25% Printed from counselvise.com ITA No.799/Hyd/2025 4 thereof (Rs.6,77,863/-). Accordingly, the Ld. AO completed the assessment under section 144 of the Act on 28.12.2019, determining total income at Rs.78,73,402/-. 4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition of Rs.25,14,149/- holding that commission income was already disclosed. However, he confirmed additions of Rs.36,96,420/- under section 69A of the Act and Rs.6,77,863/- on account of disallowance of expenses. The observations of the Ld. CIT(A) is placed at para no.6 of his order which is to the following effect : Printed from counselvise.com ITA No.799/Hyd/2025 5 5. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. The Learned Authorised Representative (“Ld. AR”) submitted that only two issues survive in the appeal of the assessee i.e. (a) addition under section 69A of the Act (Rs.36,96,420/-) and (b) Disallowance of expenditure (Rs.6,77,863/-). As far as addition of Rs.36,96,420/- under section 69 of the Act is concerned, the Ld. AR filed additional evidence in the form of cash book from 01.11.2016 to 31.01.2017 (page nos. 28 to 41 of the paper book). He pointed out that the Ld. AO wrongly assumed that cash of Printed from counselvise.com ITA No.799/Hyd/2025 6 Rs.36,96,420/- was deposited in HDFC Bank during demonetisation, whereas in fact, the assessee has no bank account with HDFC Bank. The assessee maintained only one bank account with Union Bank of India (UBI), wherein actual cash deposits during demonetisation were only Rs.10,77,608/-. He further relied on para no.2 (v) (u) of Notification dated 24.11.2016 of Ministry of Finance, Department of Economic Affairs, which permitted specified businesses to accept demonetised currency. He submitted that, the assessee was an eligible person to accept specified bank notes during the demonetisation period. It was contended that the assessee, being a distributor, collected cash from retailers and deposited the same into UBI bank account, which was subsequently transferred to Aircel Ltd. It was pointed out that the assessee handled cash receipts of about Rs.2.52 crores during the year. Therefore, the cash deposit of Rs.10,77,608/- during demonetisation was in the ordinary course of business and fully explainable. Accordingly, he prayed that the additional evidence be admitted, and addition of Rs.36,96,420/- be deleted. Printed from counselvise.com ITA No.799/Hyd/2025 7 6. With regard to disallowance of expenditure (Rs.6,77,863/-), the Ld. AR submitted that the assessee incurred routine business expenses such as depreciation, rent, power, telephone, bank charges etc., which are essential for carrying on business. The disallowance of 25% on ad hoc basis, without pointing out specific discrepancies, is not legally sustainable. Since evidence could not be produced before lower authorities, one more opportunity may be granted to substantiate expenditure claims. Accordingly, he prayed that the matter be remanded to the Ld. AO for fresh consideration. 7. Per contra, the Learned Departmental Representative (“Ld. DR”) opposed the admission of additional evidence, contending that adequate opportunity had already been provided at both assessment and appellate stage. The assessee failed to discharge his onus and cannot now be allowed to fill the lacuna. He argued that the assessee had ample opportunity but did not furnish cash book or supporting evidence. Mere reliance on a notification without corroborative evidence cannot explain the demonetisation deposits. The disallowance of expenditure was justified, as no details were Printed from counselvise.com ITA No.799/Hyd/2025 8 produced despite repeated opportunities. Therefore, he urged that the order of the Ld. CIT(A) be upheld. 8. We have heard the rival submissions, perused the material available on record and considered additional evidence placed before us. The assessee has produced cash book for the period covering demonetisation period, which was not before the lower authorities. On perusal of the same, we find that the evidence goes to the root of the matter in explaining cash deposits during the relevant period. We also note that there appears to be a factual discrepancy in the orders of the lower authorities. The Ld. AO proceeded on the assumption that the assessee deposited Rs.36,96,420/- in HDFC Bank. However, it is the claim of the assessee, supported by additional evidence, that he does not maintain any account with HDFC Bank and that actual cash deposits during demonetisation were Rs.10,77,608/- in his Union Bank of India account. This factual position requires due verification by the Ld. AO. Printed from counselvise.com ITA No.799/Hyd/2025 9 9. As regards the disallowance of 25% expenditure, we note that the Ld. AO disallowed the same purely on an ad hoc basis without pointing out specific defects. Since the assessee has now offered to furnish evidence in support of his claim, the same deserves to be examined. 10. In the interest of substantial justice, we admit the additional evidence and set aside both issues (a) addition under section 69A of Rs.36,96,420/- (factual correctness of deposits to be duly verified by the Ld. AO) and (b) disallowance of Rs.6,77,863/- to the file of the Ld. AO for fresh verification. The Ld. AO shall provide one more opportunity to the assessee to substantiate his claims, and the assessee is directed to fully cooperate without seeking unnecessary adjournments. 11. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 12th Sept., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 12.09.2025. * Reddy gp Printed from counselvise.com ITA No.799/Hyd/2025 10 Copy of the Order forwarded to : 1. Ms. Himabindu, Narayanam, Konappana, Agara, Electronic City, Bengaluru-560100 2. The ITO, Ward-1, Chittoor. 3. Pr.CIT, Tirupati. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "