KRIPAKARAN R T,CHENNAI V. DCIT, TAMBARAM

ITA 2629/CHNY/2025

AI Insights

The case involves Shri Kripakaran Rajagopal Thirunavukkarasu, a licensed non-judicial stamp vendor, who appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs.1,66,85,200 as unexplained cash deposits under section 69A of the Income Tax Act. The Assessing Officer had initially treated these deposits as unexplained income, but the assessee argued that they were legitimate business proceeds. The Tribunal examined the documentary evidence provided by the assessee, including bank statements and sales registers, and found a direct correlation between the stamp paper sales and the cash deposits, leading to the decision in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791093 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 24-09-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM; J. C.I.T
• Assessee Lawyers: R. T. KRIPAKARAN; ASSESSEE
• Keywords: Set aside; Corroborative evidences; Salary income; Principle of natural justice
• Section: 263

Judgement Text

"आयकर अपील य अ धकरण, ‘बी’ \u000eयायपीठ, चे\u000eनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI \u0015ी एस एस \u0018व\u001aवने\u001b र\u0018व, \u000eया यक सद य एवं \u0015ी एस. आर. रघुनाथा, लेखा सद य क े सम% BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:2629/Chny/2025 नधा&रण वष& / Assessment Year: 2017-18 Shri. Kripakaran Rajagopal Thirunavukkarasu, 3A, Janapriya, M.R.Nagar, Via Chrompet Salai, Kovilambakkam S.O., Kanchipuram – 600 129. vs. DCIT, Non-Corporate Circle -22(1) Tambaram. [PAN:AFFPR-9083-L] (अपीलाथ(/Appellant) ()*यथ(/Respondent) अपीलाथ( क+ ओर से/Appellant by : Shri. R. T. Kripakaran, Assessee )*यथ( क+ ओर से/Respondent by : Ms. Gouthami Manivasagam, J.C.I.T. सुनवाई क+ तार ख/Date of Hearing : 28.10.2025 घोषणा क+ तार ख/Date of Pronouncement : 09.12.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [herein after “ld. CIT(A)] dated 23.09.2025 and pertains to assessment year 2017-18 against the order of the Assessing Officer passed u/s.143(3) r.w.s.263 of the Income Tax Act, 1961 (in short ‘the Act’) dated 22.12.2022. Printed from counselvise.com :-2-: ITA. No.:2629 /Chny/2025 2. The assessee has raised the following grounds of appeal: 1. Against Confirmation of addtions u/s.69A: The Ld. CIT(A) has grossly erred in confirming the additions of Rs.1,66,85,200/- u/s.69A as unexplained cash deposits, without appreciation that: • The appellant is a licensed non-judical stamp vendor License No. 18/CH(S)/2008 dated 03.12.2008, issued by District Registrar, Chennai South) • The amounts deposited represented cash collections from sold of stamp papers, of which only commission income is taxable, not the entire turnover. • Supporting documents such as cash book, indents, and daily sales registers were duly filed, but were disregarded without proper verification. 2. Non- Consideration of evidence: • Loan of Rs,14,50,000/- availed from ICICI Bank (31.10.2015), which was part of available funds. • Salary /settlement income of Rs.5,78,399/- from Amazon, which explained part of the bank transactions. • Rejecting of these explanations was arbitrary and without proper reasoning. 3. Violation of directions issued u/s.263: The Principal CIT had specifically directed the AO to: • Obtain details of specified bank notes (SBN) from the bank; • Verify inflow/outflow of both SBI Accounts; • Examine the genuineness of stamp vending business as per TN stamp Vending Act, • These directions were not complied with, rendering the reassessment order defective. The CIT(A) failed to note this non- compliance. 4. Faceless Procedure-denial of natural justice The appellant had requested personal hearing, citing the peculiar nature of the case requiring oral explanation. The NFAC rejected the request merely because the appellant declined video-conference, through the right to effective hearing was not satisfied. This is a gross violation of principles of natural justice. 5. Erroneous treatment of turnover as income: The CIT(A) wrongly treated the entire indent value (Rs.1.94 Cr) as the appellant’s income, ignoring that: • In stamp vending, the treasury amount represents purchase value; • Only commission (Rs.46,512) is taxable as income; • This principal has been upheld in multiple judicial precedents involving stamp vendors and lottery agents, where only commission was taxable, not entire turnover. Printed from counselvise.com :-3-: ITA. No.:2629 /Chny/2025 6. Failure to adjudicate ground on housing loan interest The CIT(A) summarily dismissed the claim of deduction u/s.24(b) for housing loan interest of Rs.2,00,000/- without proper adjudication, violating the mandate of section 250(6) which requires reasoned order for each ground of appeal. 3. The issues raised by the assessee in Grounds of appeal pertains to the contention that the ld.CIT(A) erred in facts by upholding the addition of cash deposits of Rs.1,66,85,200/- u/s.69A of the Act and disallowed the claim of interest u/s.24(b) of the Act for housing loan interest of Rs.2,00,000/-. 4. The brief facts of the case are that the assessee is an individual, filed his return of income for the impugned year declaring total income of Rs.10,35,020/- which included income under the head salary of Rs.13,87,484/- and loss under the head Income from House Property of Rs.2,00,000/-. The case was selected for scrutiny under CASS to verify the source of cash deposit in bank account during the demonetization period. The assessment was completed u/s.143(3) of the Act on 12.11.2019, making an addition of Rs.20,60,800/- u/s.69 of the Act. Though the case was initially selected for limited scrutiny, it was found that the assessee’s explanation regarding cash receipt from stamp vending business was not in order, therefore, the issue warranted conversion into complete scrutiny to examine genuineness of cash deposits for the entire year. However, the AO failed to seek approval for conversion. Hence, the order u/s.263 of the Act was passed by the learned Principal Commissioner of Income Tax, asking the AO to thoroughly verify the nature and source of cash deposit of Rs.1,66,85,200/- made throughout the year in the light of his claim that he was carrying out stamp vending business. The AO noted that no positive material was brought on record to show that the cash deposited was the proceeds from sale of stamp vendor business which was carried out by the assessee. Therefore, in the absence of satisfactory explanation and evidence, an addition of u/s.69A of the Act was made in the hands of the assessee as unexplained income for the impugned year by holding as under: “But the assessee failed to furnish samp duty register and submitted particulars of indent, details to Sub-Treasury Saidapet as cash Book. And the snapshot of bank account no 35328489692 for the same period i.e. 07.11.2016 to 14.11.2016 is as under: made in the A/c no 35328489692 bank account maintained with SBI, Velachery Branch, Chennai i.e. assessee was doing stamp paper vendor business and the money got Printed from counselvise.com :-4-: ITA. No.:2629 /Chny/2025 from the customer to get stamp papers were deposited in the above said account and the assessee obtained a loan of Rs.14 Lakhs from ICICI bank, which he deposited in the bank account maintained with SBI. Further, no material was brought on record to explain the source of cash deposit made during the specified period in the bank account maintained with State Bank of India. Further, no positive material was also brought on record to show that the amount deposited was the proceeds from sale of stamp vendor business which was carried out by the assessee. When the test of human probabilities are applied to the facts and circumstances of the case, it would be clear that the assessee failed to explain the source of cash deposit in the bank account through any cogent and reliable evidence and surrounding circumstances speak against the assessee. Further the bank statements cannot be treated as books of accounts in view of decisions held by the Hon’ble Bombay High Court in the case of Bhai Chand Gandhi (1983)/53 comp Cas 400/Bombay. In the absence of any suitable explanation from the assessee, it is inferred that the assessee has not maintained books of account; consequently, the transactions is unrecorded transaction in books of account and subject to assess under section 69A of the Act. The nature of cash deposit in bank account cannot be determined unless the assessee explain and furnish evidences or provide essential information to verify its nature. The transaction is real and it is apparent from the bank account that deposit in bank account is not from regular business or past savings and is unexplained money earned from undisclosed source. As per the provisional interest statement of loan account maintained with PNB Housing Finance Ltd, it is seen that Principal component of loan repayment is Rs.9,65,623/- and interest component is Rs.43,383/- but the total repayment done by the assessee during the year is only Rs.7,65,000/-. Thus, it is not clear whether the payment is made towards the principal component or the interest component. Further, the interest component as per provisional interest statement attached above is only Rs.43,383/- but the assessee has claimed Rs.2,00,000/- as deduction as interest paid on housing loan. In view of the above, the deduction claimed of Rs.2,00,000/- as interest on housing loan(income from house property) is disallowed. Further, the assessee had claimed Rs.2,00,000/- as deduction u/s.24(b) of the Act, on account of housing loan interest, the statement reflected interest payment of Rs.43,383/-. Hence the claim of Rs.2,00,000/- towards interest on housing loan was found to be incorrect and was disallowed”. 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee challenged the issue of additions of Rs.1,66,85,200/- made by the AO under 69A of the Act. After perusing the documents and details furnished by the assessee, the ld.CIT(A) confirmed the additions made by the AO by holding as under: - Printed from counselvise.com :-5-: ITA. No.:2629 /Chny/2025 “7.1.2 During the appellate proceedings, the appellant has stated that he had furnished various documents before the PCIT during proceedings u/s.263 of the Act as well as the AO during the proceedings u/s.143(3) rws 263 of the Act, but nothing has been considered by the authorities. Before the appellate authority, he once again furnished form 16 received from the employer Amazon, copy of ICICI Loan, loan statement, bank statement of city bank, profit and loss account, copy of cash book, indent copies, and daily sales register for sale of stamp papers. He stated that he had only received commission of Rs.46,512/- on the sale of stamp paper, while the AO has computed the entire sales proceeds of stamp papers as his income for the year. 7.1.3 Upon careful examination of the assessment order, and the submissions made by the appellant, I am of the considered view that the contentions of the appellant are not tenable. It is seen that the appellant has filed his return of income for the year in ITR-1 SAHAJ INDIVIDUAL INCOME TAX RETURN disclosing only salary income. No where has he mentioned in the ITR about his business of stamp vending and receipt of commission there from. It is only when faced with statutory proceedings under the Income Tax Act, he has come out with the details of stamps vending business by filing a P& L account showing a turnover of Rs.1,94,16,107/- and net loss of Rs.1,04,700/- from the said business. He also furnished copy of the license to vend stamps dated 03.12.2008 received from the District Registrar, Chennai (South). However, no details or supporting evidence have been filed in respect of the names PAN addresses and confirmation from the customer to whom the stamps worth Rs.1,94,16,107- were sold and proceeds received in cash from them. The copy of the daily sales register furnished by the appellant before the FAA is a completely illegible document and nothing is verifiable from it. The onus was on the appellant to upload proper documents in support of the grounds of appeal. Further, the copy of the cash book simple states ‘stamp paper sales’ without any client-wise details and evidence. It is also pertinent to note that the aforesaid license states that he is authorized to vend stamp paper not exceeding Rs.50,000/- each in value. Thus, no quantitively details of stamp papers worth Rs.1,94,16,107/- have been furnished. Further, the license has been issued in the year 2008. The appellant is completely silent of the taxation of the profits from the said business in the earlier years from 2008 to 2015- 16. Further, P & L account does not show any opening stock of stamp papers as on 01.04.2016. Furthermore, the appellant is showing to have made purchase of Rs.2,04,46,488/- of Stamp paper during the year. However, there is no explanation regarding the source of investment for making the said purchases. The copies of the indent submitted before the FAA are on sample on random basis and there is no purchase – sale reconciliation of stamp papers bought and sold. Thus, the appellant has furnished partial self-serving documents with no third party contemporaneous evidences. 7.1.4 Further, the appellant has failed to refute the findings of the Assessing Officer that the amount of Rs.5,78,399/- was received from his employer Amazon .com’ directly into the appellant’ bank account and so, it could not be the source of cash deposit in bank. Further, the appellant has failed to refute the findings of the Assessing Officer that the loan of Rs.14,50,000/- from ICICI bank was disbursed 3 years ago on 31.10.2015 and so, it could not be the source of cash deposit in bank. Furthermore, Printed from counselvise.com :-6-: ITA. No.:2629 /Chny/2025 the appellant has contended that the AO did not obtain details of SBN from the Bank, when he himself ought to have submitted the same before the AO. He has not referred to the relevant provisions of the Stamp vending Act of the Tamilnadu Government. For acceptance of proceeds, in cash and determination of his commission from the said business. He has not furnished the transaction details of inflow and outflow in the two bank accounts held by him for explaining the source of cash and other deposits. Thus the appellant has failed to discharge the onus cast upon him to explain the nature and source of the impugned cash deposits in his bank accounts. 7.1.6 Thus, in the light of absence of concrete and substantive evidences, the findings of the AO are confirmed and the addition of Rs.1,66,85,200/- u/s.69A is upheld. Hence, the grounds filed by the appellant are dismissed. 7.1.7 No separate ground has been filed non any details have been furnished wrt denial of claim of Rs.2,00,000/- towards interest on housing loan. Hence, no separate adjudication is required. 8. In the result, the appeal is dismissed”. 6. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. 7. Before us, the assessee submitted that he is a licensed non-judicial stamp vendor and that all cash deposits in the bank account of the assessee represent daily cash collections from the sale of stamp papers. From the sale proceeds of the stamp papers the assessee earns a small commission from such activity. During the assessment proceedings, the assessee had submitted the particulars of indent, the details furnished to the Sub-Treasury, Saidapet as cash book and the snapshot of Bank Account No.35328489692 for the period from 07.11.2016 to 14.11.2016, pertaining to the said account maintained with SBI, Velachery Branch, Chennai 8. However, the AO did not properly appreciate these records and treated cash deposits of Rs.1,66,85,200/- as unexplained income of the assessee u/s.69A of the Act. Before the ld.CIT(A), the assessee had furnished all supporting documents which included Form No.16 received from employer Amazon showing salary/settlement income of Rs.5,78,399/-, the ICICI Bank loan statement for Rs.14,50,000/- bank statement of the Citibank , the profit and loss account showing the transactions of the commission earned from sale of stamp paper, a copy of the Printed from counselvise.com :-7-: ITA. No.:2629 /Chny/2025 cash book, indent copies, and the daily sales register for sale of stamp papers. These documents demonstrated that the assessee had legitimate sources and that the deposits were only daily stamp-paper collections on the sale of stamp paper. The assessee’s real income is only the commission of Rs.46,512/-. 9. The assessee in order to substantiate the aforesaid facts, during the course of hearing has submitted a copy of the bank statements of State Bank of India, account No.35328489692, Velachery branch for the period 01.04.2016 to 31.03.2017 together with the Daily Sales Register, and explained that the daily cash collections match the daily cash deposits made into the account amounting to Rs.2,03,96,750/-. The consistent pattern of day-to-day deposits clearly shows that the amounts are nothing but daily stamp-paper collections from stamp paper sales which are deposited into State Bank of India, Account No.35328489692, Velachery branch. It was therefore submitted that the nature and source of the cash deposits were fully explained in view of the documentary evidence and explanations placed on record and consequently the assessee prayed that the addition sustained u/s.69A of the Act may kindly be deleted in the interest of justice. 10. The assessee further contended that the claim for deduction of housing-loan interest of Rs.2,00,000/- u/s.24(b) of the Act was rejected by the Ld.CIT(A) without any discussion or finding, contrary to the mandate of section 250(6) of the Act, which requires a reasoned order on each ground. 11. Per contra, the ld.DR during the course of hearing submitted that the ld.CIT(A) had rightly dismissed the assessee’s appeal and that the present appeal of the assessee deserved to be dismissed. 12. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The admitted facts of the case are that the assessee is an individual who has filed his return of income declaring total income of Rs.10,35,020/-, comprising salary income and loss under the head Income from House Property. The case was selected for limited scrutiny Printed from counselvise.com :-8-: ITA. No.:2629 /Chny/2025 under CASS for examining cash deposits during the demonetisation period. In the assessment completed u/s.143(3) of the Act dated 12.11.2019, the AO made an addition u/s.69A of the Act for an amount of Rs.20,60,800/- since the assessee could not explain the nature and source of cash deposit during the demonetization period. Thereafter, the ld.PCIT, in proceedings u/s.263 of the Act, set aside the assessment order passed u/s.143(3) of the Act dated 12.11.2019. In the consequential assessment, the AO treated the cash deposits as unexplained money u/s.69A of the Act amounting to Rs.1,66,85,200/- and disallowed the claim of deduction amounting to Rs.2,00,000/- from Income from House Property interest on housing loan. The ld.CIT(A) thereafter confirmed the action of the AO. 13. The assessee’s consistent case before the lower authorities and before us is that he is a licensed non-judicial stamp vendor and that all the cash deposited in his State Bank of India, Velachery Branch, Account No.35328489692 for the period 01.04.2016 to 31.03.2017 represents regular sale collections from sale of stamp papers. According to the assessee, such receipts are sale proceeds of the stamp papers, and he earns only the commission income from such sale. In support of this claim the assessee furnished the bank statements of State Bank of India, account No. 35328489692, Velachery branch together with the Daily Sales Register, and explained that the daily cash collections match the daily cash deposits made into the account amounting to Rs.2,03,96,750/-. The assessee specifically demonstrated before us that the daily stamp-paper collections from stamp paper sales, recorded in the sales register corresponding to the daily deposits made into the bank account and that the pattern of collections and deposits is consistent with the functioning of a licensed stamp vendor. Further, the assessee also filed a statement showing the purchase of stamp paper out of the cash deposits made regularly from the treasury. 14. On careful consideration of the facts and circumstances of the case and the documents furnished during the course of hearing, we find that the assessee has produced verifiable documents showing a clear one-to-one correlation between the stamp-paper sales and the cash deposits into the bank accounts on various dates Printed from counselvise.com :-9-: ITA. No.:2629 /Chny/2025 and payment of such amounts to purchase the stamp paper from treasury along with indents for purchase of stamp paper. The daily sales register and the bank statements placed before us convincingly establish that the deposits represent daily cash collections from customers for purchase of stamp papers and thus, there was no unexplained cash deposits in his bank account as alleged by the AO. There is no material brought by the Revenue to discredit the genuineness of these documents or to suggest any alternative source for the deposits into the bank account of the assessee. When the assessee acts only as an agent and earns merely the commission income, the daily cash collections cannot be treated as unexplained income in his hands of the assessee. The addition made by the AO has been sustained by the ld.CIT(A), without properly appreciating documentary evidence placed on record. 15. In view of the above facts and the evidences produced, we are of the considered view that the assessee has satisfactorily explained the nature and source of the cash deposits aggregating to Rs.2,03,96,750/- into the assessee’s bank account. Consequently, we set aside the order of the ld.CIT(A) and direct the AO to delete the addition made u/s.69A of the Act amounting to Rs.1,66,85,200/-. 16. Coming to the next ground of claim of Rs.2,00,000/- towards interest on house loan, the assessee has contended that the ld.CIT(A) erred in not adjudicating its claim for deduction of housing-loan interest amounting to Rs.2,00,000/- u/s.24(b) of the Act. According to the assessee, although the claim was raised in the course of appellate proceedings, the ld.CIT(A) rejected it summarily by observing that no separate ground had been filed and no details had been furnished, and therefore no adjudication was required. The assessee submitted that such an approach is contrary to the mandate of section 250(6) of the Act, which casts a statutory obligation on the first appellate authority to dispose of each ground of appeal by way of a speaking and reasoned order. It is apparent that the assessee’s claim for deduction of interest on housing loan was not dealt with by the ld.CIT(A) on merits. The appellate authority simply recorded that no Printed from counselvise.com :-10-: ITA. No.:2629 /Chny/2025 separate ground or details were furnished and therefore no decision was called for. However, once the issue regarding allowability of a statutory deduction forms part of the appellate proceedings, the ld.CIT(A) is required to examine the same in accordance with law. The failure to adjudicate a claim affecting computation of income renders the issue legally unsustainable. 17. In this circumstance, and in the interest of justice, we deem it appropriate to set aside this limited issue to the file of the AO for fresh examination. The AO shall verify the assessee’s claim for deduction of interest on housing loan u/s.24(b) of the Act and decide the matter afresh after providing adequate opportunity to the assessee to produce the necessary evidences. We make it clear that we have not expressed any opinion on the merits of the deduction and the AO shall determine the issue strictly in accordance with law. 18. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 09th December, 2025 at Chennai. Sd/- Sd/- (एस एस \u0018व\u001aवने\u001b र\u0018व) (S.S. VISWANETHRA RAVI) \u000eया यक सद य/Judicial Member (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखा सद य/Accountant Member चे\u000eनई/Chennai, /दनांक/Dated, the 09th December, 2025 SP आदेश क+ ) त1ल\u0018प अ2े\u0018षत/Copy to: 1. अपीलाथ(/Appellant 2. )*यथ(/Respondent 3.आयकर आयु3त/CIT– Chennai/Coimbatore/Madurai/Salem 4. \u0018वभागीय ) त न ध/DR 5. गाड& फाईल/GF Printed from counselvise.com "