KUNGUMAN GANESHAN,CHENNAI V. ITO, NCW-11(3), , CHENNAI

ITA 295/CHNY/2025

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The case involves Kunguman Ganeshan, who was assessed for unexplained cash deposits totaling \\u20b929,07,242 during the demonetization period in India, specifically for the assessment year 2017-18. The Income Tax Officer treated these deposits as unexplained money under section 69A of the Income Tax Act, 1961, and assessed it under 'income from other sources'. The assessee appealed to the CIT(A), which confirmed the addition. The matter was then brought before the Income Tax Appellate Tribunal, which found procedural lapses in the handling of the case and remitted it back to the Assessing Officer for a fresh assessment, considering the correct tax rate applicable prior to April 1, 2017, as per the cited High Court decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107104 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Other Referred Cases: S.M.I.L.E. Microfinance Ltd. v. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J. SARAVANAN
• Keywords: Opportunity of being heard; Corroborative evidences
• Section: 144; 142(1); 250; 133(6); 69A

Judgement Text

"आयकर अपीलीय अिधकरण, ‘डी’ Ɋायपीठ, चेɄई IN THE INCOME TAX APPELLATE TRIBUNAL‘D’ BENCH, CHENNAI ŵी जॉजŊ जॉजŊ क े., उपाȯƗ एवं ŵी एस.आर.रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI GEORGE GEORGE K., VICE-PRESIDENT AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./ITA No.: 295/Chny/2025 िनधाŊरणवषŊ / Assessment Year: 2017-18 Kunguman Ganeshan, 22/59, Mohammed Hussain Street, Royapettah S.O., Royapettah, Chennai 600 014. [PAN: BGQPG-5503-H] Vs. Income Tax Officer, Non Corporate Ward -11(3), Chennai 600 006. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri J. Saravanan, Advocate ŮȑथŎकीओरसे/Respondentby : Shri A. Sasi Kumar, CIT सुनवाईकीतारीख/ Date of hearing : 18.03.2025 घोषणाकीतारीख /Date of Pronouncement : 17.04.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 06.11.2024 and pertains to assessment year 2017-18 under section 250 of the Income Tax Act, 1961 [“Act” in short]. 2. The only effective ground raised in the appeal of assessee for our consideration as to whether the ld. CIT(A) is justified in confirming the addition of ₹.29,07,242/- made under section 69A of the Act being cash :-2-: ITA. No: 295/Chny/2025 deposited during demonetization period in the facts and circumstances of the case. 3. Brief facts of the case are that the assessee is an individual and as per the information received by the Department, the assessee made cash deposits of ₹.11,44,000/- during the demonetization period in the bank account maintained with the South Indian Bank. Since the assessee did not file the return of income for the AY 2017-18, the Assessing Officer issued notice under section 142(1) of the Act requiring the assessee to file the return of income. Since there was no response from the assessee, by issuing notice under section 133(6) of the Act, the Assessing Officer obtained bank statement and observed that during the demonetization period, the assessee made cash deposits of ₹.11,44,000/- and the cash deposits for the remaining period of FY 2016-17 was ₹.17,63,242/-. Since there was no response/reply from the assessee and the deposits remain unexplained, the Assessing Officer treated the same as unexplained money under the provisions of section 69A of the Act and assessed the income of the assessee under “income from other sources”. 4. The assessee carried the matter in appeal before the ld. CIT(A) and furnished additional grounds/fresh evidence. In order to satisfy the provisions of Rule 46A of the Income Tax Rules, the ld. CIT(A) sought for the remand report from the Assessing Officer. The Assessing Officer :-3-: ITA. No: 295/Chny/2025 submitted remand report and the same is reproduced at para 6 of the impugned order. Moreover, the remand report was confronted with the assessee and in response to that, the assessee filed his reply and the same is reproduced in pages 7 to 9 of the impugned order. However, since the assessee could not file any documentary evidence to substantiate the claim of the assessee, the ld. CIT(A) confirmed the addition made by the Assessing Officer. 5. On being aggrieved, the assessee carried the matter in appeal before the Tribunal. 6. The ld. AR Shri J. Saravanan, Advocate, submits that the ld. CIT(A) erroneously sustained the addition being the entire cash deposits made in assessee’s bank account. He further submits that during the course of remand proceedings, the assessee filed the reply on various dates, which are neither accepted not rejected by the Assessing Officer. The ld. AR vehemently contended that the cash deposits, both during demonetization period and the remaining period, were from earlier cash withdrawals from the same Bank account, jewel loans borrowed, agricultural income and p proceeds from his tyre business. He further submitted that though the ld. CIT(A) duly noted the fresh evidences/written submissions of the assessee and obtained remand report and counter reply of the assessee, the ld. CIT(A) confirmed the addition made by the Assessing Officer is not :-4-: ITA. No: 295/Chny/2025 justified. By producing copy of bank statement, which consists both deposits and withdrawals, the ld. AR prayed that the matter may be remanded to the file of the Assessing Officer for fresh adjudication. 7. Per contra, the ld. DR Shri A. Sasi Kumar, CIT drew our attention to page 6 of the impugned order and submitted that the assessee was given fair opportunities to furnish supporting evidence to substantiate his claim, but, however, the assessee was silent after seeking adjournment. 8. Having heard both the parties, we note that the assessee is doing tyre puncture pasting business, second hand tyre sales and also an agriculturist. Before us, the AR filed detailed written submissions with break-up of cash deposits during demonetization period totaling to ₹.11,44,000/-. It was the submissions of the ld. AR that the assessee’s main source of income was from agriculture, which is exempt from taxation, but, however, could not brought on record any documentary evidence to substantiate the claim of the assessee either before the Assessing Officer or before the ld. CIT(A) or even before this Tribunal. 9. In his written submissions, the ld. AR made an alternative plea that if the cash deposits to the tune of ₹.29,07,242/- is to be assessed under section 69A of the Act in respect of cash deposits made in the FY 2016-17, the Assessing Officer ought to have been applied the rate at 30% only, whereas, the Assessing Officer made the addition under section 69A of the :-5-: ITA. No: 295/Chny/2025 Act by applying the tax rate at 60% plus applicable surcharge and cess. By relying upon the decision of the Hon’ble High Court of Madras in the case of S.M.I.L.E. Microfinance Ltd. v. ACIT in W.P. (M.D) No. 2078 of 2020 dated 19.11.2024, wherein, it was held that the revenue is empowered to impose 60% rate of tax for transactions from 01.04.2017 and not prior to the said cut-off date and for prior transaction, the revenue is empowered to impose only 30% rate of tax, the ld. AR prayed that the matter may remitted to the file of the Assessing Officer for fresh consideration. 10. Admittedly, the assessment was completed under section 144 of the Act. On perusal of the assessment order, we note that there was no assistance from the assessee to the notices issued by the Assessing Officer. The ld. CIT(A) passed exparte order without considering the written submissions filed by the assessee, bank statements, rejoinder to the remand report filed before the ld. CIT(A). 11. Under the above facts and circumstances and in the interest of justice, we deem it proper to remit the matter to the file of the Assessing Officer to decide the issue afresh by affording one more opportunity of being heard to the assessee to consider his submissions as may be filed and pass order in accordance with law keeping in mind the above decision of the Hon’ble High Court of Madras in the case of S.M.I.L.E. Microfinance :-6-: ITA. No: 295/Chny/2025 Ltd. v. ACIT (supra). Thus, the grounds raised by the assessee are partly allowed for statistical purposes. 12. In the result the appeal of the assessee is allowed for statistical purposes. Order pronounced in the court on 17th April, 2025 at Chennai. Sd/- Sd/- (जॉजŊ जॉजŊ क े.) (GEORGE GEORGE K) उपाȯƗ /VICE PRESIDENT (एस.आर.रघुनाथा) (S. R. RAGHUNATHA) लेखा सद˟/ACCOUNTANT MEMBER चे᳖ई/Chennai, ᳰदनांक/Dated, the 17th April, 2025 Vm/- आदेशकीŮितिलिपअŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF "