MOHAN ,TRIUPUR V. ITO WARD 1(3), TIRUPUR, TIRUPUR

ITA 2118/CHNY/2025

AI Insights

This case involves an appeal by the assessee, Mohan, against the order of the Learned Commissioner of Income Tax (Appeals), Delhi, for the Assessment Year 2017-18. The primary contention was that the Assessing Officer (AO) exceeded the scope of the limited scrutiny under CASS, which was specifically to examine cash deposits during the year. The AO made additions to the income based on unexplained cash credits and business income, which were not part of the issues flagged by CASS. The Tribunal found that the AO did not provide a proper opportunity to the assessee and did not adequately clarify the nature of the additions made, leading to a decision to set aside the CIT(A)'s order and remand the case for a fresh assessment.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 836163 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 31-07-2025
• Other Referred Cases: TIN Box Co. v. CIT [2001] 249 ITR 216 (SC), Smile Microfinance Ltd. v. ACIT in WP (MD) No.2078 of 2020 & 1742 dated 19.11.2024 (Madras-HC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. ANITHA
• Assessee Lawyers: T.S.LAKSHMI
• Keywords: Set aside; Business income; Unexplained cash credit

Judgement Text

"आयकर अपीलीय अिधकरण, ’सी’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी एस. आर. रघुनाथा, लेखा सद क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2118/Chny/2025 िनधा\u000eरण वष\u000e/Assessment Year: 2017-18 Mohan, 62/5, Thirumurugan Nagar, SS Nagar, 2nd Street, Kongu Main Road, Tirupur-641 607. [PAN: AJLPM 0534 D] v. The ITO, Ward-1(3), Tirupur. (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.T.S. Lakshmi Venkataraman, FCA \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Ms.R. Anitha, Addl.CIT सुनवाईक\u001aतारीख/Date of Hearing : 29.01.2026 घोषणाक\u001aतारीख /Date of Pronouncement : 11.02.2026 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 13.06.2025 for the Assessment Year (hereinafter referred to as \"AY”) 2017-18. 2. At the outset, the Ld.AR of the assessee submitted that the AO erred in making additions on issues which were not flagged by the CASS. In this respect, the Ld.AR, drew our attention to the first paragraph of the Printed from counselvise.com ITA No.2118/Chny/2025 (AY 2017-18) Mohan :: 2 :: assessment order dated 26.12.2019, wherein the AO had acknowledged that the return of income (RoI) filed by the assessee [ITR filed on 16.03.2018 for AY 2017-18 declaring total income at ₹8,37,250/-] was selected for “limited scrutiny under CASS” to examine the “cash deposit during the year”. However, according to the Ld.AR, a perusal of the assessment order would reveal that the AO had made addition of ₹41,13,322/- [₹17,28,000/- u/s.69A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and business income @8% on ₹2,98,16,525/- i.e. ₹23,85,322] as under: Income admitted Rs. 8,37,250/- Add:(1) Unexplained cash credit u/s.69A r.w.sec.115BBE as discussed above Rs.17,28,000/- (2) Business income as discussed above Rs. 23,85,322/- Assessment income Rs. 49,50,572/- 3. According to the Ld.AR, the AO couldn’t have travelled beyond the issue [cash deposits] as per the binding Circular on the subject. Therefore, according to the Ld.AR, the AO erred in passing the assessment order dated 26.12.2019 and prayed for de-novo assessment by the AO since the assessee didn’t get proper opportunity before the AO by citing the decision of the Hon’ble Supreme Court in the case of TIN Box Co. v. CIT reported in [2001] 249 ITR 216 (SC). 4. Per contra, the Ld.DR supported the action of the Ld.CIT(A) confirming the action of the AO and didn’t want us to interfere. However, she agreed that the AO couldn’t have gone beyond the issue which has Printed from counselvise.com ITA No.2118/Chny/2025 (AY 2017-18) Mohan :: 3 :: been flagged by the CASS i.e. ‘cash deposits during the relevant assessment year’. 5. Having heard both the parties and after perusal of the records, it is noted that the assessee is engaged in the business of purchase & sale of garments and filed his ITR/RoI for AY 2017-18 on 16.03.2018 admitting total income at ₹8,37,250/-, which ITR was selected for limited scrutiny under CASS to examine the cash deposits during the year. The AO is noted to have asked for the details of the cash deposits in the following banks and noted the relevant facts as under: SI.No Name of the Bank Account No. Cash deposit made during demonetization period(Rs.) Total credits during year(Rs.) 1 ICICI BANK 615405046938 - Rs.2,29,58,635 2 INDIAN OVERSEAS BANK 12802000000516 Rs.13,78,000 Rs.1,73,88,052 3 ICICI BANK 615405050829 Rs.3,50,000 Rs.38,40,509 TOTAL Rs.17,28,000 Rs.4,41,87,196 6. The AO is noted to have asked the assessee to give details of the deposits made [nature and source of it] and has made the following observations as under: It is seen from the details uploaded that the assessee has credited a sum of Rs. 4,41,87,196 in the above bank accounts out of which the cash deposited in SBN notes Rs. 17,28,000/- during the demonetization period. In this regard the assessee have not uploaded any evidence to substantiate the source of cash deposit made during the demonetization period of Rs. 17,28,000/-. The govt. was not allowed to accept the SBN notes and the government announced decision on 08/11/2016 to withdraw the legal tender status to the existing series of the bank notes of the value of Rs.500/- and Rs. 1000/- with effect from 09/11/2016. Printed from counselvise.com ITA No.2118/Chny/2025 (AY 2017-18) Mohan :: 4 :: Section 69A of the Income-tax Act, 1961: Unexplained money, etc. \"Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year\". In view of the above, a cash deposit of Rs.17,28,000/- was made during the demonetization period is added to the total income returned u/s.69A of the Act, 1961 read with sec. 115BBE of the Act. Further the balance credit of Rs. 4,41,87,196/- is taken as the assessee's turnover of the business during the year relevant to the assessment year. It is seen from the return of income filed the business income admitted Rs. 10,11,000/- on 8% of the gross receipts of Rs. 1,26,42,671/-. Hence the balance credit of Rs. 2,98,16,525/- in the bank account is also taken as the assesseee undisclosed sales and the same profit ratio is applied i.e. 8% on Rs. 2,98,16,252/- and the profit is arrived at Rs. 23,85,322/- and the same is added to the total income returned. Accordingly the assessment is completed. Income admitted Rs. 8,37,250/- Add:(1) Unexplained cash credit u/s.69A r.w.sec.115BBE as discussed above Rs.17,28,000/- (2) Business income as discussed above Rs. 23,85,322/- Assessment income Rs. 49,50,572/- The Income-tax computation sheet along with demand notice and challan is enclosed. The demand should be paid as per notice of demand enclosed. 7. According to the Ld.AR, the AO has only considered the cash deposits during demonetization period [08.11.2016 to 31.12.2016] and thereafter has made addition of ₹17,28,000/- u/s.69A r.w.s.115BBE of the Act levying 60% tax on it which is against the order of the Hon’ble jurisdictional High Court in the case of Smile Microfinance Ltd. v. ACIT in WP (MD) No.2078 of 2020 & 1742 dated 19.11.2024 (Madras-HC), wherein the Hon’ble High Court has held that levy of 60% u/s.115BBE of the Act will be applicable only from AY 2018-19. In other words only 30% tax is leviable in the relevant AY. According to the Ld.AR, even the AO Printed from counselvise.com ITA No.2118/Chny/2025 (AY 2017-18) Mohan :: 5 :: didn’t consider the assertion made by the assessee that the nature of cash deposits/SBNs, inter-alia, were trade receipts. According to the Ld.AR, it is not understood ‘as to how’ the AO has made an addition of ₹23,85,322/- in respect of the credits made in the bank account of the assessee which includes bank to bank transactions. According to the Ld.AR, the AO erred in travelling beyond the scope on issues which were not flagged by the CASS. In other words, according to assessee, the AO ought to have only enquired about the nature and source of the cash deposits during the year under consideration. For such a proposition, he cited the decision of the CBDT Instruction No.20/2015 dated 29.12.2015 & CBDT Instruction F.No.225/402/2018/ITA.II dated 28.11.2018. 8. A perusal of the first para of the assessment order reveals that the ITR of the assessee was selected for limited scrutiny in respect of the cash deposits. The AO is noted to have made certain enquiry regarding the cash deposits in the three (3) bank accounts of the assessee. But the assessment order doesn’t spell out clearly about the cash deposits made in the accounts of the assessee. In other words, no bifurcation of the cash deposits in the three (3) bank accounts of the assessee is discernable from a reading of the assessment order. In such a scenario, the action of the AO in making addition of ₹23,85,322/- can’t be properly appreciated or examined. Since there is no clarity about the cash deposits made in the year under consideration other than the SBNs Printed from counselvise.com ITA No.2118/Chny/2025 (AY 2017-18) Mohan :: 6 :: deposited makes the order vague for non-application of mind. In this regard, the assessee asserted that the AO didn’t give proper opportunity to the assessee during the course of assessment proceedings. Therefore, without making any observation on the merits of the additions made, we are inclined to give one more opportunity to assessee before the AO, so, we set aside the impugned order of the Ld.CIT(A) and restore the assessment back to the file of the AO for de-novo assessment by relying on the Hon’ble Supreme Court in the case of TIN Box Co. (supra). The Ld.AR has undertaken to file the details of nature and source of cash deposits in the assessee’s bank account. The AO is directed to examine the same in accordance to law after hearing the assessee and to pass fresh assessment order in accordance to law on the issue flagged by the CASS. We clarify that AO to frame assessment on merits, untrammeled by any observation made by us in this case supra in accordance to law. 9. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced on the 11th day of February, 2026, in Chennai. Sd/- (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 11th February, 2026. Printed from counselvise.com ITA No.2118/Chny/2025 (AY 2017-18) Mohan :: 7 :: TLN आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ /Appellant 2. \u000e\u000fथ /Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड फाईल/GF Printed from counselvise.com "