SAMIAPPAN ,SALEM V. ITO, WARD-1(1), SALEM

ITA 487/CHNY/2025

AI Insights

The case involves Samiappan, the appellant, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for the assessment year 2018-19. The primary contention was the addition of Rs.1,12,29,000 as unexplained cash deposits in his bank account, which the AO treated as unexplained cash credit under section 68 of the Income Tax Act. The assessee argued that these deposits were from legitimate cash balances carried forward from previous years, supported by bank statements and cash books. The Tribunal found that the AO had not adequately considered the evidence provided and had not rejected the books of accounts, leading to the decision to allow the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633274 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Other Referred Cases: CIT vs. Durga Prasad More (82 ITR 540 SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITHA; C.I.T
• Assessee Lawyers: T.S. LAKSHMI VENKATARAMAN; F
• Keywords: Set aside; Corroborative evidences; Unexplained cash credit; Rejection of books of accounts; Source of fund; Competent authority
• Section: 68

Judgement Text

" आयकर अपीलीय अिधकरण, ‘सी’ Ɋायपीठ, चेɄई IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, CHENNAI. ŵी मनु क ुमार िगįर, Ɋाियक सद˟ एवं ŵी एस. आर. रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:487/Chny/2025 िनधाŊरण वषŊ / Assessment Year: 2018-19 Samiappan, 37/31, Kalaimagal Street, Swarnapuri, Salem – 636 004. vs. Income Tax Officer, Ward- 1(1), Salem – 636 007. [PAN:CDIPS-7997-B] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से/Appellant by : Mr. T. S. Lakshmi Venkataraman, F.C.A. ŮȑथŎ की ओर से/Respondent by : Ms. Anitha, Addl. C.I.T. सुनवाई की तारीख/Date of Hearing : 22.04.2025 घोषणा की तारीख/Date of Pronouncement : 12.06.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2018-19, vide order dated 30.12.2024. 2. The assessee has raised the following grounds of appeal:- 1. On the facts and circumstances of the case the order of first appellate authority dated 30.12.2024 in dismissing the appeal of the appellant is bad in law and is not legally justified. 2. On the facts and circumstances of the case the lower authorities are not justified in not furnishing the reasons recorded for issue of notice U/s.148 of the Act. 3. On the facts and circumstances of the case the lower authorities are not justified in not providing the copy of satisfaction note given by the competent authority in terms of section 151 of the Act. :-2-: ITA. No:487/Chny/2025 4. On the facts and circumstances of the case the re-assessment proceedings initiated is bad in law in as much as notice u/s.148 has been issued by ITO Ward l (l), Salem and for proper initiation of re- assessment proceedings the above notice should have been issued by Assessment Unit, NFAC of Income Tax department. 5. On the facts and circumstances of the case the First appellate authority is not justified in sustaining the action of the AO in assessing a sum of Rs.1,12,29,000/- by invoking the provision of section 68 of the Act which amount represents cash deposits made by the assessee in Canara bank during the financial year 2017-18. 6. On the facts and circumstances of the case the lower authorities are not justified in accepting the cashbook for the financial years 2015-16 and 2016-17 wherein substantial cash balance is available as on 31.03.2016 and 31.03.2017 to explain the cash deposits made in the bank account during the financial year 2017-18. 7. In view of the above grounds and other submissions to be made at the time of Appeal hearing, the order U/S 250 passed by Commissioner of Income Tax (Appeals ), NFAC may be cancelled and justice rendered. 3. The brief facts of the case are that the assessee is an individual, had not filed his return of income for the A.Y. 2018-19. As per the information in accordance with the Risk Management Strategy by CBDT, the department found that the assessee had made a cash deposit of Rs.1,12,29,000/- and cash withdrawal of Rs.47,33,000/- in the current account held at Canara Bank. Accordingly, the assessment proceedings were reopened by issuing statutory notices to the assessee. In response to notice u/s.148 of the Act the assessee filed his return of income on 15.02.2023 declaring an income of Rs.6,05,220/-. During the assessment proceedings the assessee submitted a copy of the ITR filed on 15.02.2023 along with the computation of total income, copy of bank account statements of Canara bank, Indian Bank, SBI, List of loan parties, Cash book, Copy of partner ledger accounts of M/s.Raghavendra Finance and M/s.Shivambiga Fuels where the assessee is a partner. Further the assessee also explained that the cash deposits made to the bank accounts during the :-3-: ITA. No:487/Chny/2025 A.Y. 2018-19 were out of the cash balance held as on 31.03.2017. The assessee stated that the income earned by the assessee is from the business of taxi hire charges and interest received as a partner in the partnership firms. The assessee submitted that the cash balance held by the assessee as on 31.03.2016 was Rs.45,87,312/-, which has been shown along with the return of income filed. However, the assessee has not filed return of income for the A.Y. 2017-18, but filed a cash flow statement for the F.Y. 2016-17 which includes the cash withdrawal of Rs.68,00,000/- from canara bank current account out of the loan borrowed from the Repco bank and arrived a net closing cash balance of Rs.1,71,98,704/-. 4. However, the AO was not convinced with the details provided and made an addition of Rs.1,12,29,000/- by passing an order u/s.147 r.w.s.144B of the Act dated 14.03.2024 by holding as under: “The assessee has failed to provide supporting documentary evidence to prove the source of funds used for huge cash deposits. The assessee had made an attempt to explain without providing supporting documents to prove availability of cash in hand used for bank deposits. No attempt is made by the assessee to clearly explain the cash availability in hand but vague replies are submitted. In the absence of documentary evidence, the explanation could not be relied upon. Though assessee claims to have withdrawn cash from loan taken from Repco Finance, it is pertinent to say here that assessee has also deposited cash in bank for repayment of the said loan. Further, the reasons for non-submission of particular return for A.Y. 17-18 and 18-19 wherein there are heavy cash deposits is best known to the assessee. However, perusal and careful analysis of the submissions made by the assessee could not establish the existence of any genuine business activity conducted by the assessee through which the cash is generated. The cash balance available is not proved and hence remains unexplained. Accordingly, the total cash deposited in bank account of Rs.11229000/- is deemed to be income in the hands of the assessee and treated as unexplained cash credit u/s 68 and taxed- accordingly. Penalty proceedings are separately initiated u/s 271AAC(1) for mis-reporting of income. Subject to the above remarks, the total income is computed as per para 4.” 5. Aggrieved by the order of the AO the assessee preferred an appeal before the ld.CIT(A), NFAC, Delhi. :-4-: ITA. No:487/Chny/2025 6. Before the ld.CIT(A) the assessee submitted the detailed reply along with the evidence by explaining source of cash deposits made to the tune of Rs.1,12,29,000/-. The assessee again submitted the copy of reply filed dated 10.03.2024 before the AO during the assessment proceedings along with enclosures including all the bank statements for the F.Y. 2017-18 during the appellate proceedings. 7. However, the ld. CIT(A) was not convinced with the submissions and rejected the grounds of appeal of the assessee stating that the assessee has not filed return of income for the A.Y. 2016-17 and 2017-18 in page no.7 of his order dated 30.12.2024 by holding as under: “I find that the Assessing Officer observed during the assessment proceedings as under. “a. The reply submitted was carefully perused. The assessee has stated that the loan obtained from Repco Home Finance Ltd of Rs. 2.39 crore was used for self withdrawal of Rs.68,00,000/-, paid to Sivambiga Fuels as capital of Rs. 50 lakhs, Paid to Sivambiga Transports as Capital Rs. 40 lakhs, and paid to P. Athiyannan- HUF and P. Athiyannan-lndividual of Rs. 40 lakhs each. However, no supporting documents were furnished such as loan confirmation, ledger account with Sivambiga Fuels and Sivambiga Transports to prove the contention. The capital account of Sivarbiga Fuels shows capital balance of assessee as 490000/- as on 31.03.17 and 31.03.18. b. It is just claimed that the rise in cash balance is reflected in cash book. In the show-cause notice issued (para 2.3), it was pointed out that the entries of cash book are not clear and hence entries cannot be analysed. Assessee has not specifically pointed out specific cash entries which had given rise to cash balance in hand. No date wise data was furnished explaining the entries which led to increase in huge cash balance in assessee's hand. Again no clear copy of the cash book was furnished but left for the revenue to search the entries in unclear copy of cash book. c. The balance in unsecured is stated to be wrongly reported at Rs. 6306207/- in earlier reply. The assessee had submitted new list of unsecured loans totalling to Rs. 108, 60, 000/-. No documentary evidence/ proof in support thereof is submitted to prove that the list submitted now is a genuine. One of the loan entry in name of of Shri Kunal Bhatija is submitted in new reply which was omitted in earlier reply. This shows the casual attitude of the assessee in submitting reply even during the assessment proceedings claim one figure in a reply and claiming another figure in subsequent reply without any :-5-: ITA. No:487/Chny/2025 reconciliation/ pointing out the reasons for revising the figures and submitting documentary evidence to prove that the revised figures are correct. In the absence of proper and complete reply from the assessee alongwith documentary evidence which could be relied upon in support of the cash deposits made by the assessee in Canara Bank, and non-legible copy of cash book submitted, the source of cash deposits cannot be treated as explained meanwhile reply was received from assessee on 11.03.24 after issue of ILDP providing details of utilisation of loan taken from Repco Home Finance herein it is stated that amount of Rs. 68 lakhs is cash withdrawals, 90 lakhs is capital introduced in firm and Rs. 80 lakhs is towards advances made. Assessee has again emphasised on cash balance available on 31.03.16 of Rs. 4587312/-, as on 31.03.2017 of Rs.17198704/- which is mainly on account of cash withdrawals from bank and capital from firm as per the cash book submitted. However, the assessee has not provided a legible copy of the cash book when it was specifically pointed out in Show-cause notice that the copy of cash book was not clear. The assessee has further stated that non-filing of ITR for A.Y. 17-18 and 18-19 should not result in any adverse view when cash book has been maintained by the assessee explaining reason for substantial increase in cash balance. The reply of the assessee is vague. The assessee has very well pointed out that AO cannot take adverse view but is not aware of his own responsibility of filing the return of income in time and legible copy of cash book for verification of rise in cash balance. It has not been clearly pointed out the reason for rise in cash balance with proper explanation and date wise data alongwith the reply. Further, the assessee has also submitted revised figures of unsecured loan stating that the closing balance as on 31.03.2017 was wrongly reported. One entry of Kunal Bhatija was newly added. No supporting evidence in respect of the changes was submitted to prove the revised figures. This proves that whatever copies of records were submitted were prepared in accordance to match and substantiate the queries raised during the assessment. In the circumstances, the contention of the assessee cannot be accepted.\" The appellant has not brought any new evidence during the appellant proceedings. The appellant has submitted during the appellate proceedings that the cash balance of Rs.1,71,98,704/- as on 31.03.2017 should be accepted as day books for FY2016-17 were submitted. I find that the Assessing Officer has observed that the appellant did not provide a legible copy of cash book though it was specifically pointed out. Further, the Assessing Officer pointed out that documentary evidences of unsecured loans stated to be taken was not furnished. No date wise data was furnished explaining the entries which lade to increase in huge cash balance in assessee's hand. The increased in cash balance to Rs.44,87,312/- as on 31.03.2016 and to Rs.1,71,98,704/- as on 31.03.2017 appears disproportionate looking to the figures of 31.03.2013 (Rs.42,588/-), figures of 31.03.2014 of Rs.48,056/- and 31.03.2015 of Rs.1,92,553/-. :-6-: ITA. No:487/Chny/2025 The appellant did not file return of Income for AY2016-17 and for AY 2017-18 in which years there is abnormal increase in opening cash balance. Further, the appellant did not file return of Income u/s 139(1) of the Act for the AY2018-19. In these circumstances the appellant has failed to prove the correctness of opening cash balance and has also failed to prove the source of cash deposits. The income of the appellant declared in the return of Income also does not justify availability of such huge cash balance. In case of CIT vs. Durga Prasad More (82 ITR 540 SC) it was held that the Courts and Tribunal have to judge the evidence before them by applying the test of human probabilities. In the present case there appears no probability of having such huge cash as opening balance. From the above discussion it is cleared that the appellant has failed to explain the source of cash deposits. Therefore, the grounds of appeal are not tenable are dismissed. In the result the appeal is dismissed. 8. The ld.AR for the assessee submitted that the AO has erred in making the addition of cash deposit as unexplained money u/s.69A of the Act though the source of cash deposit was explained clearly by submitting the cash book and bank statements, return of income for the A.Y. 201-17 by showing the closing balance as on 31.03.2016. The ld.AR further submitted that the AO has neither rejected the books of accounts furnished nor found any other investment made out of the cash balance recorded in the books as on 31.03.2017. The AO has observed that the legitimate copy of the cash book was not submitted during the assessment proceedings. He further argued that the ld.CIT(A) has dismissed the appeal of the assessee by confirming the order of AO by doubting the availability of huge cash balance as on 31.03.2017. In support of the case, the ld.AR submitted the return of income for the A.Y. 2016- 17 along with the financials, Cash book for the A.Y. 2017-18 along with the financials and also the return of income and the financials for the impugned :-7-: ITA. No:487/Chny/2025 A.Y. 2018-19 showing the availability of cash balances. In light of the above arguments and submissions the ld.AR prayed for allowing the appeal by deleting the additions made by the AO, by setting aside the order of the ld.CIT(A). 9. Per contra, the ld.DR for the Revenue relied on the orders of the lower authorities and submitted that the assessee had not filed the return of income for the impugned A.Y. as well as the earlier A.Y. 2017-18 and hence prayed for dismissing the appeal of the assessee. 10. We have heard the rival contentions perused the material available on record and gone through the orders of the lower authorities. It is admitted fact that the assessee had not filed return of income for the A.Y.2017-18, but filed the return of income u/s.148 of the Act, which has been considered in the computation of income tax by the AO in his order by making the addition to the returned income. The assessee has claimed that the cash deposits made during the F.Y.2017-18 to the tune of Rs.1,12,29,000/- was out of the cash on hand held as on 31.03.2017 of Rs.1,71,98,704/-, for which the assessee had furnished the cash book for the F.Y.2016-17. The assessee filed his return of income for the A.Y.2016-17, wherein he has shown a cash balance as on 31.03.2016 of Rs.45,87,312/-. 11. Further, we note that the AO has observed that the assessee has drawn a cash of Rs.68,00,000/- from the Canara bank current Account of the assessee, out of the loan borrowed from Repco Bank. Before us the assessee also submitted the legible copy of the cash book. Further, the assessee had filed a cash book for the F.Y. 2016-17 showing the opening cash balance as on :-8-: ITA. No:487/Chny/2025 01.04.2016 of Rs.45,87,312/- as per the return of income filed and the transactions of cash withdrawals of Rs.68,00,000/- from the Canara bank current account and arrived the closing cash balance of Rs.1,71,98,704/-, which was not denied by the AO. 12. We also note that the AO has not rejected the books of accounts (cash book for the F.Y. 2016-17) filed by the assessee by showing the cash balance as on 31.03.2017 of Rs.1,71,98,704/- to explain the source of the cash deposit to the tune of Rs.1,12,29,000/- during the impugned A.Y.2018-19. Further, we find that the AO has not brought out any other evidence to show that the assessee has utilized the cash balance shown as on 31.03.2017 to doubt the explained source of cash deposit. Further, we note that the closing cash balance as on 31.03.2016 as per the return of income filed by the assessee for the A.Y.2016-17 was Rs.45,87,312/- along with the cash withdrawal of Rs.68,00,000/- from the Canara bank current account during the A.Y.2017-18 itself is sufficient source for cash deposit of Rs.1,12,29,000/- during the impugned A.Y.2018-19, as the AO has neither brought out any other evidence for having utilized the cash balance nor rejected the books of accounts of the assessee in his order. 13. Further, we note that the Ld.CIT(A) has wrongly stated that the assessee has not filed return of income for the A.Y.2016-17, however, we find that the AO in his order considered the return of income filed by the assessee to show the closing cash balance of Rs.45,87,312/- as on 31.03.2016. 14. In light of the above discussion and in the present facts and circumstances of the case, we are of the considered view that the AO and that :-9-: ITA. No:487/Chny/2025 of the ld.CIT(A) have erred in taxing the cash deposit of Rs.1,12,29,000/- as unexplained income u/s.69A of the Act, though the assessee has a sufficient cash balance. Therefore, we are inclined to set aside the order of ld.CIT(A) and direct the AO to delete the additions made u/s.69A of the Act by allowing the grounds of appeal filed by the assessee. 15. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 12th June, 2025 at Chennai. Sd/- Sd/- (मनु क ुमार िगįर) (MANU KUMAR GIRI) Ɋाियक सद˟/Judicial Member (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखा सद˟/Accountant Member चेɄई/Chennai, िदनांक/Dated, the 12th June, 2025 SP आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT– Chennai/Coimbatore/Madurai/Salem 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF "