VEMPATI SATISH,WEST GODAVARI V. INCOME TAX OFFICER, WARD-2, ELURU

ITA 455/VIZ/2024

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The case involves Vempati Satish, an authorized business correspondent for the State Bank of India, who facilitated banking services in remote villages. He was assessed under section 144 of the Income Tax Act, 1961, for not filing his income tax return and for making substantial cash deposits during the demonetization period. The A.O. treated these deposits as unexplained money under section 69A of the Act. The CIT(A) upheld this decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal acknowledged the assessee's role and the bank's certification but noted the lack of detailed customer information to fully substantiate the source of the deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669100 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Opportunity of being heard
• Section: 144; 142(1)

Judgement Text

" आयकर अपीलीय अधिकरण, विशाखापटणम पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL Visakhapatnam Bench श्री रिीश सूद, माननीय न्याययक सदस्य एिं श्री एस. बालक ृष्णन, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI BALAKRISHNAN. S, ACCOUNTANT MEMBER, I.T.A. No.455/Viz/2024 (निर्धारण वर्ा/ Assessment Year : 2017-18) Vempati Satish, West Godavari District. PAN : CLOPS4607N Vs. The Income Tax Officer, Ward – 2, Eluru. (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri GVN Hari, Advocate (HYBRID) राजस्व का प्रतततितित्व/ Department Represented by : Dr. Satyasai Rath, CIT(DR) सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 25.06.2025 घोषणा की तारीख/ Date of Pronouncement : 26.06.2025 O R D E R प्रतत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee arises from the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 16.07.2024, which in turn arises from the order passed by the Assessing Officer (for short “A.O.”) 2 ITA No.455/Viz/2024 Vempati Satish u/s 144 of the Income Tax Act, 1961 (for short, “the Act”) dated 20.11.2019 for A.Y. 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us : “1. That under the facts and circumstances of the case the orders passed u/s144 of the IT Act that was up held by the learned CIT (A) vide order passed u/s 250 of the IT Act on dt. 16.07.2024 is not a valid order in the eyes of law. 2. The Ld.CIT(A) erred in law and on facts in not appreciating that the assessee is an authorized agent of a business correspondent appointed by State Bank of India (SBI), specifically tasked with extending banking services to remote villages. As part of these services, the assessee receives cash deposits from villagers and facilitates the transfer of these funds to the respective bank accounts of these villagers through the assessee's own bank account. 3. Under facts and circumstances and taking note of ground no. 2, the Ld. CIT(A) is not correct in bringing to tax the cash deposits made in the bank account Rs.15,50,550/-as unexplained cash deposits invoking provisions of sec 69A of the IT Act. 4. For these and other reasons the appellant prays for the quashing of the impugned orders and seeks relief in accordance with the grounds stated above and any additional grounds to be urged during the hearing of the case. 2. Apart from that the assessee has raised an additional ground of appeal which reads as under: “The Finance Act 2017 introduced an amendment to Section 115BBE of the IT Act, which set a higher tax rate of 60% through the Taxation (Second Amendment) Act, 2016. This amended rate is applicable only for assessments conducted from 01.04.2017 onward. Therefore, it is not permissible to apply the revised rate to the assessment year in question.” 3. As the assessee by raising the aforesaid additional ground of appeal has sought our indulgence for adjudicating a legal issue which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our 3 ITA No.455/Viz/2024 Vempati Satish aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC). 4. At the threshold of hearing of the appeal, the Learned Authorized Representative (in short “Ld.AR”) for the assessee, submitted that there is a delay of 55 days involved in filing the present appeal. Elaborating on the reasons leading to the delay, the Ld.AR submitted that the same had occasioned because the assessee during the relevant period was taken medically unwell. The Ld.AR to buttress his contention had drawn our attention to the condonation petition filed by the assessee along with the copies of the medical certificates. 5. Per contra, the Ld. Departmental Representative objected to the seeking of condonation of delay by the assessee appellant. 6. We have thoughtfully considered the contentions of the Ld. Authorized representatives of both parties regarding the reasons leading to the delay in filing the present appeal. In our view as there were bonafide reasons leading to the delay in filing of the present appeal, therefore, the same in all fairness and interest of justice merits to be condoned. 4 ITA No.455/Viz/2024 Vempati Satish 7. Succinctly stated, the A.O. based on the information gathered during the phase of online verification under the “Operation Clean Money” that though the assessee had made substantial cash deposits of Rs. 13,45,550/- in his bank accounts during the demonetization period, i.e., 09.11.2016 to 31.12.2016, but had not filed his return of income for the subject year, called for his return of income u/s 142(1) of the Act. As the assessee failed to comply with the aforesaid notice, therefore, the A.O. was constrained to proceed with and frame the assessment to the best of his judgment u/s 144 of the Act. 8. During the course of assessment proceedings, the A.O. observed that the assessee had, in the year under consideration, made cash deposits aggregating to Rs.15,50,550/- in his bank account No.31669365654 with State Bank of India. 9. As the assessee had failed to come forth with any explanation regarding the source of the aforesaid cash deposits, the A.O., vide his order passed u/s 144 dated 20.11.2019, held the entire amount as having been sourced out of his unexplained money u/s 69A of the Act. 10. Aggrieved, the assessee carried the matter in appeal before the CIT(A). During the course of appellate proceedings, it was the claim of the assessee that he had failed to participate in the assessment 5 ITA No.455/Viz/2024 Vempati Satish proceedings as he was putting up in a remote place, i.e., Village Thochilaka Rayudu Palem, Lingapalem Mandalam, West Godavari District, and the notice(s) that were stated to have been sent by the A.O. were not received by him. On merits, it was the claim of the assessee that he was an authorized small business correspondent of the State Bank of India, Branch: Dharmajigudem Lingapalem Mandal, and during the subject year was providing services to the illiterate poor people in and around the villages falling in the nearby area. 11. Elaborating further on his claim, it was stated by the assessee that he would carry out cash collections from illiterate people engaged in petty jobs in remote areas that were not catered with the banking services, and would, as a custodian, deposit the amounts so collected in his current account with the State Bank of India, Branch: Dharmajigudem Lingapalem Mandal. The assessee, in order to dispel all doubts regarding the veracity of his aforesaid explanation had filed before the CIT(A) a certificate of the aforesaid bank, i.e., State Bank of India, Branch : Dharmajigudem Lingapalem Mandal dated 13.01.2020, wherein the bank had certified that he during the subject year was rendering his services as a business correspondent in and around Thochilaka Rayudupalem, Lingapalem Mandalam, West Godavari District. The bank had further certified that during the subject year, i.e. 6 ITA No.455/Viz/2024 Vempati Satish for the period 01.04.2016 to 31.03.2017 the customer transactions were carried out through the current account of the assessee i.e., Account No. 31669365654. The assessee, based on the aforesaid facts, submitted before the CIT(A) that as the cash deposits in his bank account during the subject year was the money held by him as a custodian for and on behalf of his customers who were engaged in petty jobs in the remote areas, therefore, there was no justification for the A.O. to have held the same as his unexplained money u/s 69A of the Act. 12. However, the aforesaid claim of the assessee did not find favour with the CIT(A). The CIT(A) was of the view that as the assessee had failed to come forth with any plausible and logical explanation regarding the source of the cash deposits of Rs. 15.50 lacs (approx.) made in his bank account during the subject year, therefore, no infirmity did emerge from the view taken by the A.O., who had rightly held that the same was sourced out of the assessee’s unexplained money u/s 69A of the Act. 13. The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us. 7 ITA No.455/Viz/2024 Vempati Satish 14. We have heard the learned Authorized Representatives of both parties and perused the material on record in the backdrop of the orders of the lower authorities. 15. Shri C. Subrahmanyam, the Learned Authorized Representative (in short “Ld.AR”) for the assessee, at the threshold of the hearing of the appeal, submitted that the CIT(A) had grossly erred in law and on the facts of the case in upholding the addition of Rs. 15.50 lacs made by the A.O u/s 69A of the Act. 16. Elaborating further on his contention, the Ld. AR submitted that, as the assessee was, during the subject year, undeniably a business correspondent of the State Bank of India, Branch: Dharmajigudem Lingapalem Mandal and had, as a custodian, collected cash from his customers, i.e., the poor illiterate persons who were rendering their services in the remote areas which were not served by any banking facility, and, in his capacity as a business correspondent of the bank, deposited the same in his current account no. 3166936564 during the subject year, therefore, there was no justification for the lower authorities to have arbitrarily held the same as his unexplained money u/s 69A of the Act. 8 ITA No.455/Viz/2024 Vempati Satish 17. The Ld. AR, to buttress his claim, has drawn our attention to the certificate of the State Bank of India, Branch: Dharmajigudem Lingapalem Mandal, dated 13.01.2020 that was filed by the assessee before the CIT(A). The Ld. AR submitted that the bank in its aforesaid certificate had categorically stated that the assessee was a business correspondent and had carried out customer transactions through his subject current account during the year under consideration. However, the Ld. AR, on being queried as to why the complete details of the customers whose money the assessee was holding as a custodian were not provided in the course of the proceedings before the CIT(A), failed to come forth with any plausible explanation. The Ld. AR submitted that the matter in all fairness be restored to the file of the A.O., with liberty to the assessee to furnish the requisite details to substantiate his contention that the cash deposited in his current account was that of his customers to whom he was providing services as a business correspondent of the bank and was held by him in his bank account only in the status as that of a custodian. 18. Per contra, Dr. Aparna Villuri, the learned Senior Departmental Representative (for short “Ld. DR”) relied on the orders of the lower authorities. 9 ITA No.455/Viz/2024 Vempati Satish 19. We have thoughtfully considered the contentions advanced by the learned authorized representatives of both parties qua the issue in hand. 20. Admittedly, it is a matter of fact borne from the record that the cash deposits of Rs.15,50,550/- were made in the bank account of the assessee during the subject year, i.e., A.Y. 2017–18. We find that the claim of the assessee that he, during the subject year, was a business correspondent of the State Bank of India, Branch: Dharmajigudem Lingapalem Mandal is not a claim raised by him in the thin air, but is a fact backed by the certificate issued by the bank dated 13.01.2020. As observed hereinabove, the bank has not only certified that the assessee during the subject year was a business correspondent but also stated that he had, during the subject year, carried out customer transactions in his current account no. 3166936564. For the sake of clarity, the bank certificate that was filed by the assessee before the CIT(A) (copy of which is placed on our record) is culled out as under: 10 ITA No.455/Viz/2024 Vempati Satish 21. Although there is no denying the fact that the assessee had failed to substantiate the source of the cash deposits in his bank account, i.e., by providing the complete details of the respective customers from whom he had during the subject year collected the cash and deposited the same in his bank account as a custodian, but, we are of the firm conviction that, in the backdrop of the aforesaid bank certificate, the claim of the assessee that the subject cash deposits in his bank account 11 ITA No.455/Viz/2024 Vempati Satish were the amounts collected by him from his customers and held on their behalf could not have been summarily rejected. At the same time, we are of the firm conviction that the assessee who was providing services as a custodian to his customers would have maintained the requisite details about the respective cash collections from his customers that had found its way in his subject bank during the year under consideration. 21. Considering the facts involved in the case before us, we are of the view that the matter, in all fairness, requires to be set aside to the file of the A.O., who is directed to re-adjudicate the aforesaid issue. Needless to say, the A.O. shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at liberty to substantiate his claim based on fresh documentary evidence, if any. The Grounds of Appeal Nos. 1 to 3 are allowed for statistical purposes in terms of our aforesaid observations. 12 ITA No.455/Viz/2024 Vempati Satish 23. Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in the Open Court on 26th June, 2025. Sd/- (एस. बालक ृष्णन) (S. BALAKRISHNAN) लेखध सदस्य/ACCOUNTANT MEMBER Sd/- (रिीश सूद) (RAVISH SOOD) न्यधनिक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 26.06.2025. TYNM/sps आदेशकी प्रतततिति अग्रेतषत/ Copy of the order forwarded to:- 1. तिर्ााररती/The Assessee : Vempati Satish, 2-98, T CH R Palem, Lingapalem Mandal, West Godavari District – 534462, Andhra Pradesh. 2. राजस्व/ The Revenue : The Income Tax Officer, Ward – 2, Eluru. 3. The Principal Commissioner of Income Tax, Visakhapatnam 4. तवभागीयप्रतततितर्, आयकर अिीिीय अतर्करण, / DR, ITAT, Visakhapatnam. 5. गार्ाफ़ाईि / Guard file आदेशािुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "