Cash Deposit Not Deemed Unexplained u/s 144 r/w 147 of Income Tax Act Without Reasonable Opportunity to Prove Source: ITAT affirms Substantial Justice & Fair Play [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench has held that Cash Deposit shall not be treated as “Unexplained” under Section 144 read with Section 147 of Income Tax Act, 1961 without affording the assessee a fair and reasonable opportunity to prove the Source of the deposit made by him in his bank account. The bench thus upheld the principles of Substantial Justice & Fair Play.

The Assessing Officer (AO) had treated the cash deposit made by the assessee as unexplained under Section 144 read with Section 147 of Income Tax Act, 1961. The same treatment was upheld by the Commissioner of Income Tax (Appeals) (CIT(A)) in an ex-parte order due to the assessee's non-response to notices.

The appeal was filed by the assessee, Shri Harminder Singh represented by Shri Y.K. Saxen to set aside the ex-parte order and grand an opportunity to prove the source of cash deposit of Rs. 49,40,750.

The assessee submitted that the delay in filing of appeal was not intentional. The assessee had to go to the United States of America (USA) frequently to attend the family affairs.

The assessee also highlighted the extension of limitation in consequent to Covid-19 pandemic as well as illness of his father and produced the copy of passport and the Visa stamps of departure and arrival and requested to condone the delay.

The Revenue, Income Tax Officer (ITO), Jagraon represented by Smt. Amandeep Kaur submitted that the appeal shall be rejected since barred by limitation.

The benchobserved that there were clear lapses and negligence on the part of the assessee in not filing the appeal within the prescribed time frame. However, the bench highlighted that the assessee deserves a chance to be heard on the merits of the case before reaching a final decision.

The bench noted that the explanations provided by the assessee regarding the source of the cash deposit were not considered by the lower authorities.

The bench referred to the case of Sanchit Software and Solutions Pvt. Ltd vs. Commissioner of Income Tax and Others, in which Bombay High Court held that the objective of tax administration is to collect the legally payable amount from the assessee and not to impose excessive tax.

The bench stressed the importance to consider the principles of Substantial Justice and Fair Play and hence condoned the delay in filing the appeal imposing a cost of Rs. 5,000 on the assessee.

The two-member bench consisting of Shri A.D. Jain (Vice President) and Shri Vikram Singh Yadav (Accountant Member) set aside the previous orders and remanded the matter to the AO for fresh consideration indicating that the decision pertained to the procedural aspects of the case rather than the merits.

The bench also directed the assessee to provide necessary information and documentation to support the claim regarding the source of the cash deposit.

In the result, the appeal of the assessee is allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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