The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) ruled that rejecting records solely due to handwritten form is unjust without considering the taxpayer’s explanation and business context.
Kalpeshbhai Amthabhai Desai, the assessee is a retail milk seller primarily operating in cash. The assessee deposited Rs. 16,35,513 in cash into the ICICI Bank account. A notice was issued to the assessee on 25.03.2019 under Section 148 of the Income Tax Act due to the initial non-filing of an income tax return for the assessment year 2012-13.
In response, the assessee filed an income tax return on 10.04.2019 declaring an income of Rs. 1,66,160. On 09.12.2019, AO added Rs. 16,35,513 as unexplained cash deposits under Section 69A of the Income Tax Act rejecting the assessee’s explanation and evidence.
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The assessee appealed this addition before the Commissioner of Income Tax (Appeals) (CIT(A)) submitted a handwritten record, including a cash book (‘desi hisab’), profit and loss account, balance sheet, and bank statements.
However, the CIT(A) rejected the records because it is in handwritten form and upheld the AO’s decision. Aggrieved, the assessee appealed before the Ahmedabad Bench of ITAT arguing that the cash deposits were claimed to be from the retail milk business, which primarily operates in cash, especially in rural areas.
The assessee also provided a cash book (‘desi hisab’), bank book, and other related documents to justify the deposits. The assessee sought relief and requested a re-evaluation of the evidence provided which included handwritten records.
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On the other hand, the Revenue counsel argued that the cash deposits were unexplained under Section 69A, deeming the provided handwritten evidence as insufficient and unreliable. Both the AO and CIT(A) rejected the assessee’s evidence primarily due to its handwritten nature and a lack of credibility considering it did not meet their standards.
The two-member bench comprising Suchitra Kamble (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) noted that the CIT(A) heavily relied on the AO’s order without an independent assessment of the evidence.
The tribunal emphasized that the CIT(A) did not adequately consider the context of the assessee’s business, which traditionally operates in cash. The tribunal criticized the revenue for rejecting the evidence due to its handwritten form rather than the content and substance it provided.
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The tribunal found that the CIT(A) failed to give a reasoned order, which is required under the principles of natural justice. Therefore, the tribunal set aside the CIT(A)’s order and remanded the matter for a fresh evaluation.
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