Assessee could not Produce Evidence before Tribunal due to Judicial Custody: ITAT sets aside Addition of Bank Credits to Income Tax [Read Order]
ITAT set aside the additions remanding the matter as the appellant was in judicial custody and was unable to produce evidence to explain bank credits and cash deposits
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The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has set aside additions made on account of cash deposits and bank credits for Assessment Years (AY) 2019–20 and 2020–21, noting that the appellant was in judicial custody and could not appear and produce evidence before the authorities.
The appellant-assessee Sanjay Awathare, an individual deriving income from a partnership firm named M/s Mahalakshmi Corporation, had filed their returns for AY 2017–18 and 2018–19.
The police authorities intercepted the appellant and seized cash of ₹1.20 crore. The department issued a requisition under Section 132A for the seized cash and initiated proceedings under Section 153A of the Act. The appellant filed returns admitting the same income as declared in the original return of income. However, the assessee failed to respond during assessment and appellate proceedings.
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The Tribunal noted that despite an earlier remand order, the assessee did not file any supporting evidence before the Commissioner of Income Tax (Appeals) ( CIT(A) ) due to being in judicial custody.
The assessee contended that the bank credits were business receipts through RTGS/NEFT modes of bank transactions and that cash withdrawals explained the subsequent deposits. However, the AO made the additions without verification. The Tribunal observed that most entries were through the cheque/NEFT mode of transfer.
The Bench comprising Vijay Pal Rao (Vice President) and Manjunatha G. (Accountant Member) held that the assessee had not been given a fair opportunity to explain his case due to his judicial custody.
The tribunal ordered that all these facts are required to be verified and re-examined based on the relevant record to be produced by the assessee.
Accordingly, ITAT remanded the matter to the AO with directions to allow the assessee an opportunity to furnish supporting documents and explain the bank entries.
The assessee was represented by A.V. Raghuram, while Srinath Sadanala represented the revenue.
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