Unexplained Cash Deposits and Status of Resident Not Verified on Merits: ITAT Remands ₹1.17 Crore Addition [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) set aside the assessment order passed, and restored the matter to the file of the Assessing Officer (AO) for a detailed review on the merits of the case for the issue of unexplained cash deposits and status of resident.

Arunbhai Chhaganbhai Patel (assessee) was flagged under the Risk Management Strategy for not filing a return of income for Assessment Year (AY) 2019-20, despite having carried out various transactions. A notice under Section 148 was issued, but the assessee failed to file a return or comply with subsequent statutory notices.

Based on bank statement details, the AO determined that the assessee had deposited ₹1,17,00,000/- during the year. As the assessee failed to discharge the onus to explain the source of these deposits, the AO treated the entire amount as unexplained cash deposits under Section 69A read with Section 115BBE of the Act.

The AO determined the assessee’s status as a Resident in India. Aggrieved by the AO’s order, the assessee appealed the assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal ex-parte without addressing the issues on merit.

Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The counsel for the assessee contended that the assessee was not in India when the original assessment took place, which was the reason for the non-compliance.

The counsel further submitted that the CIT(A) order was also ex-parte because the consultant engaged by the assessee failed to respond to the notices despite being provided with all the necessary evidence.

The two-member bench, comprising Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member), observed that since the assessment was made ex-parte under Section 144 and the first appeal was also dismissed ex-parte, there appeared to be a genuine difficulty on the part of the assessee.

In the interest of justice and fair play, the Tribunal remanded the entire matter back to the file of the AO with a direction to grant the assessee a proper opportunity of hearing by following the principles of natural justice.

The tribunal directed the AO to properly verify the evidence and adjudicate the contested issues, including the addition under Section 69A and the status of the appellant as a resident, on their merits. In the result, the appeal filed by the assessee was partly allowed for statistical purposes.

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