Unexplained Deposits of ₹41.02 Lakh Restored to AO: ITAT Cites Illiteracy, Allows Additional Evidence with 5k Costs [Read Order]

The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) acknowledged the assessee's illiteracy and restored the assessment involving an unexplained deposit of Rs. 41,02,924 to the AssessingOfficer (AO) for fresh consideration.

Bharatbhai Raghavbhai Jograna (assessee), an individual who was involved in the sale of milk, did not file a return of income for the Assessment Year (AY) 2017-18, claiming his income was exempt.

The case was selected for scrutiny under Section 144 of the Income Tax Act, 1961, after the AO observed a total deposit of Rs. 41,02,924/- in the assessee's bank account during the financial year 2016-17.

This amount included cash deposits of Rs. 14,96,500/- during the demonetization period and other credit entries of Rs. 26,06,424/- supposedly from gold loan disbursements. The assessee failed to respond to multiple notices issued by the AO.

The AO treated the entire amount as unexplained money under Section 69A and taxed it under Section 115BBE of the Income Tax Act. Aggrieved by the assessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)].

However, the assessee failed to respond to five hearing notices issued by the CIT(A) between 2021 and 2024. The CIT(A) dismissed the appeal and observed that the assessee could not substantiate the source of the deposits or the nature of the gold loan entries. Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT.

The assessee's counsel argued that the assessee was now in a position to substantiate the deposits, presenting additional evidence in the form of bank statements and records of income from the sale of milk, which were not available before the lower authorities. The counsel explained that the assessee's illiteracy prevented him from filing this evidence earlier.

The two-member bench comprising Siddhartha Nautiyal (Judicial Member) and Narendra Prasad Sinha (Accountant Member) observed the illiteracy of the assessee and the additional evidence presented before the tribunal.

The Tribunal restored the matter to the file of the Assessing Officer for fresh consideration and directed the AO to provide the assessee a due opportunity to file all necessary documents and submissions.

However, in view of the consistent non-compliance by the assessee before both the AO and the CIT(A) the ITAT imposed a cost of Rs. 5,000/- which is to be submitted before the Prime Minister’s Relief Fund for the purpose of order to be set-aside. In the result, the appeal of the assessee was allowed for statistical purposes.

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