Facts of the Case

The assessee, Santosh Bai Bhatevra, a retail trader, filed her return of income for Assessment Year 2017-18 declaring total income of ₹3,73,790. The case was selected for scrutiny under CASS on the basis of alleged large cash deposits during the demonetisation period. The Assessing Officer completed assessment under Section 143(3) on 19.12.2019 and made an addition of ₹7,78,000 under Section 69A, treating cash deposits in three bank accounts maintained with a Gramin Bank as unexplained, and taxed the same under Section 115BBE. The discrepancy arose due to incorrect reporting on the income-tax portal showing cash deposits of ₹2.85 crore, which was later clarified by the bank through confirmation under Section 133(6) that actual deposits were only ₹7,78,000.

On first appeal, the CIT(A) partly allowed the appeal by deleting ₹4,05,000 and sustaining an addition of ₹3,73,000, holding that part of the cash deposits were explained through sale proceeds and withdrawals, while the balance remained unexplained due to lack of proper linkage and supporting evidence. Aggrieved by partial sustenance, the assessee preferred a second appeal before the Tribunal.

Issues Involved

Whether the partial sustenance of addition of ₹3,73,000 under Section 69A was justified, whether the assessee had sufficiently explained the source of cash deposits through business income, past savings and bank withdrawals, whether proper correlation between withdrawals and redeposits was examined, and whether the appellate order suffered from incomplete adjudication on merits warranting remand.

Petitioner’s Arguments

The assessee contended that the entire scrutiny was triggered due to incorrect portal data showing deposits of ₹2.85 crore, which was later admitted to be erroneous. It was argued that total deposits were only ₹7,78,000 for the entire year and were sourced from sale proceeds already offered to tax under presumptive taxation under Section 44AD and from withdrawals made prior to demonetisation. It was submitted that certain withdrawals, including a withdrawal of ₹2,00,000 on 14.03.2016 and ₹25,000 on 01.02.2016, were not properly considered by the CIT(A). The assessee further argued that sustaining part of the addition without full appreciation of bank statements and linkage resulted in hardship to a small taxpayer.

Respondent’s Arguments

The Revenue submitted that the assessee failed to furnish complete and readable bank statements and did not file any rejoinder to the Assessing Officer’s remand report called for by the CIT(A). It was argued that no clear cash flow or correlation between withdrawals and redeposits was established before the lower authorities and that the remand report specifically highlighted these deficiencies. In absence of rebuttal to the remand report, partial sustenance by the CIT(A) could not be faulted, and at best the matter required remand for fresh examination.

Court Order / Findings

The ITAT Indore observed that although partial relief was granted by the CIT(A), the factual matrix was incomplete due to non-submission of readable bank statements, absence of a detailed cash flow, and failure of the assessee to file any rejoinder to the remand report dated 27.02.2025. The Tribunal noted that crucial aspects such as proper linkage between withdrawals and redeposits and availability of cash were not conclusively examined. Considering the incomplete appreciation of evidence and in the interest of justice, the Tribunal held that the matter required fresh adjudication. Accordingly, the Tribunal set aside the impugned appellate order in entirety and remanded the case to the file of the CIT(A) with a direction to adjudicate the appeal afresh after considering all bank statements, establishing correlation between withdrawals and redeposits, and after examining a detailed rejoinder to the remand report.

Important Clarification

The Tribunal clarified that in cases of cash deposit additions under Section 69A, appellate authorities must undertake a holistic examination of bank statements, timing of withdrawals and redeposits, and explanations supported by evidence. Partial adjudication without resolving core factual deficiencies does not meet the requirement of a speaking and reasoned order.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes, the impugned order of the CIT(A) partly sustaining the addition was set aside, and the matter was remanded to the file of the CIT(A) for fresh adjudication on merits in accordance with law after granting due pportunity of hearing to the assessee.

 Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769159143_SANTOSHBAIBHATEVRAJHABUAVS.ITOWARD1RATLAMRATLAM.pdf

 

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pportunity of hearing to the assessee.