The Income Tax Appellate Tribunal, Chennai – ‘A’ Bench, has set aside an addition of Rs 26.90 lakh made under Section 69A read with Section 115BBE in respect of cash deposits during the demonetisation period, restoring the matter to the Assessing Officer for fresh adjudication after granting one final opportunity to the assessee to substantiate its explanation with supporting evidence.

The appeal was filed by Emperor Timber Trader Pvt. Ltd. for Assessment Year 2017-18 against the order of the CIT(A), NFAC, which had confirmed the addition solely on the ground of non-compliance and failure of the assessee to furnish supporting documents during appellate proceedings. The assessee had declared income of Rs 20.39 lakh, whereas the assessment was completed at Rs 47.29 lakh after treating cash deposits of Rs 26.90 lakh made between 09.11.2016 and 30.12.2016 as unexplained money under Section 69A.

Before the Tribunal, the assessee contended that due to non-receipt/non-communication of notices, it could not properly represent its case before the lower authorities. It was submitted that relevant books of account, cash book, bank statements and other evidence are now available, and therefore, one more opportunity should be granted to explain the source of cash deposits. The Revenue, on the other hand, argued that sufficient opportunities had already been provided and no further indulgence was warranted.

The Tribunal noted that both the Assessing Officer and CIT(A) had proceeded primarily on account of non-compliance without examining the supporting material, which, as claimed by the assessee, could explain the cash deposits. The Bench observed that assessment proceedings must be based on proper appreciation of material evidence, and where such evidence is available but not examined, the matter warrants reconsideration in the interest of justice.

The Tribunal specifically observed that the assessee should be afforded an opportunity to produce books of account, cash book and bank statements to substantiate the source of cash deposits made during the demonetisation period, before any final conclusion is drawn.

Accordingly, the Tribunal set aside the order of the CIT(A) and restored the matter to the file of the Assessing Officer for fresh adjudication. The AO has been directed to examine all evidence to be produced by the assessee and decide the issue afresh in accordance with law, after granting a reasonable opportunity of hearing.

The appeal was thus allowed for statistical purposes.

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