Demonitization cash deposited from sales treated as unexplained cash deposit: ITAT remands back case

The appeal had been filed by a taxpayer named Mohd. Amin Sofi in ITAT Amritsar, against the income tax officer (ITO) Ward-2, Srinagar. The assessee challenged an order dated November 30, 2023, passed by the CIT(A) NFAC, Delhi, under section 250(6) of the Income Tax Act, 1961. The present appeal was filed 122 days late before the tribunal. The assessee had requested condonation of delay, giving the reason that he is illiterate and did not know how to operate a computer.

The system, or even his smartphone, was totally dependent on his tax consultant. The order of the first appellate authority dated November 30, 2023, was not served physically by post; instead was uploaded on the e-filing portal, and the tax consultant did not inform the assessee about the order. He was informed about the order by his tax consultant only, but in May 2024, the assessee immediately adopted the necessary steps to appoint his new counsel, who helped him to file the appeal before the Income Tax Appellate Tribunal.

The appeal was successfully filed on June 14, 2024, but was still late by 122 days. The assessee also specified the reason behind the delay in finding his lawyer. He said that he had been suffering from a lumbar disc herniation problem and his doctors had advised him to get bed rest, which resulted in a delay. The tribunal found that the delay was not intentional, hence accepting the assessee’s application requesting condonation of the delay.

The assessee deposited a cash amount of Rs. 11.86 lakhs in his bank account during the period of demonetisation. The assessee did not file his income tax return (ITR) even after receiving a reminder notice under section 142(1) from the tax authority. In conclusion, the assessing officer (AO) completed the assessment without his participation (ex parte) under section 144 and declared the total income of the assessee at Rs. 14.02 lakh, which includes Rs. 11.86 lakh treated as unexplained cash deposit under section 69A, and Rs. 2.15 lakh treated as business profit, calculated at 8% of the remaining bank deposits.

The aggrieved assessee then approached CIT(A). However, the CIT(A) dismissed his appeal because the assessee did not respond to notices dated November 25, 2021, November 10, 2022, and the final show cause notice on July 14, 2023. The authority closed the case without examining or deciding the issues mentioned in Form 35.

Thereafter, the case was taken before ITAT Amritsar, where the tribunal noted that the assessee is engaged in the business of bakery products and has disclosed the total cash receipts over the entire financial year in the cash book, which is also the explanation of deposits of cash in bank account during the demonetisation period, which is come out of sale proceeds of such bakery products. The records indicate that the cash balance on November 01, 2016, was Rs. 8.84 lakhs.

Cash was deposited in the bank, and some cash sales were recorded between November 01 and November 08, 2016, but the cash balance as of November 08, 2016, is missing in the cash book. In the interest of fairness, the tribunal remanded the case to the CIT(A) to examine all the submitted documents again. The assessee has been directed to submit the cash book and supporting documents to prove the source of cash deposits made during the demonetisation period, and must fully cooperate in the appeal. The CIT(A) may also take a report from the Assessing Officer (AO) on any new evidence as required.

The assessee will be given a fair chance to present their side. The Tribunal has not given any opinion on the actual merits of the case. The appeal is allowed only for statistical purposes.