ITAT Partly Allows Appeal Citing Need for Detailed Verification in Cash Deposit Transaction 

A search operation conducted on the Mehta Soni Group led to the reopening of the assessee’s case, alleging escapement of income. It was found that the assessee, Mehmud Ahmed Mian Ahmed, had made transactions with M/s. Mehta Finance, where cash of Rs 8,20,273, was deposited with the company in exchange for drafts or cheques.

The assessee claimed that the cash given to M/s Mehta was out of sales proceeds, and he had to use M/s Mehta Finance because the suppliers had refused to accept the demand drafts or cheques issued by the assessee’s bank. The assessee said that M/s Mehta Finance was charging less commission as compared to others. However, during the assessment and appellate proceedings, no confirmation was received from M/s Mehta Finance or the supplier about the transaction. The AO made an addition of Rs 8,20,273 under section 69A of the Income Tax Act. The CIT(A) upheld the addition. Therefore, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad.

The assessee submitted that the AO reopened the assessment just on the alleged escapement of income based on a search conducted. The assessee submitted that the confirmation was not submitted before the lower authorities but the same was submitted to the tribunal. He also submitted that the assessing officer had ignored the fact that the assessee had filed his ITR.

The ITAT noted that while the assessee had submitted a list of amounts and commissions, there was no confirmation from M/s. Mehta Finance regarding the cash deposits and the CIT(A) and AO did not consider the ledger account given by the assessee. The Tribunal said that these details require further verification, including whether the assessee is in possession of filing the confirmation from M/s Mehta Finance and the supplier. Therefore, the Tribunal remanded the case back to the CIT(A), directing further investigation in the case.