ITAT Remands Rs 16.69 Crore Cash Deposit Addition to AO for Fresh Verification of Egg Sales:

The assessee is Noor Ahmed who filed his return of income for Assessment Year 2018-19 on October 11, 2018, declaring a total income of Rs 13,36,240. During scrutiny proceedings, the AO noticed substantial cash deposits in the assessee's bank accounts and sought an explanation through notices issued under Sections 143(2) and 142(1) of the Income Tax Act.

In response, the assessee explained that he was engaged in the wholesale and retail distribution of eggs and that most of his sales were made in cash. He submitted that the bank deposits amounting to approximately Rs 16.69 crore represented sale proceeds from his business. He also explained that the financial statements originally filed along with the return had incorrectly reflected net income instead of gross turnover, based on the accounting treatment followed on the advice of his Chartered Accountant.

The assessee further submitted that he was facing difficulties in collecting and furnishing the purchase and sales invoices due to the COVID-19 lockdown. The AO treated the entire cash deposits of Rs 16,69,38,150 as unexplained money under Section 69A of the Income Tax Act and added the amount to the assessee's total income through an assessment order dated August 11, 2021, passed under Section 143(3) read with Section 144B of the Act.

After considering the rival submissions and examining the material available on record, the Tribunal observed that the assessment proceedings had been conducted entirely during the COVID-19 pandemic period. The Tribunal noted that notices under Section 142(1) were issued on June 11, July 14, July 23 and August 2, 2021, while the assessment was ultimately completed on August 11, 2021. In these circumstances, the Tribunal considered it reasonable that the assessee may have been prevented from furnishing the requisite details due to the difficulties arising from the lockdown.

The Tribunal also took note of the additional evidence furnished during the appellate proceedings and the assessee's explanation regarding the substantial turnover reported in subsequent assessment years. Considering the overall facts and circumstances, it found it appropriate to provide the assessee with one more opportunity to substantiate his claim that the cash deposits originated from the sale of eggs.

Accordingly, in the interest of justice and fair play, the Tribunal restored the matter to the file of the AO for fresh adjudication, directing the assessee to furnish the requisite supporting documents and establish the reconciliation between the cash deposits and business sales. Consequently, the Tribunal set aside the order passed by the CIT(A) and allowed the assessee's appeal for statistical purposes.