ITAT Bangalore Flags Apparent Double Addition in Section 69A Cash Deposit Reassessment

Background of the Dispute

The case of Syed Ghouse Peer Vs ITO (ITAT Bangalore) concerns a reassessment under Section 147 of the Income Tax Act 1961 where large cash deposits and withdrawals in bank accounts led to additions under Section 69A as unexplained money. The assessee, a small-time vegetable trader operating from Kolar, had not filed any return of income for the relevant year and remained non-compliant during both assessment and first appellate stages. This culminated in ex-parte orders at both levels.

The core controversy before the Tribunal was whether the simultaneous addition of cash deposits and cash withdrawals from the same bank account, without proper examination of their nature, led to a double addition of the same stream of funds and whether the assessee deserved another opportunity to explain the transactions.

Initiation of Reassessment under Section 147

Information Trigger and Reopening

  1. Information was received under the risk management mechanism indicating that the assessee, an individual non-filer, held a bank account with State Bank of India.
  2. It was noticed that during the assessment year 2017-18, the assessee had:
    • Cash deposits aggregating to ₹ 4,463,900, and
    • Cash withdrawals amounting to ₹ 29,601,600.
  3. Based on this information, the Assessing Officer (AO), functioning through the National Faceless Assessment Centre, Delhi, reopened the assessment by issuing notice under Section 147 read with Section 148.

Non-Compliance During Assessment

Despite the initiation of reassessment proceedings, the assessee did not respond to several statutory notices and communications, including:

  • Notice under Section 148
  • Multiple notices under Section 142(1)
  • Show cause notice proposing best judgment assessment under Section 144
  • Centralised communication notices
  • Additional show cause notices issued on more than one occasion

With no compliance at all, the AO obtained the bank statement directly from State Bank of India and proceeded to complete the assessment ex-parte.

Ex-Parte Assessment and Addition under Section 69A

Basis of Addition

Relying solely on the bank statement and in the absence of any explanation from the assessee, the AO:

  • Treated the entire cash deposits and
  • The entire cash withdrawals

as unexplained money under Section 69A.

A total addition of ₹ 35,343,596 was made as unexplained money, and the assessee’s total income was assessed accordingly.

The assessment order was passed under:

  • Section 147
  • read with Section 144 (best judgment)
  • read with Section 144B (faceless assessment procedure)

on 31 January 2025.

Apparent Double Addition

The crucial aspect later noticed by the Tribunal was that the AO clubbed both cash deposits and cash withdrawals as unexplained money, without analyzing whether withdrawals were merely redeployment or circulation of earlier deposits or business receipts. This mechanical addition raised the issue of potential double taxation of the same cash flow.

Appeal before NFAC and Continued Non-Compliance

First Appeal before CIT(A) – National Faceless Appeal Centre

The assessee challenged the reassessment before the National Faceless Appeal Centre, Delhi (CIT(A)).