ITAT Surat Remands Section 69A Cash Deposit Addition With Cost: Key Takeaways

Background of the Dispute

The Surat Bench of the Income Tax Appellate Tribunal in Madhubhai Shambhubhai Sojitra Vs ITO dealt with an appeal where a substantial addition of Rs.3,12,25,564/- had been made as unexplained money under Section 69A and taxed under Section 115BBE.

The matter arose from reassessment proceedings for Assessment Year 2017-18 and ultimately resulted in the Tribunal restoring the case to the Jurisdictional Assessing Officer (JAO) for a fresh decision, subject to the assessee depositing Rs.10,000/- as cost.

Origin of Reassessment: High-Value Cash Transactions

Non-filing of Return and Information in Possession of Department

For the relevant year, the assessee, an individual, did not furnish a return of income under Section 139(1) of the Income Tax Act, 1961. Subsequently, the Income Tax Department obtained information indicating:

  • Cash deposits of Rs.3,07,54,760/- in a bank account with ICICI Bank, and
  • Cash withdrawals of Rs.4,70,804/-,

aggregating to total financial transactions of Rs.3,12,25,564/- in that account.

In view of the non-filing of the return and these sizeable cash dealings, the Department initiated reassessment proceedings.

Initiation of Section 148A Proceedings

Proceedings were triggered by issuing a notice under Section 148A of the Act. The assessee did not respond to this preliminary notice.

Due to the absence of a reply, the authority passed an order under Section 148A(d) and then issued a notice under Section 148 on 28.03.2024.

Subsequently:

  • Multiple notices were issued under Section 142(1),
  • The assessee did not file any response or produce details,

leading the Assessing Officer (AO) to proceed without the assessee’s participation.

Ex Parte Assessment and Section 69A Addition

Completion of Assessment Under Section 147 r.w.s. Section 144

Because of continued non-compliance with statutory notices, the AO framed the assessment:

  • Under Section 147 read with Section 144 (best judgment assessment), and
  • Treated the entire sum of Rs.3,12,25,564/- as unexplained money under Section 69A.

This addition was brought to tax in accordance with Section 115BBE, which provides for a higher rate of tax on such deemed income.

The AO’s stand essentially was that, in the absence of any explanation, evidence, or books of account from the assessee, the cash deposits and related movements in the bank account represented unexplained money liable to be taxed in full.

Appeal Before CIT(A) and Ex Parte Dismissal

Proceedings Before NFAC (CIT(A))

The assessee challenged the reassessment order before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi.

The CIT(A):

  • Provided three hearing opportunities on 05.01.2025, 20.05.2025 and 08.08.2025,
  • Granted adjournments on two occasions,
  • Nevertheless, did not receive any written submissions or supporting documents from the assessee.

In these circumstances, the CIT(A) passed an ex parte appellate order, confirming:

  • The reopening of assessment under Section 147, and
  • The full addition of Rs.3,12,25,564/- under Section 69A read with Section 115BBE.

Appeal Before ITAT Surat: Grounds Raised