ITAT Ahmedabad Remands ₹97.35 Lakh Addition To Income For Cash Deposits, Imposes ₹10 thousand Cost On Taxpayer

A motorcycle sub-dealer from the Panchmahal district, Gujarat, has secured a fresh opportunity before tax authorities after the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) set aside an addition of ₹97.35 lakh towards unexplained cash deposits, while imposing a cost of Rs 10,000 for earlier non-compliance.

A coram of Judicial Member Siddhartha Nautiyal and Accountant Member Narendra Prasad Sinha observed that the addition was made largely due to non-compliance and lack of evidence, holding that “the issue requires fresh examination at the level of the Assessing Officer” and that “one more opportunity should be granted to the assessee to substantiate his claim.”

The taxpayer, who had declared an income of Rs 3.50 lakh for Assessment Year 2017–18, came under limited scrutiny after the tax department flagged cash deposits of Rs 97.35 lakh in his bank account.

He claimed that he was acting as a sub-dealer for a motorcycle dealership and that the deposits represented customer payments collected and passed on to the principal dealer.

The Assessing Officer, however, treated the entire amount as unexplained under Section 69A of the Income-tax Act after noting that the assessee failed to furnish supporting documents despite multiple opportunities and a final show-cause notice. The addition was also taxed under Section 115BBE.

The Commissioner of Income Tax (Appeals) upheld the addition, recording that the assessee continued to remain non-compliant even during appellate proceedings and failed to discharge the burden of explaining the source of the deposits.

Before the Tribunal, the assessee argued that the addition ignored corresponding cash withdrawals from the same bank account and submitted that he was now in a position to produce supporting evidence.

The Tribunal condoned a delay of 159 days in filing the appeal, noting that the delay was sufficiently explained and not deliberate. On merits, it found that the issue warranted reconsideration, particularly since the addition had been made primarily on account of non-compliance.

Restoring the matter for de novo adjudication, the tribunal directed the Assessing Officer to grant adequate opportunity to the assessee to produce evidence. At the same time, it took note of the assessee's earlier conduct and directed him to deposit ₹10,000 with the Prime Minister Relief Fund as a pre-condition for the fresh proceedings