Case Law Details
Jayapal Deepak Gowda Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, allowed the assessee’s appeal for statistical purposes and remanded the matter to the Jurisdictional Assessing Officer (JAO) for fresh consideration. The case arose from additions made under Section 68 of the Income-tax Act, 1961 in relation to unsecured loans and cash deposits during Assessment Year 2018-19. The Assessing Officer had treated the amounts as unexplained cash credits on the ground that the creditworthiness of the creditors and debtors had not been established.
The Tribunal noted that the assessee had furnished several documents relating to the creditors, including bank statements, ledger accounts, PAN details, and confirmation letters. Prima facie, these documents indicated that the loans had been received from genuine persons, but the lower authorities had not verified the material placed on record. Regarding cash deposits, the assessee explained that the amounts represented collections from dealers arising from cash sales, including GST, in the course of its business as a distributor of ITC products. The assessee also correlated the deposits with supporting sales records.
The Tribunal observed that the authorities had not properly appreciated the documentary evidence before concluding that additions under Section 68 were warranted. It therefore set aside the orders of the lower authorities and restored the matter to the JAO for fresh adjudication after considering the supporting documents. The Tribunal also clarified that the assessee would be at liberty to raise the legal plea regarding non-issuance of notice under Section 143(2) during the remand proceedings.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 08/07/2025 in respect of the A.Y. 2018-19.
2. The brief facts of the case are that the assessee is an individual and filed his return of income. The return was selected for limited scrutiny to examine the issue of cash deposits and unsecured loans. Notices u/s. 142(1) were issued and the assessee also filed various details along with the unsecured loans as well as the cash deposits. The AO alleged that the credit worthiness of the creditors were not established and similarly, the credit worthiness of the debtors from whom cash was received, could not be established and therefore treated the said unsecured loans and cash deposits as unexplained cash credit u/s. 68 of the Act.
3. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The assessee filed additional ground and also filed written submissions and the details of the various persons from whom unsecured loan and cash were received. In spite of the said facts, the Ld.CIT(A) had dismissed the appeal as the assessee had not proved the credit worthiness of the lenders and debtors.
4. As against the said order, the present appeal has been filed by the assessee before this Tribunal.
5. At the time of hearing, the Ld.AR submitted that the assessee had raised a legal plea in the additional and revised grounds filed before the Ld.CIT(A) on 11/10/2024 in which the assessee had raised a ground that the assessment order without issuing a notice u/s. 143(2) is bad in law which was not adjudicated by the Ld.CIT(A). The Ld.AR also submitted the details of the creditors but the same was not verified by the authorities. The Ld.AR further submitted that the cash deposits are the collections from the various dealers to whom the assessee had supplied goods and therefore it could not be treated unexplained cash credit u/s. 68 of the Act. The Ld.AR filed a paper book enclosing the various documents about the creditors and the source for cash deposits. The Ld.AR also relied on the written submissions filed before the Ld.CIT(A) and also the documents filed before him and submitted that the Ld.CIT(A) had not considered the said details which would establishes the fact that the additions made u/s. 68 could not be sustained.
6. The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.
7. We have heard the arguments of the both sides and perused the materials available on record.
8. As seen from the various records submitted before the Ld.CIT(A) as well as before us, we find that the assessee had submitted several documents relating to the creditors such as bank statements, ledger account, PAN details and also confirmation letters from the said parties. It seems that prima facie the assessee had demonstrated that the loans are from genuine persons but the said details were not verified by the lower authorities.
9. In respect of the cash deposits, the assessee had explained that these are from cash sales including the GST. The assessee is a distributor for ITC products. Normally they will effect credit sales and most of the dealers would repay the bill amount by cash. Further, the assessee is able to correlate the sales by producing the various records. In such circumstances, the addition u/s. 68 on the ground that the credit worthiness of the debtors were not established is not correct. It seems that the authorities had not correctly appreciated the various documents filed by the assessee before arriving a conclusion that the addition has to be made u/s. 68 of the Act.
10. We therefore of the opinion that this matter requires reconsideration at the end of the JAO. We therefore set aside the orders of the lower authorizes and remit this issue to the file of the JAO for passing orders afresh after considering the various supporting documents filed by the assessee. During the course of such proceedings, it is open to the assessee to raise the legal plea of not issuing the notice u/s. 143(2) of the Act before passing the impugned assessment order.
11. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 03rd June, 2026.
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