Thaladammanahalli Muninarayanappa Ravikumar Vs ITO (ITAT Bangalore)
Bengaluru ITAT Remands Ex Parte Assessment Based on Demonetisation Cash Deposits; AO Directed to Recompute Income on Proper Evidence
The Bengaluru ITAT has set aside an ex parte assessment where the Assessing Officer estimated the assessee’s income at 8% under section 44AD solely on the basis of cash and non-cash deposits reflected in the bank account during the demonetisation period. The Tribunal held that such estimation, without examining supporting material regarding the actual business turnover and income, was not sustainable and required fresh consideration.
The assessee, engaged in the wholesale business of edible oils, had not filed his return of income on the ground that his income was below the taxable limit. On receiving information regarding substantial cash deposits during demonetisation, the AO treated the total bank deposits as turnover and estimated income at 8% under section 44AD. The CIT(A) also dismissed the appeal ex parte after the assessee failed to respond to multiple notices.
Before the Tribunal, the assessee contended that the AO had adopted an incorrect figure of bank deposits, ignored the concept of peak/quick credit, and arbitrarily applied the 8% profit rate, whereas the assessee had disclosed a net profit of around 2% in subsequent assessment years. The Tribunal observed that the AO had made the estimation only on the basis of bank deposits, without relying on any other material to determine the correct income, and that the assessee had now undertaken to produce the necessary records.
Considering that both the assessment order and the appellate order were passed ex parte, and that the assessee claimed a substantially lower profit rate in subsequent years, the Tribunal restored the matter to the Assessing Officer for fresh adjudication after granting adequate opportunity of hearing. It, however, cautioned that the assessee must fully cooperate in the proceedings, failing which the Revenue would be at liberty to complete the assessment in accordance with law.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 24/02/2026 in respect of the A.Y. 2017-18.
