Akbarali Noordeen Vs ITO (ITAT Chennai)
Entire Cash Deposits Of ₹1.47 Crore Added Under Section 69A—Chennai ITAT Grants One More Opportunity Despite Assessee’s “Nonchalant Attitude”
Summary: The Chennai Bench of the Income-tax Appellate Tribunal has restored an ex parte reassessment to the Assessing Officer where the entire cash deposits of ₹1,47,25,490 in the assessee’s bank account had been added as unexplained money under section 69A. Although the Tribunal strongly deprecated the assessee’s repeated failure to comply with notices issued by both the Assessing Officer and the First Appellate Authority, it held that, in the interest of justice and equity, one final opportunity should be provided to substantiate the claim that the cash deposits represented the sale proceeds of his business.
Facts of the case
The assessee did not file his return of income for AY 2018-19. Information was available with the Income-tax Department showing cash deposits aggregating to ₹1,47,25,490 in a current account maintained with Lakshmi Vilas Bank.
To examine the source of these deposits, the Assessing Officer issued a notice under section 148 on 1 April 2022. The assessee did not respond to the notices subsequently issued under section 142(1). A show-cause notice was issued on 19 December 2023, followed by a final show-cause notice dated 20 January 2024.
In the absence of any effective response, the Assessing Officer completed the assessment under sections 147 read with 144 and 144B on 18 March 2024. The entire cash deposits of ₹1,47,25,490 were treated as unexplained money and added under section 69A.
Proceedings before the Commissioner (Appeals)
The assessee challenged the assessment before the First Appellate Authority. The NFAC issued three notices dated 6 October 2025, 7 November 2025 and 18 December 2025.
The assessee once again failed to submit any representation. The Commissioner (Appeals) therefore decided the appeal against the assessee based upon the statement of facts contained in Form 35 and confirmed the assessment.
The assessee thereafter approached the Tribunal with a delay of 138 days.
Delay condoned
The assessee explained that he was unaware of the order passed by the First Appellate Authority. Due to severe financial distress and continuous business losses, he was compelled to close his business in 2019 and relocate to the Maldives along with his family.
The Tribunal accepted that the circumstances constituted sufficient cause for the delayed filing of the appeal. It found that no deliberate negligence or laches could be attributed to the assessee in relation to the filing of the Tribunal appeal. Accordingly, the delay of 138 days was condoned and the appeal was admitted for adjudication.
Grounds raised by the assessee
Apart from disputing the addition under section 69A, the assessee challenged the validity of the entire reassessment proceedings. It was contended that the Assessing Officer had not satisfied the statutory conditions required for reopening the assessment.
The assessee specifically alleged that the Assessing Officer had failed to obtain approval from the competent authority prescribed under section 151. It was also contended that the approval, even if obtained, had not been furnished or communicated to him.
Another important ground was that the Assessing Officer had not granted seven clear days to file a response to the notice issued under section 148A(b). According to the assessee, violation of this mandatory requirement vitiated the reassessment proceedings.
On merits, the assessee contended that section 69A had no application because the bank deposits represented sale proceeds of his business. It was argued that the entire gross deposits could not be treated as unexplained income. The Assessing Officer and Commissioner (Appeals) had allegedly disregarded the trading account and profit and loss account explaining the nature and source of the deposits.
Tribunal’s findings
The Tribunal noticed that the proceedings before both the Assessing Officer and the First Appellate Authority had remained substantially ex parte because of the assessee’s failure to comply with the notices.
The assessee’s counsel explained that, due to business losses, closure of business and relocation to the Maldives, the assessee did not have the benefit of a legal consultant to represent him before the lower authorities.
However, the Tribunal noticed that the assessee had made partial compliance during the proceedings. It therefore found that the explanation based entirely upon relocation and absence of professional assistance was not fully justified.
The Tribunal strongly deprecated what it described as the assessee’s “nonchalant attitude” towards the proceedings before the Assessing Officer and the Commissioner (Appeals).
Nevertheless, the Tribunal considered that the assessee should be granted one more opportunity in the interest of justice and equity. Since the original assessment itself had been completed ex parte, the matter was restored to the Assessing Officer for a fresh examination.
The assessee was directed to cooperate with the Department and furnish all relevant information and evidence explaining the source of the cash deposits. The Assessing Officer was directed to afford a reasonable opportunity of hearing.
The Tribunal also clarified that the assessee would be at liberty to raise before the Assessing Officer all the contentions raised before the Tribunal, including the jurisdictional objections relating to sections 148A and 151.
The appeal was consequently allowed for statistical purposes.
Author’s comments
The decision does not delete the addition of ₹1.47 crore. It merely reopens the opportunity for the assessee to establish the source and nature of the deposits. The entire issue—including the validity of reassessment and applicability of section 69A—remains open before the Assessing Officer.
Where cash deposits represent business receipts, treating the entire deposits as unexplained income may produce an unrealistic result. Subject to verification of sales, purchases, stock records, bank entries, GST returns and profit margins, ordinarily only the income element embedded in genuine business turnover can be brought to tax. However, a bare claim that deposits represent sales, unsupported by records, may not be sufficient.
The assessee must now produce the trading and profit and loss account, purchase and sales invoices, stock records, GST returns, bank statements and a deposit-wise reconciliation. He must also substantiate the legal objections concerning section 148A(b) and sanction under section 151 from the assessment records.
The ruling reflects a balanced approach. Procedural non-compliance was strongly criticised, but a substantial addition was not permitted to attain finality without one effective opportunity to explain it. At the same time, the Tribunal’s direction to cooperate makes it clear that the fresh opportunity is not an invitation for further default—it is effectively the assessee’s final chance.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, CHENNAI
This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, dated 29.12.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
2. There is a delay of 138 days in filing the present appeal before the Tribunal. The assessee has filed a petition seeking condonation of delay, supported by an affidavit explaining the reasons for the belated filing of the appeal. The assessee stated that, he was unaware of the order passed by the First Appellate Authority (FAA) and, owing to severe financial distress and sustained business losses, was compelled to close his business operations in 2019 and thereafter relocate to Maldives along with his family. On perusal of the reasons stated, we are of the view that no latches can be attributed to the assessee as there is sufficient cause for belated filing of this appeal. Hence, we condone the delay of 138 days and proceed to dispose off the appeal on merits.
3. Brief facts of the case are as follows:- For AY 2018-19, the assessee did not file any return of income. Notice u/s. 148 of the Act was issued on 01.04.2022 in order to examine the source of cash deposits made in the current account maintained with Lakshmi Vilas Bank at Rs.1,47,25,490/-. Since the assessee did not respond to the notices issued u/s.142(1) of the Act, a show-cause notice was issued on 19.12.2023, followed by a final show-cause notice dated 20.01.2024. In the absence of any response, the AO completed the assessment u/s. 147 r.w.s. 144 r.w.s. 144B of the Act on 18.03.2024, making addition of Rs.1,47,25,490/- u/s. 69A of the Act.
4. Aggrieved, assessee filed an appeal before the FAA. Before the FAA, three notices were issued on 06.10.2025, 07.11.2025 and 18.12.2025. In response to the same, assessee did not file any representation. Consequently, based on statement of facts mentioned in Form-35, the FAA adjudicated the appeal against the assessee.
5. Aggrieved, assessee has filed the present appeal before the Tribunal. The grounds raised before the Tribunal read as follows:
“1. The order of the Commissioner of Income Tax (Appeals) [“CIT(A)”] is against the law, the facts and circumstances of the case and the principles of equity and natural justice.
2. The CIT(A) ought to have provided the Appellant with sufficient opportunity of being heard.
3. The CIT(A) ought to have appreciated that the assessing officer had erroneously assumed jurisdiction to initiate the reassessment proceedings particularly when the preconditions contemplated in the Act are not fulfilled.
4. The CIT(A) ought to have appreciated that the assessing officer failed to obtain approval from the competent authority specified in section 151(ii) of the Act.
5. The CIT(A) has failed to appreciate that the Assessing Officer initiated reassessment proceedings under section 147 of the Act without furnishing or circulating the mandatory approval obtained under section 151, thereby vitiating the reassessment proceedings as being contrary to statutory requirements.
6. The CIT(A) failed to appreciate that the assessing officer failed to grant 7 clear days as mandated in section 148A(b) of the Act to enable the Appellant to file his response. Therefore, proceedings initiated and completed by violating the mandatory requirement contemplated in section 148A(b) of the Act is liable to be vitiated.
7. The CIT(A) erred in confirming the addition made by the assessing officer under section 69A of the Act without appreciating that the implication of section 69A of the Act will not apply to facts and circumstances of the present case.
8. The CIT(A) erred in confirming the addition of Rs.1,47,25,490/- made by the AO u/s 69A of the Act, treating the entire cash deposits in the bank account as unexplained money, without appreciating that the said deposits represented sale proceeds of the appellant’s business.
9. The CIT(A) erred in disregarding the Trading and Profit & Loss Account filed by the appellant, establishing the source of deposits.
10. That the appellant craves leave to add, alter, amend, substitute or withdraw any of the above grounds of appeal at or before the time of hearing.”
6. The Ld.AR relied on the above grounds.
7. The Ld.DR supported the orders of the AO and the FAA.
8. We have heard rival submissions and perused the materials on record. The proceedings before the AO and the FAA remained exparte as the assessee did not respond to notices issued. The Ld.AR submitted that owing to severe financial losses, the assessee closed his business operations in the year 2019 and thereafter relocated to Maldives along with his family and did not have a benefit of a legal consultant to represent him before the AO and the FAA. However, we find during the course of proceedings assessee had made part compliance. Therefore, the explanation give by the assessee is that he was relocated and did not have a benefit of a legal consultant is without justification. We strongly deprecate the nonchalant attitude of the assessee in non-compliance of the proceedings before the AO and the FAA. However, in the interest of justice and equity, we are of the view that one more opportunity should be provided to the assessee for a proper representation of his case. Since, the proceedings before the AO also remained exparte, we deem it proper to restore the matter to the file of the AO and we do so. The assessee is directed to cooperate with the department and furnish the relevant details with regard to source of cash deposits as and when called for. Needless to state, assessee is liberty to raise all the contentions raised before us also before the AO. The AO is directed to afford reasonable opportunity of hearing to the assessee. It is ordered accordingly.
9. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 16th September, 2026 at Chennai.
