Sonam Tshering Bhutia Vs ITO (ITAT Kolkata)
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) heard the assessee’s appeal against the order of the National Faceless Appeal Centre (NFAC) for Assessment Year 2017-18.
At the outset, the Tribunal condoned a delay of 100 days in filing the appeal after finding sufficient cause in the affidavit submitted by the assessee.
The assessee, a resident individual, was selected under Operation Clean Money (OCM) because cash deposits of ₹17,85,000 had been made in the bank account during the demonetisation period and no return of income had been filed for Assessment Year 2017-18. Despite issuance of notice under Section 142(1) and opportunities granted during assessment proceedings, there was no compliance. The Assessing Officer completed the assessment under Section 144 and made an addition of ₹56,73,199 as unexplained money under Section 69A of the Income-tax Act.
On appeal, the CIT(A) called for a remand report from the Assessing Officer. During the remand proceedings, the assessee furnished a cash flow statement, cash withdrawal statement, cash book and other documents. After considering the remand report and the material produced, the CIT(A) deleted a substantial part of the addition but sustained an addition of ₹17,85,000.
Before the Tribunal, the assessee contended that the sustained addition represented cash generated from the sale of two plots situated in the State of Sikkim. The assessee relied upon two registered sale deeds, one recording consideration of ₹10,50,000 and the other ₹10,00,000. It was submitted that both registered documents reflected the consideration amounts, dates of cash payments, signatures of the purchasers and sellers and registration before the Sub-Registrar, Gangtok, Sikkim. According to the assessee, the cash had been received between March and May 2016 and was retained because there was an intention to purchase another parcel of land near Gangtok. Since the proposed purchase did not materialise due to demonetisation, the cash was subsequently deposited into the bank account.
The assessee further argued that the CIT(A) erred in rejecting the explanation merely because confirmations from the purchasers had not been furnished, despite the registered sale deeds being public documents.
The Revenue supported the orders of the lower authorities.
After examining the record, the Tribunal observed that the assessee was a bona fide resident of the State of Sikkim and was entitled to claim exemption under Section 10(26AAA) of the Act. It noted that the assessment had originally been completed because of non-compliance during the assessment proceedings, whereas, during the appellate proceedings, the assessee had produced detailed documents explaining the source of the deposits.
The Tribunal noted that the registered sale deeds clearly reflected the consideration received from the sale of the two plots. It also observed that the CIT(A) had held that sufficient evidence had not been furnished to establish that the income was earned within the financial year for claiming exemption under Section 10(26AAA). However, on examining the documents, the Tribunal found that the assessee had produced material establishing his status as a resident of Sikkim and had filed the registered sale deeds explaining the consideration received within the geographical limits of the State of Sikkim.
On this basis, the Tribunal held that the assessee was entitled to claim exemption under Section 10(26AAA). It accordingly allowed the appeal and deleted the addition of ₹17,85,000 sustained by the CIT(A).
Cases Discussed
- Chandra Sales Agency vs. ACIT (ITAT Kolkata), (2025) 176 taxmann.com 679
- Rakesh Metal & Tubes vs. ITO (ITAT Mumbai), (2022) 144 taxmann.com 68
- ITO vs. Satish Kumar (ITAT Jodhpur), (2014) 51 taxmann.com 537
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is directed against the order dated 04.07.2025 of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Id. CIT(A)”) passed u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year (A.Y.) 201718.
2. At the outset, it appears from the report of the Registry, the appeal of the assessee has been filed after a delay of 100 days. The assessee has filed an affidavit to condone the delay. Going over the contents of the affidavit, we find sufficient cause to condone the delay in filing appeal, accordingly, the delay is hereby condoned.
3. The facts of the case in brief are that as per order u/s 144 of the Act, dated 09.12.2019, the assessee is a resident individual. The case of the assessee, Sonam Tshering Bhutia, (PAN: AWIPB3540L) has been selected under ‘Operation Clean Money (0CM)’ for the A.Y. 2017-18, as the assessee had deposited substantial cash in bank accounts during the demonetization period but has not filed his income tax return for A.Y. 2017-18. The data reveals that the assessee had deposited cash of Rs.17,85,000/- in the following bank account during the demonetization period.
Further, it is also apparent that the assessee has not filed his return of income for the A.Y. 2017-18 within the due date prescribed u/s 139(1) of the Act and failed to furnish return of income in response to notice u/s 142(1) of the Act, issued on 22.02.2018, calling the assessee to prepare a true and correct return of income for the A.Y. 2017-18 on or before 24.03.2018. After giving sufficient opportunities, the AO completed the assessment by making addition of Rs.56,73,199/- as unexplained money u/s 69A of the Act.
4. Aggrieved by the said order, the assessee preferred appeal before Id. CIT(A), wherein the appeal of the assessee has been partly allowed as the Id. CIT(A) has confirmed the addition of Rs.17,85,000/- against the addition of Rs.5,67,739/- made by the AO.
5. Being aggrieved, dissatisfied, the assessee filed appeal before us. The Id. AR challenges the very impugned order thereby submitting that the Id. CIT(A) has erred in sustaining an addition of Rs.17,85,000/-ignoring the submission of the assessee and documents filed that these funds were generated from the sale of two plots in the State of Sikkim. The Id. AR further submits that first registered sale deed document is of Rs.10,50,000/- and the second one is of Rs.10,00,000/- respectively and the executed registered sale deed documents clearly reflect the consideration amount along with date of cash payments signed by the purchasers and sellers and duly registered by the Sub-Register, Gangtok, Sikkim. The Id. AR further submits that cash transaction of the same has been calculated between March and May, 2016 supported by registered sale deed. The Id. AR further submits that Id. CIT(A) has erred in rejecting the explanation on the reason that assessee did not provide confirmation from the purchaser, ignoring the registered sale deeds, being a public document. The Id. AR placed the following judgment:
(i) ITO vs. Satish Kumar, (2014) 51 taxmann.com 537 (Jodhpur — Trib.),
(ii) Rakesh Metal & Tubes vs. ITO, (2022) 144 com 68 (Mumbai — Trib.) and;
(iii) Chandra Sales Agency vs. ACIT, (2025) 176 com 679 (Kolkata — Trib.).
6. Contrary to that Id. Sr. DR supports the impugned order of the lower authorities.
7. Upon hearing the submission of the Id. AR of the representative parties and on perusing of the impugned order, we find that the assessee is residing in the State of Sikkim and he is exempted u/s 10(26AAA) of the Act. The case of the assessee was selected under operation clean money for the A.Y. 2017-18 as assessee had deposited substantial cash in bank account during the demonetization period and did not file ITR. At the time of assessment proceedings, opportunity has been giving to the assessee to submit response, there was non-compliance, as a result of which assessment was done by making addition of Rs.56,73,199/-. At the stage of appellate proceedings before the Id. CIT(A), assessee filed written submission in which he explained the credit of Rs.56,73,119/-. The Id. CIT(A) has asked a remand report from the AO and during the remand report, the assessee has submitted a cash flow statement, cash withdrawal statement, cash book statements and other documents. The Id. CIT(A) after considering the remand report and documents has only confirmed the Rs.17,85,000/- and rest has been deleted. The Id. AR submitted before us that out of Rs.56,73,119/-, the assessee had deposited Rs.18,35,000/-as cash during demonetization period that Rs.17,85,000/- and Rs.50,000/- in the State of Sikkim and according to the Id. AR was deposited were made from the accumulated cash, which was generated by selling land against which the cash was received in the month of March, 2016 to May, 2016 and the total cash calculated for sale of Rs.20,50,000/-. The submission of the Id. AR is that this amount was not deposited in the bank account and during that time there was planning to buy land nearby Gangtok. It has been submitted by the Id. AR that land was finalized but demonetization took place and he deposited cash in the bank account. It is pertinent to mention that two sale deeds with reference to the sale land has been filed by the Id. AR before the Id. CIT(A) and before us also. The first registered sale deed is of Rs.10,50,000/- and the second was of Rs.10,00,000/- that clearly reflects the consideration amount with the date of the cash payments. It is important to mention here that income earned and accrued money with the geographically exempted u/s 10(26AAA) of the Act for the bonafide resident. There is no dispute that the assessee is a bonafide resident of the Sikkim. Two registered sale deeds filed by the assessee clearly reflects the consideration amount. The Id. CIT(A) in its order has held that assessee did not furnish sufficient documents to substantiate his claim that his income earned during the financial year were earned pre-requisite for claiming exemption u/s 10(26AAA) of the Act. Going over the facts of the case and documents filed by the assessee, we find that assessee has submitted the documents regarding his claim being a citizenship of Sikkim. He has filed the sale deed to explain the consideration amount which he earns within the geographical limit of the State of Sikkim and accordingly we are of the view that assessee is entitled to claim exemption u/s 10(26AAA) of the Act. In view of the discussion made above, the appeal of the assessee is allowed and addition sustained by Id. CIT(A) for an amount of Rs.17,85,000/- is hereby deleted.
8. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 06/07/2026.
