Rampal Singh Vs ITO (ITAT Agra)
Cash Withdrawal Is Not Unexplained Money—₹1.09-Crore Addition u/s 69A Sent Back &; Penalty u/s 271AAC Loses Its Foundation
Summary:
One Assessment, Two Appeals
The Assessee filed two interconnected appeals. The first challenged an addition of ₹1,09,73,000 u/s 69A r.w.s. 115BBE, while the second challenged consequential penalty of ₹8,47,664 u/s 271AAC(1).
The Assessee, an individual engaged in supplying & selling cow fodder, had not filed his return for AY 2018-19 because, according to him, his income was below the taxable limit.
The AO received information that the Assessee had deposited cash of ₹2 lakh & withdrawn cash of ₹1,07,73,000 from his Canara Bank account. Notice u/s 148 was issued on 26.03.2022, followed by notices u/s 142(1) & a show-cause notice.
As there was no compliance, the AO completed the assessment ex parte u/s 144 r.w.s. 147 & added the aggregate amount of ₹1.09 crore u/s 69A.
Even Withdrawals Were Treated as Unexplained Money
The AO treated the cash deposit of ₹2 lakh as unexplained because no evidence regarding its source was furnished.
More unusually, the AO also treated the cash withdrawals of ₹1.0773 crore as unexplained money. It was presumed that the withdrawals must have arisen from unaccounted credits in the bank account.
Thus, instead of confining the inquiry to the source of money deposited or credited, the AO added money withdrawn from the bank as unexplained income. The entire amount was subjected to the special tax provisions of section 115BBE.
The CIT(A)/NFAC confirmed the addition, principally because the Assessee had not complied during assessment & had allegedly failed to explain the transactions.
The Missed Notices
Before the ITAT, the Assessee explained that the assessment-stage notices were transmitted to the email address of his advocate. The advocate did not inform him about those communications. Consequently, the Assessee remained unaware of the proceedings & could not place the relevant books or supporting documents before the AO.
The assessment was therefore completed u/s 144 without examining the nature of the Assessee’s business, cash turnover or corresponding bank movements.
The Assessee requested restoration to the AO so that the correct income & tax liability could be determined after considering the complete evidence.
Rule 46A Application Was Filed—but Overlooked
During appellate proceedings, the Assessee attempted to cure the evidentiary deficiency. On 27.12.2025, he uploaded an application u/s Rule 46A together with additional evidence.
The documents included the sales account for milk, sales account for cattle feed, purchase accounts for milk & cattle feed, bank statements, the bank account as appearing in the books & details of cash withdrawals & deposits.
The Assessee produced before the Tribunal the electronic-proceeding acknowledgement proving that the Rule 46A application & supporting documents had been uploaded before the CIT(A).
However, the CIT(A)’s order contained no discussion whatsoever about the application. There was no decision admitting or rejecting the evidence, no reasons were recorded & no remand report was called from the AO. The material appeared to have been completely overlooked.
Additional Evidence Went to the Root of the Matter
The Tribunal observed that the assessment had been completed ex parte because of the Assessee’s non-appearance. The explanation that communications sent to the advocate’s email were not conveyed to the Assessee required fair consideration.
More importantly, the additional documents were directly relevant to the controversy. Whether the bank transactions arose from the Assessee’s milk & cattle-feed business could be decided only after examining the purchase records, sales accounts, books & movement of cash.
These were not peripheral documents introduced merely to delay proceedings. They were critical to determining the correct taxable income & required factual verification.
The ITAT was satisfied that the Assessee had been prevented by sufficient cause from submitting them before the AO. It therefore directed that the documents be admitted & examined in fresh assessment proceedings.
Assessment Restored to the AO
The Tribunal set aside the CIT(A)’s order & restored the entire quantum matter to the AO.
The AO was directed to pass a fresh assessment after admitting the additional evidence, verifying the documents & granting the Assessee a reasonable opportunity of hearing. The assessment must thereafter be framed afresh in accordance with law.
The Tribunal did not express a concluded opinion on whether the cash deposit or withdrawals represented business transactions. The quantum appeal was therefore allowed for statistical purposes, leaving factual adjudication to the AO.
Penalty Cannot Outlive Its Parent Addition
The penalty of ₹8,47,664 u/s 271AAC(1) had been levied exclusively upon the addition of ₹1.09 crore u/s 69A.
Once the assessment order forming the penalty’s foundation was set aside for fresh adjudication, the existing penalty could not independently survive. The ITAT therefore deleted the penalty order.
The quantum appeal in ITA No. 248/Agr/2026 was allowed for statistical purposes, while the penalty appeal in ITA No. 249/Agr/2026 was allowed outright.
Section 69A may question unexplained money found with an assessee, but a bank withdrawal is ordinarily money going out—not fresh income coming in. When the CIT(A) overlooks the Rule 46A evidence & the quantum foundation is reopened, the penalty building u/s 271AAC must also come down.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AGRA BENCH
These two appeals are directed against two impugned orders both dated 16.01.2026 passed in appeal No NFAC/2017-18/10415584 and appeal No NFAC/2017-18/10415830 respectively by the NFAC (hereinafter referred to as the “CIT(A) u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2018-19, wherein ld. CIT(A) has dismissed both the appeals of the assessee. Since both the appeals are inter connected, and therefore, they are disposed by this common order for the sake of brevity and convenience.
2. Brief facts of the case: The AO noted that the assessee had not filed his return of income for A.Y. 2018-19. The AO had information that the assessee had deposited cash of Rs. 2,00,000/- and had withdrawn cash of Rs. 1,07,73,000/- in his bank account held in Canara Bank totaling Rs. 1,09,73,000/-. A notice u/s 148 of the Act was issued to the assessee on 26.03.2022 followed by subsequent notices u/s 142(1) and show cause notice as per the details on page 2 on the assessment order. However, according to the AO the assessee did not appear before the AO and the assessment was completed on 01.03.2023 u/s 144/147 r.w.s 144(3) of the Act in which the AO made an addition of Rs. 1,09,73,000/- u/s 69A of the Act.
3. Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT (A).
4. The Ld. CIT (A) dismissed the appeal of the assessee. The relevant extracts of the order are reproduced as under:
“2. The grounds of appeal object to addition of Rs.1,09,73,000/- as unexplained money u/s 69A of the Income Tax Act, 1961.
2.1 During the course of assessment proceedings various details related to the above transactions have been called for by way of issue of notices referred to the assessment order. However, the assessee failed to furnish the details called for. Since the assessee has not complied with the notices issued u/s 142(1) of the I. T. Act, 1961, the sources of the cash deposits of Rs.2,00,000/- remains unexplained. Hence, by virtue of provision of section 69A of the I.T. Act, 1961, the same is treated as income of the assessee.
2.2 Further, the assessee has cash withdrawal of Rs.1,07,73,000/- from the Bank Accounts maintained with Canara Bank during the year under consideration. In view of the repeated non-compliance of the notices and in the absence of any details, the cash withdrawal by the assessee from the current account is treated as unexplained money, which is out the unaccounted credits available in the bank & remains unexplained. Hence, by virtue of provision of section 694 of the I.T. Act, 1961, the same is treated as income of the assessee.
Also, it is a well established fact that the burden of proof lies on the assesse to prove the sources of each transaction. However, the assessee failed to discharge the duties and failed to furnish any explanation in this regard. Hence, in view of the above facts, that amount of Rs.1,09,73,000/- is treated as income of the assesse u/s 69A of the I. T. Act, 1961 and added to the total income and tax payable u/s 115BBE(1)(i) I. T. Act, 1961.
The addition of Rs. 1,07,73,000/- u/s 69A of the Income Tax Act, 1961 is confirmed.
3. In the result, the appeal filed by the assessee is dismissed.”
5. Aggrieved with the said order the assessee has filed an appeal before us on the following grounds of appeal:
“1. That on the facts and in the circumstances of the case and in law, the Learned C I T (Appeals), NFAC erred in not admitting and considering the additional evidence filed by the appellant under Rule 46A of the Income Tax Rules, 1962, in complete violation of the principles of natural justice and without providing adequate opportunity be heard.
2. That the learned CIT (Appeals) NFAC erred in confirming the addition of Rs. 1,07,73,000-00 which was amount of cash with drawls from bank account under section 69A treating it as unexplained money without considering the documentary evidence like copy of sales account of milk, Copy of Sales account of cattle feed, copy of purchase account of milk and Cattle feed, bank statement, copy of bank account in books of appellant and details of cash with drawls and deposit filed during appellate proceedings which clearly substantiates the transaction / source of income . The addition has been confirmed for the amount of cash with drawls from bank account not for the amount of cash deposit in bank account.
3. That the learned CIT (Appeal) NFAC erred in not adjudicating upon the application for admission of additional evidence filed under Rule 46A and Income Tax Rules 1962 and failed to call for a remand report from the Assessing Officer to verify the documents, thus acting in disregard of the mandatory procedure.
4. That the learned CIT (A) NFAC erred in confirming the assessment order passed ex parte / without appreciating the merits of the case and therefore the order the Learned CIT(A) NFAC deserves to be set aside and the matter be remanded to the file of the AO for fresh consideration of the evidence submitted.
5. That the learned CIT (Appeals) NFAC erred in not considering the additional evidence which was filed before him on 27.12.2025 vide acknowledgement no. 991328231271225 without recording valid reasons in writing, despite the evidence being crucial to the merits of the case.
6. That without prejudice to any adverse consequences that may follow, the appellant in the facts and circumstances of the case and in law presses into force for due adjudication of matter all grounds pressed in appeal before the NFAC i.e. CIT(A) for due consideration of the Hon’ble Bench.
7. That the appellant reserves his right to add, amend, waive, substitute, delete any additional ground of appeal prior to its adjudication by the Hon’ble Bench.
8. Any other relief as the Bench may feel appropriate in the facts & circumstances of the case and in law.”
6. At the time of hearing the Ld. AR submitted that the appellant is an individual and during the year was doing the business of supply and selling of cow fodder. It was further stated that the appellant had not filed his return of income for A.Y. 2018-19 because the assessee had income below taxable limits. Regarding the fact of non-compliance before the AO, it was stated that the said show cause notice was sent on the e-mail of the advocate of the appellant who did not inform the appellant. The Ld. AR referring to ground nos. 1 & 3 of the appeal submitted that the assessee had filed additional evidences before the Ld. CIT (A) on 27.12.2025 (placed at page no. 5 to 31 of the paper book) along with an application for admission of the said evidences under Rule 46A of the IT Rules, 1962 (placed at page no. 1 to 2 of the paper book) which was not considered by the Ld. CIT (A). In this regard, the Ld. AR referred to the e proceedings response acknowledgment of filling the said additional evidences along with application under rule 46A of the IT rules 1962 before the Ld. CIT (A) (placed at page no. 3 to 4 of the paper book)
6.1 In view of the above facts, the Ld. AR submitted that the matter may be restored to the file of the AO for fresh assessment with a direction to admit the additional evidences as it goes to the very root of the matter and involve a substantial cause in determining the correct income and the correct tax lability of the appellant of the year under appeal.
7. On the other hand, the Ld. Sr. DR supported order of the authorities below but did not raise any serious objection to the request of the assessee for getting the matter remanded back to the AO.
8. We have heard both the parties and perused material on record. It is stated that the appellant is an individual and during the year was doing the business of supply and selling of cow fodder. The assessment in this case was completed u/s 144 of the Act as the assessee failed to appear before the AO during the course of the assessment proceedings. The assessee has explained the reasons for his non-appearance before the AO during the assessment proceedings. Further, we notice that the Ld. CIT (A) has not examined the additional evidences filed before him by the assessee under Rules 46A of the I.T. Rules, 1962 by the assessee. In this regard, the assessee has filed the e proceedings response acknowledgment of filling the said additional evidences along with application under rule 46A of the IT rules 1962 before the Ld. CIT (A) (placed at page no. 3 to 4 of the paper book). Upon perusal of the appellate order, we notice that there is no discussion about the same in the appellate order and it appears to have been overlooked by the Ld. CIT (A). However, the said additional evidences require factual verification. Therefore, in the interest of justice and to give one more opportunity to the assessee, the matter needs to be remanded to the file of the AO for fresh assessment.
8.1 Accordingly, we set aside the order of the Ld. CIT (A) and restore the matter to the file of the AO for passing a fresh assessment order after giving a reasonable opportunity of being heard to the assessee and in accordance with law. Further, we also direct the AO to admit the additional evidences filed by the assessee for we are satisfied that the assessee was prevented by sufficient cause in not submitting the same before the AO and these evidences are critical in determining in tax lability of the assessee. Ground nos. 1 to 6 are allowed for statistical purposes.
9. In the result, the appeal of the assessee is allowed for statistical purposes.
ITA 249/Agr/2026
10. This appeal is against the order u/s 271 AAC (1) of the Act dated 27.09.2023 levying a penalty of Rs. 8,47,664/-. This penalty was levied on the quantum addition of Rs. 1,09,73,000/- u/s 69A of the Act made by the AO in the above impugned assessment order. In view of the fact that we have set aside the order of the Ld. CIT (A) and restored the matter to the file of the AO for fresh assessment, consequently this penalty order does not survive and the same is deleted. Ground nos. 1 to 6 of the appeal are allowed with the above observations.
11. In the result, the appeal of the assessee in ITA no. 248/Agr/2026 is allowed for statistical purposes and the appeal in ITA no. 249/Agr/2026 is allowed.
Order pronounced in the Open Court on- 07.07.2026
