Unexplained cash deposits require de novo scrutiny when effective hearing was denied and source evidence was not fully considered.

Unexplained cash deposit additions required fresh examination where the assessee was not given an effective opportunity to explain the source of funds. The ex parte first appellate order was set aside in substance because notices had not effectively reached the tax representative, the assessee's non-appearance was found bona fide, and the record showed only a limited reply before the Assessing Officer. The matter was restored for de novo adjudication so the assessee could substantiate the cash deposit source on evidence. The addition was therefore not finally sustained at this stage.

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Issues: Whether the addition on account of unexplained cash deposits should be sustained or the matter should be restored to the Assessing Officer for fresh consideration because the assessee had not been given an effective opportunity of hearing before the lower authorities.

Analysis: The appeal arose from an ex parte first appellate order and the assessee explained that notices had not effectively reached the tax representative due to a communication gap. The record also showed only a limited reply before the Assessing Officer and no meaningful opportunity to substantiate the source of cash deposits. In these circumstances, the assessee's explanation for non-appearance was found to be bona fide and the explanation regarding the source of cash deposits required reconsideration on evidence. To secure fair adjudication, the issue was restored to the Assessing Officer for de novo examination after granting due opportunity to the assessee.

Conclusion: The issue was remanded to the Assessing Officer for fresh adjudication, with due opportunity to the assessee, and the addition was not finally sustained at this stage.

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