Cash deposit and unsecured loan additions remanded where supporting records were not examined; section 143(1) adjustment challenge failed.
Where an assessee supports cash deposits during the demonetisation period with cash book, cash sale register and invoices, and those materials are not properly examined, the addition under section 69A should be remitted for fresh adjudication after giving a proper opportunity and considering further evidence. Likewise, where identity, creditworthiness and genuineness of unsecured loans are claimed to be established but the appellate authority has not examined the supporting material, the addition under section 68 and related interest and commission disallowances should be set aside for reconsideration. However, a disallowance made only in an intimation under section 143(1) cannot be challenged in an appeal against the separate assessment order under section 143(3), so the section 43B ground was not entertainable.
Issues: (i) Whether the addition under section 69A of the Income-tax Act, 1961, on account of cash deposits during the demonetisation period was sustainable; (ii) Whether the addition under section 68 of the Income-tax Act, 1961, along with the consequential interest and commission disallowances, was sustainable; (iii) Whether the disallowance under section 43B of the Income-tax Act, 1961, made under an intimation under section 143(1) of the Income-tax Act, 1961, could be agitated in the present appeal.
Issue (i): Whether the addition under section 69A of the Income-tax Act, 1961, on account of cash deposits during the demonetisation period was sustainable.
Analysis: The cash deposits were claimed to have been sourced from cash sales and available cash in hand, but the lower authorities relied on alleged discrepancies in cash invoices and the cash position reflected in the records. The appellate authority had not examined the cash book, cash sale register, and supporting invoices relied upon by the assessee. In the absence of consideration of those materials, the issue required fresh adjudication after granting adequate opportunity and, if necessary, permitting further evidence.
Conclusion: The issue was restored for de novo adjudication and the addition was not finally sustained at this stage, resulting in relief to the assessee for statistical purposes.
Issue (ii): Whether the addition under section 68 of the Income-tax Act, 1961, along with the consequential interest and commission disallowances, was sustainable.
Analysis: The assessee sought to support the unsecured loans by filing material to establish identity, creditworthiness, and genuineness, but those materials were not examined by the appellate authority while upholding the addition. Since the factual foundation had not been considered in full, the matter required reconsideration by the appellate authority, with liberty to call for a remand report and to afford a proper hearing.
Conclusion: The issue was set aside for fresh adjudication and the related additions were not finally affirmed, granting relief to the assessee for statistical purposes.
Issue (iii): Whether the disallowance under section 43B of the Income-tax Act, 1961, made under an intimation under section 143(1) of the Income-tax Act, 1961, could be agitated in the present appeal.
Analysis: The disallowance arose only from an intimation under section 143(1) and was not part of the assessment made under section 143(3). As the impugned appeal was against the assessment order and not the separate processing intimation, the challenge to that adjustment could not be entertained in the present proceedings.
Conclusion: The ground was rejected and the disallowance stood against the assessee.
Final Conclusion: The appeal was disposed of with partial relief: the two major additions were sent back for fresh consideration, while the challenge to the section 43B adjustment failed.
Ratio Decidendi: Where relevant evidentiary material relied upon by an assessee has not been considered, the addition should be remitted for fresh adjudication; and an adjustment made only under section 143(1) cannot be challenged in an appeal directed against the separate assessment order under section 143(3).
TaxTMI 
AI Drafter ✕
TaxTMI 
