Unexplained cash deposits treated as taxable income when the assessee fails to produce source evidence, and loss set offs unverified are disallowed.

Cash deposits made during the demonetisation period were treated as unexplained income where the assessee failed to furnish any explanation or documentary source despite statutory notices and opportunities; consequently the deposits were assessed as income and taxed under the special tax provision. A claimed current year loss set off was disallowed because the assessee did not produce supporting details for verification, and that disallowance was sustained. The ex parte assessment completed without the assessee's participation was held valid because statutory notices were issued and adequate hearing opportunities were recorded, placing the default on the assessee.

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Issues: (i) Whether the addition of Rs.14,39,648 under section 69A read with section 115BBE of the Income-tax Act, 1961, treating cash deposited during demonetisation as unexplained income, was sustainable; (ii) Whether the set off of current year losses of Rs.2,05,053 against other income was correctly disallowed; (iii) Whether the assessment completed under section 144 of the Income-tax Act, 1961, was invalid for breach of principles of natural justice.

Issue (i): Whether the cash deposits of Rs.14,39,648 during the demonetisation period could be treated as unexplained income under section 69A read with section 115BBE of the Income-tax Act, 1961.

Analysis: The AO recorded cash deposits in specified bank notes during the demonetisation period and issued statutory notices; the assessee failed to respond or furnish any source or explanation. The AO, after obtaining bank information under section 133(6), treated the deposits as belonging to the assessee and assessed them under section 69A and taxed under section 115BBE. The learned CIT(A) and the Tribunal examined the record of notices and opportunities afforded and found no material filed by the assessee to rebut the finding of unexplained deposits.

Conclusion: The addition under section 69A read with section 115BBE of the Income-tax Act, 1961, is upheld against the assessee.

Issue (ii): Whether the set off of current year losses of Rs.2,05,053 against other income was rightly disallowed by the AO.

Analysis: The assessee claimed set off of current year losses but did not produce supporting details or explanations despite statutory notices and opportunities before the AO and CIT(A). In absence of any supporting material, the claim of set off could not be verified and was rejected by the AO and sustained by the appellate authorities.

Conclusion: The disallowance of set off of current year losses of Rs.2,05,053 is affirmed against the assessee.

Issue (iii): Whether the assessment completed under section 144 of the Income-tax Act, 1961, was invalid for non-compliance with principles of natural justice.

Analysis: The record shows issuance and service of statutory notices under sections 143(2) and 142(1) and multiple hearing opportunities at the CIT(A) stage. The assessee did not respond at any stage and did not seek adjournment. The Tribunal noted that adequate opportunity was afforded and that the default lay with the assessee.

Conclusion: The ex parte assessment/order under section 144 of the Income-tax Act, 1961, does not suffer from breach of natural justice and is valid.

Final Conclusion: The Tribunal dismissed the assessee's grounds and confirmed the assessment additions and disallowance, resulting in dismissal of the appeal; the decision upholds the tax treatment of unexplained cash deposits and the rejection of unsubstantiated loss set off where the assessee fails to furnish explanations or documents.

Ratio Decidendi: Where an assessee deposits cash in bank during the demonetisation period and fails to furnish any acceptable explanation or documentary evidence despite statutory notices and opportunities, the assessing authority may treat such deposits as unexplained income under section 69A of the Income-tax Act, 1961, and tax it under section 115BBE, and claims of set off lacking supporting material may be disallowed.

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