ITAT Remands Section 69A Addition for Bank Reconciliation; Imposes Cost for Non-Compliance

ITAT Remands Section 69A Addition for Bank Reconciliation; Imposes Cost for Non-Compliance

Issue

1. Unexplained Money (Section 69A): Whether the difference between total bank credits and declared sales turnover can be added as unexplained money when the assessee claims they are contra entries and loans but failed to prove it before lower authorities.

2. Second Chance: Can the Tribunal restore a matter to the Assessing Officer (AO) for fresh verification even if the assessee remained non-cooperative and was proceeded against ex-parte by both the AO and CIT(A)?

Facts

• Assessee: M/s Punjab Metallize (HUF).

• Assessment Year: 2018-19 (Lead case) & 2019-20.

• The Discrepancy: The AO noticed that the assessee’s Yes Bank account had total credits of Rs. 6,96,59,418, while the declared sales were only Rs. 6,21,02,710.

• The Addition: The AO treated the difference of Rs. 75,56,708 as unexplained money under Section 69A, as the assessee failed to explain the source.

• Assessee’s Defense: In the appeal grounds, the assessee argued that the difference was not income but consisted of:

  • Contra entries (transfers between own bank accounts).

  • Cheque returns (entries reversed).

  • Loans received from individuals (Smt. Swaranjit Kaur and Sh. Manmohan Singh).

• Non-Compliance: The assessee did not appear before the AO or the CIT(A), leading to ex-parte orders confirming the addition. The appeal to the Tribunal was also filed 7 days late (which was condoned).

Decision

1. Remand for Verification:

• The Tribunal noted that while the assessee was non-cooperative, the addition was based on a factual mismatch that requires reconciliation of bank statements.

• To meet the “ends of justice,” the Bench decided that the matter deserves to be examined afresh. The order of the CIT(A) was set aside, and the case was restored to the file of the AO.

2. Imposition of Cost:

• Due to the assessee’s conduct (wasting judicial time and repeated non-appearance), the relief was granted subject to a strict condition.

• Cost: The assessee must deposit Rs. 3,000/- per appeal (Total Rs. 6,000 for two years) into the PM CARES Fund.

• Deadline: This must be done within one month of receiving the order. Proof of payment must be shown to the AO to start the fresh proceedings. [Matter Remanded]

Key Takeaways

• Bank Mismatches are Reconcilable: Large differences between bank deposits and sales are often due to non-income items like contra transfers or bounced cheques. Tribunals generally allow a chance to prove this mathematically rather than confirming tax on “ghost income.”

• Cost for Non-Compliance: Taxpayers cannot take the appellate process for granted. Courts are increasingly imposing monetary costs (to be paid to funds like PM CARES) as a penalty for ignoring notices at the lower stages.

• Conditional Relief: The remand is conditional. If the assessee fails to pay the Rs. 3,000 cost or fails to submit the proof within 30 days, the AO can confirm the addition immediately without a further hearing.

THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH
Manmohan Singh & Sons
Vs
CIT(A)
Ludhiana
Date of Hearing : 08/01/2026
ITA Nos. 674 & 675/Chd/ 2025