In the interest of justice, foreign bank unexplained cash credit

In the interest of justice, foreign bank unexplained cash credit addition is remanded for fresh consideration.

Issue

Whether the addition made under Section 68 of the Income-tax Act, 1961 towards unexplained credits in a foreign bank account should be remanded to the CIT(A) to grant the assessee one final opportunity to produce supporting evidence and explain the source of funds.

Facts

Foreign Bank Account Credits: During Assessment Year 2016-17, the assessee had various cash credits in a foreign bank account denominated in Singapore Dollars (SGD).
Initial AO Addition: The Assessing Officer (AO) treated the credits as unexplained cash credits under Section 68 due to a lack of satisfactory explanation regarding their source, making an addition of approximately ₹2.63 crores.
CIT(A) Appeal & Partial Relief: On appeal, despite the assessee submitting certain documents, the CIT(A) recorded non-compliance across multiple hearing opportunities and confirmed an addition of approximately ₹1.45 crores.
Pending Proceedings: The assessee was simultaneously facing criminal proceedings in connection with an alleged financial offense.

Decision

Remand Granted: The Income Tax Appellate Tribunal (ITAT) held that, in the interest of justice and considering the overall facts and circumstances, the assessee ought to be granted one more opportunity to substantiate its case.
Setting Aside CIT(A) Order: The impugned order of the CIT(A) was set aside, and the matter was remanded back to the CIT(A).
Direction to Assessee: The CIT(A) was directed to afford one final opportunity to the assessee to furnish the necessary supporting documents and a complete explanation regarding the source of the foreign bank credits [Para 5.2].

Key Takeaways

Principles of Natural Justice: Tribunals often extend an additional opportunity to assessees to furnish evidence where substantial financial additions are involved, provided the interest of justice warrants it.
Burden of Proof Under Section 68: The onus remains strictly on the assessee to establish the identity, creditworthiness, and genuineness of the source of any cash credits in foreign or domestic bank accounts.
Procedural Rigor: Remand orders do not delete the tax liability; they merely reopen the forum, requiring the taxpayer to actively participate and submit concrete documentary proof during the remanded proceedings.

IN THE ITAT HYDERABAD BENCH ‘B’

Prasad Nimmagadda

ACIT

VIJAY PAL RAO, Vice President
and MANJUNATHA G, Accountant Member

IT Appeal No. 1567 (HYD) of 2025
[Assessment year 2016-17]

JULY 3, 2026

K.A. Sai Prasad, CA for the Appellant. K. Prasad, Sr. AR for the Respondent.

ORDER

Vijay Pal Rao, Vice President. – This appeal by the Assessee is directed against the Order dated 23.07.2025 of the learned CIT(A)-12, Hyderabad, for the assessment year 2016-2017.

2. The assessee has raised the following grounds of appeal:

1. “The Order of the learned Commissioner of Income Tax (A) 12, Hyderabad is not correct either on facts or in law and in both.

2. The Learned CIT(A) 12, Hyderabad erred in sustaining the addition of Rs.1,17,96,000/- being foreign salary received from M/s Globex Holdings Pte Ltd, Singapore, which is taxable only in Singapore in terms of Article 15 of the India-Singapore DTAA since the appellant’s stay in Singapore was less than 183 days.

3. Without prejudice, the Learned CIT(A)-12, Hyderabad erred in dismissing the claim for foreign tax credit of taxes paid in Singapore, as relief under section 90 of the Act read with the DTAA could not be denied when substantive evidence was available on record.

4. The Learned CIT(A)-12, Hyderabad, erred in upholding the addition of Rs.1,45,43,306/- as unexplained credits appearing in the appellant’s foreign bank account, ignoring necessary evidence filed.

5. The appellant craves leave to add, amend, modify, rescind, supplement or alter any or more grounds of appeal stated herein above either before or at the time of hearing of this appeal.”

3. At the time of hearing, the learned Authorised Representative of the Assessee has submitted that the assessee was in custody in respect of some financial transactions of Singapore Dollars [in short “SGD”] credited in the bank account of the assessee which is also the subject matter of the addition. Therefore, the assessee could not file the relevant supporting evidence as well as properly represented before the authorities below and said matter is still pending adjudication before the Hon’ble Supreme Court in RAS AL Khaimah Investment Authority v. Matrix Pharmacorp (P.) Ltd. [Civil Appeal Nos.12561 to 12566 of 2025, dated 25-5-2026]. The learned Authorised Representative of the Assessee has thus submitted that because of the criminal case the assessee was confined in the jail for more than 02 years and therefore, he was not able to collect the relevant evidence and was not properly represented before the learned CIT(A). He has thus contended that the assessee may be given one more opportunity to file the relevant record as well as supporting evidence before the learned CIT(A).

4. On the other hand, the learned DR has objected to grant of one more opportunity to the assessee and submitted that the Assessing Officer as well as the learned CIT(A) has granted sufficient opportunities to the assessee and even the additional evidence filed by the assessee before the learned CIT(A) was also forwarded to the Assessing Officer for remand report however, the assessee failed to explain the source of the credits in the bank account. He has relied upon the Orders of the authorities below.

5. We have considered the rival submissions and carefully perused the Orders of the authorities below. The Assessing Officer has made the addition of Rs.2.63 crores on account of credits in the bank account of the assessee in SGD currency for want of explanation of the source. On appeal, though the assessee has filed some documents however, the same were not found to be satisfactory to explain the source of the credits in the bank account of the assessee. The learned CIT(A) has recorded these facts in Para nos.6.5.5 to 6.5.7 as under:

“6.5.5. I have considered the submission of the appellant, additional evidences and the remand report submitted by the Assessing Officer. In this regard, it is submitted that the remand report was duly forwarded to the appellant, offering an opportunity to furnish objections, comments or rebuttal submissions, if any, on the remarks made by the AO. However, the appellant failed to avail the opportunity, as no response, explanation or written submission was received from the appellant within the time allowed or even thereafter.

6.5.6. The appellant only on two occasions replied stating that “The assessee requests time till 20th February 2024 to submit the detailed reply to the notice”. And on another time, it was replied that “Gathering of material from multiple sources and preparing paper book requires time till 21.06.2025. Inconvenience is deeply regretted”.

However, till date no counter comments were furnished by the appellant. Therefore, FINAL opportunity was provided to the appellant vide notice dated 07.07.2025 fixing the hearing on 09.07.2025. There is no response from the appellant even on 09.07.2025.

6.5.7. From the above, it is clear that neither the appellant nor the Authorised Representative appeared nor filled written submissions in support of ground of appeal on the dates posted for hearing on several occasions as mentioned above.”

5.1. Thus, the learned CIT(A) has observed that despite various opportunities the assessee has not filed any response to the notice. Further, the learned CIT(A) has held in Para nos.6.5.10 to 6.5.15 as under:

“6.5.10. The absence of any counter-submission from the appellant, despite due and adequate opportunity, implies that the appellant has not controverted or disputed the findings and observations made by the AO in the remand report. Hence, the contents of the remand report stand unrebutted and unchallenged, and the same are taken into consideration as part of the adjudication of this appeal.

6.5.11. After carefully considering the facts of the case, the submissions made by the appellant, the additional evidence filed, and the detailed remand report of the Assessing Officer, it is clear that the appellant has not satisfactorily explained the credits totaling SGD 2,95,896.35, equivalent to Rs.1,45,43,306/-, appearing in his Singapore OCBC Bank account. Despite being given several chances both during the assessment and appellate proceedings, the appellant failed to furnish proper documents to substantiate the nature and source of the credits.

6.5.12. Specifically, in respect of the credit of SGD 2,80,000/, the appellant claimed it was a personal loan from Mr. Tan Chau Chuang; however, the material on record shows conflicting entries, including a transfer of SGD 2,06,596.33 to a third party, raising serious doubts about the genuineness of the transaction, and no identity proof or bank statement of the alleged lender was furnished.

6.5.13. Similarly, for the credits of SGD 326.35 and SGD 3,570, the appellant initially described them as “Alsai Rental Deposits” during assessment but later changed the explanation to “loan refunds” without any credible supporting documents, making the explanation unreliable.

6.5.14. In the case of the SGD 12,000 credit claimed to have been received from M/s EIJI Holdings Pte Ltd, the appellant failed to produce his own bank statement for March 2016, and the financials of EIJI Holdings did not reflect any such transaction, leaving the claim unverified. Further, the appellant was repeatedly given opportunities to present his case during the appellate proceedings, but he failed to appear or file any further evidence or counter-submissions despite several hearing notices, including a final notice dated 07.07.2025.

6.5.15. The appellant only sought time extensions on two occasions but ultimately failed to submit any explanation or documents. Since the appellant has not rebutted the findings of the Assessing Officer in the remand report, the observations made by the AO remain unchallenged and are taken into account for this decision. Given these facts, it is evident that the appellant did not discharge the burden of proof required under Section 68 of the Income-tax Act to explain the nature and source of these credits. Therefore, the addition of Rs.1,45,43,306/- made by the Assessing Officer towards unexplained credits is upheld and Ground No. 4 is hereby dismissed.”

5.2. It is manifest from the impugned order of the learned CIT(A) that the assessee failed to submit the explanation as well as documents in support of the source of credits in the bank account and consequently, the additions made by the Assessing Officer were confirmed by the learned CIT(A). Now the learned Authorised Representative of the Assessee has explained that assessee was in custody for more than 02 years in India and even when the assessee was out of India he was detained due to look-out notice issued by the investigation agencies and therefore, the assessee was not able to properly prosecute his case before the learned CIT(A). He has also filed copy of the Order of the Hon’ble Supreme Court in the Interlocutory Application filed by the assessee in Civil Appeal Nos.12561 to 12566/2025. From the record filed by the learned Authorised Representative of the Assessee it is clear that there were criminal proceedings pending against the assessee in respect of some financial offence. Accordingly, in the facts and circumstances of the case and in the interest of justice, we allow one more opportunity to the assessee to present its case and file the relevant supporting evidence before the learned CIT(A). Hence, the impugned order of the learned CIT(A) is set aside and the matter is remanded to the record of the learned CIT(A) for granting one more opportunity to the assessee to file the necessary supporting evidence as well as to furnish the explanation regarding the source of the credits in the bank account of the assessee. Needless to say, assessee may be given proper opportunity of hearing before passing the fresh order.

6. In the result, appeal of the Assessee is allowed for statistical purposes.