Cash Deposits Were Duly Recorded in NBFC’s Books: ITAT Deletes Rs. 14.84 Lakh Addition [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition of Rs. 14.84 lakhs made under Section 69A of the Income Tax Act, 1961, on the grounds that the cash deposits in question were duly recorded in the books of account maintained by a registered non-banking financial company (NBFC), Savery Transport Finance Ltd.

Savery Transport Finance Ltd., the assessee, is a registered NBFC engaged in the business of financing commercial vehicles. For the Assessment Year 2017–18, the assessee filed its return declaring income under the normal provisions and also under the Minimum Alternate Tax (MAT) regime. During the demonetization period from 9 November 2016 to 30 December 2016, the assessee deposited Rs. 15.87 crore in cash, of which Rs. 14.84 lakhs were in Specified Bank Notes (SBNs).

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The Assessing Officer reopened the assessment under Section 147 and treated the Rs. 14.84 lakhs as unexplained cash deposits under Section 69A, on the basis that the assessee had failed to provide supporting confirmations from the borrowers who allegedly repaid loans in cash. The AO had issued notices under Section 133(6) to 108 borrowers, most of whom did not respond, leading to doubts about the genuineness of the cash receipts.

On appeal before the NFAC, both the addition under Section 69A and the disallowance under Section 80G were confirmed. Before the ITAT, the assessee’s counsel argued that, being a regulated NBFC, it maintained complete books of account audited under the Income Tax Act. The cash receipts were loan repayments from customers, duly entered in the records and supported by cash books, ledgers, and tax audit reports.

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The single-member bench comprising G. Manjunatha (Accountant Member) observed that the cash deposits were part of the assessee’s regular business receipts and were fully accounted for in the audited financials.

The tribunal explained that once the books are maintained and not rejected by the AO, and receipts are explained with business records, addition under Section 69A was unjustified. The tribunal deleted the Rs. 14.84 lakh addition under Section 69A. The appeal was partly allowed.

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