Incorrect Invocation of S.69A for disclosed Cash Deposits: ITAT quashes Rs. 44.5 Lakh Addition [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the addition of Rs. 44.5 lakh, ruling the incorrect invocation of Section 69A of Income Tax Act, 1961 for disclosed cash deposits.

Kamlesh Kampani,appellant-assessee,was in the business of trading cloth, fabrics, and textiles. He filed his return for AY 2017-18 on 03/11/2017, declaring an income of Rs. 4,30,970/-. His case was selected for scrutiny, and notices under sections 143(2)/142(1) were issued.

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The Assessing Officer ( AO ) found that the assessee made cash deposits of Rs. 44.5 lakh in his Axis Bank account during the demonetization period ( 09/11/2016 to 30/12/2016 ). The AO was not convinced by the assessee's explanation for having such cash available by 08/11/2016 and noted there were no withdrawals before that date. As a result, the AO added Rs. 44.5 lakh under section 69A as unexplained money. The assessee appealed to the Commissioner of Income Tax(Appeals) [CIT(A)], who upheld the AO’s decision.

The assessee appealed before the tribunal against the CIT(A) order.

The Tribunal, after hearing both parties and reviewing the records, found that the AO had passed an assessment order under section 143(3), adding Rs. 44.5 lakh under section 69A to the assessee’s income. The CIT(A) upheld the AO’s decision, confirming the addition of Rs. 44.5 lakh for cash deposits made during demonetization, which the AO believed were unexplained.

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The appellate tribunal noted that the assessee had explained the cash deposits as part of cash sales, supported by the cash book and summary, which were not rejected by the AO. The AO had not provided evidence to show misuse of the cash, and both authorities had accepted the books of accounts without pointing out any defects.

A Single Member bench comprising Shamim Yahya ( Accountant Member ) agreed with the assessee’s argument that Section 69A could not be invoked for cash deposits already disclosed in the bank account, as the books were not rejected. Following a similar case, the bench ruled that the addition was unjustified and allowed the assessee’s appeal, deleting the disputed addition.

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