The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition of Rs. 9.99 lakh made under Section 69C of Income Tax Act, 1961, where cash payments toward credit card bills from agricultural income were treated as unexplained.

Venkateswarlu Chandu,appellant-assessee, filed his income tax return for AY 2017-18 on 31.10.2017, declaring NIL income. The case was selected for limited scrutiny through CASS, and notices were issued. During the proceedings, he stated that he earned agricultural income of Rs. 23,10,000/-, which he deposited in cash to pay credit card bills in Delhi.

The Assessing Officer (AO) noted that the income was earned in Nellipudi Village, Andhra Pradesh, and the appellant did not provide a satisfactory explanation for transporting cash over 1,800 km to Delhi. Consequently, cash payments of Rs. 9,99,000/- toward credit card bills were added to his income under Section 69C.

The Commissioner of Income Tax(Appeals) [CIT(A)] upheld the AO’s view, observing that it was improbable for the appellant to carry cash from Nellipudi instead of depositing it locally, and payments were also made in Hyderabad, Vijayawada, Guntur, and Secunderabad. Aggrieved, the assessee approached the tribunal.

The assessee counsel argued that the CIT(A) wrongly confirmed the addition of Rs. 9,90,000/- as unexplained cash payments toward credit card bills under Section 69C, based only on suspicion and conjecture.

He stated that the explanation about the source of payment was rejected without any evidence to the contrary. He also pointed out that the payments were made from agricultural income, which the AO had already accepted during assessment.

The departmental counsel relied on the orders of the lower authorities.

A single member bench of Mahavir Singh ( Vice President) observed that the addition of Rs. 9,99,000/- was made solely based on doubt and suspicion, as the explanation for the source of cash payments toward the credit card was rejected without any concrete evidence.

It noted that the payments were made from agricultural income earned during the year, which the AO had accepted during assessment and which the CIT(A) had also acknowledged. Since the source of payment was not in dispute and the addition rested only on assumptions, the tribunal held it was not justified.

Accordingly, the tribunal deleted the addition and allowed the assessee’s appeal.

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