Mere Presence of Blank Cheque w/o any other Evidence to show Assessee Earned any Income: ITAT upholds Deletion of Addition [Read Order]
The Assessing Officer (AO) treated these cheques as evidence of unaccounted transactions and added Rs. 1.40 crore to the assessee’s income as unexplained money under Section 69A.
The Delhi Bench “A” of the Income Tax Appellate Tribunal (ITAT) has held that mere possession of undated or blank cheques, without corroborative evidence of income generation or any underlying transaction, cannot justify addition as unexplained money under Section 69A of the Income Tax Act, 1961.
The bench comprising Shri S. Rifaur Rahman (Accountant Member) and Shri Sudhir Pareek (Judicial Member) delivered the ruling while adjudicating cross appeals filed by Ashok Parshad Gupta, a Delhi-based businessman, and the Deputy Commissioner of Income Tax, Central Circle–20, New Delhi, for the Assessment Year 2019–20.
During a search and seizure operation conducted on December 1, 2018, under Section 132, in the Faquir Chand Lockers & Vaults Pvt. Ltd. group of cases, officials discovered four signed but undated cheques totaling Rs. 1.40 crore in the locker of the assessee. The cheques were signed by one Avadh Aggarwal, two of which were blank, and two were made out in the names of Prabha Garg and Ashok Parshad Gupta.
The Assessing Officer (AO) treated these cheques as evidence of unaccounted transactions and added Rs. 1.40 crore to the assessee’s income as unexplained money under Section 69A. The assessee, represented by Shri K. Sampath, Advocate, explained that the cheques were handed over by Avadh Aggarwal as security for potential business dealings that never materialized, and no monetary exchange had occurred.
Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, noting that the cheques remained uncashed and in their original form at the time of search, demonstrating the absence of any actual transaction. The CIT(A) further observed that the Revenue had failed to trace or question Avadh Aggarwal, whose role was central to the alleged transaction.
On Revenue’s appeal, the Tribunal upheld the CIT(A)’s decision. The bench observed that “the Assessing Officer made the addition merely on the basis of the presence of signed cheques without verifying whether they were ever encashed or acted upon.” It reasoned that a cheque represents only a potential transaction until it is presented and honoured.
The Tribunal categorically held that unless the cheques are encashed or acted upon, the transaction is not complete. Mere presence of uncashed or blank cheques without supporting evidence cannot establish that the assessee earned any income or engaged in a taxable transaction.
The ITAT also noted that the Department had not conducted any further inquiry with the alleged issuer of the cheques, thereby leaving the AO’s inference speculative and unsupported. Since no actual inflow of funds was proved, the Tribunal ruled that the addition under Section 69A was unsustainable in law.
With this ruling, the ITAT reaffirmed that not every asset or document found during a search operation automatically translates into taxable income. It requires demonstrable linkage with income generation or investment for invoking deeming provisions under the Income Tax Act.
The Tribunal, therefore, dismissed the Revenue’s appeal and confirmed the deletion of the Rs. 1.40 crore addition.
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