No Income Tax Addition on Gross Cash Deposits Without Verification: ITAT Sets Aside ₹9.32 Cr Addition, Grants Final Opportunity to Substantiate Claim [Read Order]

The Income Tax Appellate Tribunal (ITAT) Pune Bench has set aside the addition of ₹9.32 crore made in the assessment of income tax for the reason of unexplained cash deposits. It held that without proper verification of the nature of the transaction, the addition cannot be sustained.

The matter has been sent back to the Commissioner of Income Tax (Appeals) [ CIT(A) ] for fresh adjudication. The Tribunal has restored the issue back to the file of the CIT(A) with a direction to grant a final opportunity to the assessee to substantiate his claim.

The assessee, who is an individual and runs a business of mobile and DTH recharge services on a commission basis had claimed income of ₹5.37 lakh. The matter was selected for limited scrutiny due to the large cash deposits made into his bank accounts.

However, there was no proper compliance with regard to the assessment proceedings. The Assessing Officer held that the cash deposits of ₹9.32 crore would be under Section 69A and the same was added to his income.

Before the CIT(A) it was contended that these deposits were related to business turnover and that only commission was liable to tax. However, the appellate authority confirmed the addition on the ground that there was no supporting evidence.

Before the Tribunal, it was contended that these deposits were related to recharge sales routed through telecom operators like BSNL and Vodafone Idea, and the relevant accounts were furnished.

However, due to improper representation before the lower authorities, there was no adequate evidence furnished on behalf of the assessee. The Revenue relied on the report furnished by the lower authorities.

The Tribunal noted that the claim in respect of commission-based business needed to be verified and that it was not justified to tax the entire cash deposit without examining the outflows.

Accordingly, the Bench comprising R.K. Panda (Vice President) and Vinay Bhamore (Judicial Member) remanded the case for fresh consideration with a direction to the assessee to fully cooperate and furnish details.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates