Reconciliation Establishes Cash Deposits as Agency Collections: ITAT Deletes ₹19.04 Lakh Addition u/s 69A [Read Order]

The appellant, Shyam Singh Hetta, carrying on business under the name M/s Hetta Enterprises, is a private contractor, retail trader, and commission agent for DTM Pvt. Ltd. For the Assessment Year (A.Y.) 2017-18, he filed his income tax return declaring a total income of ₹2,95,760. The case was selected for scrutiny due to large cash deposits made during the demonetisation period.

During assessment, the Assessing Officer (AO) observed cash deposits amounting to ₹19,04,800 across multiple bank accounts and treated the same as unexplained money under Section 69A of the Income Tax Act, 1961. The AO completed the assessment on 19.12.2019, making an addition of ₹19,04,800 to the assessee’s income.

Aggrieved, the appellant challenged the order before the Commissioner of Income Tax (Appeals), NFAC, Delhi [CIT(A)], upheld the AO’s findings on the ground that sufficient evidence had not been produced. Aggrieved by this, the appellant then approached the ITAT.

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Representing the appellant Vishal Mohan and Rohit Kaura, contended that the deposits represented membership fees collected on behalf of DTM Pvt. Ltd. and not the personal income of the assessee. It was argued that the assessee, acting merely as an agent, had immediately transferred the collected amounts into the company’s bank account, a fact corroborated by bank statements and ledger extracts.

Documentary evidence matching entry-to-entry of receipts and deposits, showing that cash collected on behalf of the company was submitted alongside a list of persons from whom the funds were collected and demonstrated reconciliation between receipts and deposits. Thus, it was submitted that the source of deposits was clearly established, and no addition under Section 69A was warranted.

Representing the Revenue, Ranjit Kaur, argued that the deposits were made in the assessee’s personal bank accounts and that he had failed to furnish credible evidence linking the amounts to the company. It was contended that in the absence of direct acknowledgments from DTM Pvt. Ltd. or confirmations from contributors, the explanation remained unsubstantiated, and therefore, the addition made by the AO and sustained by the CIT(A) should be upheld.

The Bench comprising of Judicial Member, Laliiet Kumar and Accountant Member,Manoj Kumar Aggarwal observed that the key issue was whether the cash deposits during the demonetisation period represented unexplained income of the assessee or amounts collected on behalf of DTM Pvt. Ltd.

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The Tribunal noted that the assessee had provided documentary evidence including ledger accounts, bank statements, and reconciliation record showing that the amounts were promptly transferred to the company’s account. The Tribunal observed that the CIT(A) had passed a cryptic order without evaluating the evidences produced by the assessee.

The Tribunal held that once the assessee establishes reconciliation between deposits and corresponding transfers to the principal’s account, the onus shifts to the Revenue to disprove such evidence. Since the Revenue had not produced any contrary material, the explanation of the assessee stood uncontroverted.

The Bench reiterated the settled legal principle that amounts collected by an agent on behalf of a principal cannot be taxed as unexplained income in the agent’s hands when proper reconciliation is available.

Accordingly, the Tribunal directed the deletion of the entire addition of ₹19,04,800 made under Section 69A.

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