Unexplained Cash Deposits in Co-op Credit Society Require Verification: ITAT Remands ₹5 Cr Addition u/s 69A for Fresh Adjudication [Read Order]

The case arose from reassessment proceedings initiated against the assessee, Harshang Kaushikkumar Rami, for Assessment Year 2017–18. The Assessing Officer (AO) received information that the assessee had deposited ₹5.00 crore in cash in an account held with M/s Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. during May 2017.

After reopening the assessment under Section 147, the AO issued notices under Sections 148 and 133(6), but no response was received from the assessee or the bank. Consequently, the AO completed the assessment ex parte, treating the entire cash deposits as unexplained money under Section 69A.

Being aggrieved by the Assessment Order, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. Aggrieved by this order, the assessee filed an appeal before the Tribunal

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Before the Tribunal, the assessee contended that the deposits represented business turnover arising from trading in brass and mobile products. It was argued that the funds were cycled between withdrawals and redeposits, reflecting business transactions rather than unexplained income.

The assessee relied on several judicial precedents, including CIT v. President Industries, to contend that cash deposits arising from business sales should not be treated as unexplained money. Alternatively, the assessee pleaded that only the peak balance of ₹23.85 lakh should be taxed, as the same funds were repeatedly rotated.

An affidavit and account statements from the co-operative society were placed on record, asserting that these transactions reflected legitimate business activity.

The Departmental Representative opposed the appeal, arguing that the assessee had failed to furnish any documentary evidence linking the deposits to actual business operations. Both before the AO and the CIT(A), the assessee neither disclosed the nature of the business with supporting records nor explained the source of cash, warranting the addition under Section 69A.

The Tribunal observed that, although the assessee had filed a ledger statement from the co-operative credit society, it did not clearly demonstrate any business activity, as most entries were in cash. However, since certain supporting documents and an affidavit had been filed, the matter warranted factual verification.

The two-member bench comprising Annapurna Gupta (Accountant Member) and Suchithra Kamble (Judicial Member) held that the AO had not examined the material evidence or afforded an adequate opportunity of hearing.

Invoking principles of natural justice, it remanded the matter to the AO for fresh adjudication and verification of bank statements, affidavits, and supporting evidence. The appeal was partly allowed for statistical purposes.

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