Unexplained Cash Deposit of ₹22.78 Lakh u/s 69A: ITAT Deletes Addition due to Sufficient Evidence [Read Order]

The Rajkot Bench of Income Tax Appellate Tribunal (ITAT) deleted the addition of ₹22.78 lakh made under section 69A of Income Tax Act,1961, citing sufficient evidence supporting the cash deposits.

Tapulal Nathalal Dasani, appellant-assessee, filed a return of income for the assessment year 2017-18, declaring ₹7,85,850. The case was selected for Limited Scrutiny, and a notice under section 143(2) was issued on August 9, 2018.

In response, the assessee submitted income tax returns, computation details, bank statements, and other documents. The assessing officer (AO) sought clarification on cash deposits made during the demonetization period. Further submissions included balance sheets, cashbooks, and debtor confirmations, but the AO did not verify them under section 133(6) of the Act.

Join the Legal Thinkers – Explore Tax and Constitutional Battles in Court! - Click Here

The assessee explained that the cash deposits came from retail business sales and were lower than in previous years. However, the AO rejected the explanation and treated ₹22,78,500 as unexplained, adding it to the total income under section 69A of the Act.

The assessee appealed to the Commissioner of Income Tax(Appeals)[CIT(A)], who upheld the addition, stating that the cash deposits and receipts from debtors were not proven genuine. Aggrieved, the assessee filed a further appeal.

Join the Legal Thinkers – Explore Tax and Constitutional Battles in Court! - Click Here

The assessee's counsel argued that cash deposits followed the same pattern as in previous years, as the business was cash-based. It was contended that the AO accepted deposits made before demonetization but wrongly questioned later deposits from debtors. The counsel stated that all necessary documents were submitted, but the authorities neither discredited nor rebutted them, making the addition unjustified.

The Revenue's representative supported the AO's decision without adding new arguments.

Join the Legal Thinkers – Explore Tax and Constitutional Battles in Court! - Click Here

The two member bench comprising Dinesh Mohan Sinha (Judicial Member) and Dr.A.L.Saini (Accountant Member) reviewed the submissions, documents, and case records and found that the AO overlooked key facts. The cash deposit of ₹22,78,500 came from debtor receipts and opening cash on hand, as recorded in the balance sheets. The assessee had submitted balance sheets and cashbooks for multiple years, showing sufficient cash balances.

It noted that the AO wrongly invoked section 69A despite partially accepting cash receipts from debtors based on confirmation letters. The assessee provided various documents, including tax returns, balance sheets, and cashbooks, which were neither verified nor discredited.

Join the Legal Thinkers – Explore Tax and Constitutional Battles in Court! - Click Here

Read More:Unexplained Cash Deposits u/s 69A: ITAT upholds CIT(A)’s deletion of ₹2.27 Crore Addition

Since the assessee operated a cash-based retail business and regularly deposited cash before and after demonetization in the same pattern, there was no abnormality. The AO failed to justify why the evidence was disregarded.

Join the Legal Thinkers – Explore Tax and Constitutional Battles in Court! - Click Here

The tribunal held that valid evidence could not be ignored without reason and deleted the addition.

In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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