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Facts
The assessee, a doctor, declared an income of Rs. 27,72,180/-. The Assessing Officer (AO) noted a difference of Rs. 19,66,554/- between the opening and closing cash balances as per the ITR, treating it as unexplained money and adding it under Section 69A r.w.s. 115BBE. The CIT(A) sustained this addition.
Held
The Tribunal held that the AO erred in treating the difference in cash balance as unexplained money without considering the assessee's personal cash flow statement and cash book extracts. The closing balance of one year was correctly carried forward as the opening balance of the next year, rendering the AO's observation incorrect.
Key Issues
Whether the difference in cash balance, when personal cash flow statements and cash books are considered, can be treated as unexplained money under Section 69A r.w.s. 115BBE.
Sections Cited
69A, 115BBE
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Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad
करदाता का प्रतततितित्व/ : Shri K.C. Devdas, C.A. Assessee Represented by राजस्व का प्रतततितित्व/ : Dr. Sachin Kumar, Sr. A.R. Department Represented by सुिवाई समाप्त होिे की ततति/ : 26.03.2026 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 27.03.2026 Date of Pronouncement O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 10.09.2025, pertaining to the assessment year 2023-24. 2 Venkata Naga Mohan Rao. B
The brief facts of the case are that, the assessee is a Doctor by profession, employed with Government Medical College, Nizamabad, filed his return of income for A.Y. 2023-24 declaring total income at Rs. 27,72,180/-. The case was selected for scrutiny to verify credit card payments. During the course of assessment proceedings, the A.O. called upon the assessee to file relevant details and explain source for credit card payments. In response, the assessee has submitted details of credit card expenses along with the cash flow statement for the financial year 2022-23. The A.O., on perusal of cash flow statement submitted by the assessee, observed that the assessee had shown opening cash balance of Rs. 19,91,554/- as on 01.04.2022 and closing cash balance of Rs.25,000/- as on 31.03.2022, as per the ITR filed for the assessment year 2023-24. Therefore, the difference between opening cash balance as on 01.04.2022 and closing cash balance as on 31.03.2022 of Rs. 19,66,554/- has been treated as unexplained money and the same has been added under Section 69A r.w.s. Section 115BBE of the Income Tax Act, 1961.
On appeal, the learned CIT(A) sustained the additions made by the A.O. for the reasons stated in the appellate order.
3 Venkata Naga Mohan Rao. B
Aggrieved by the order of learned CIT(A), the assessee is now in appeal before us.
The learned counsel for the assessee, Shri K.C. Devdas, C.A. referring to cash flow statement filed by the assessee, submitted that the assessee is maintaining two sets of cash books, one for his salary income and income from other sources, and another for his personal affairs and the A.O. considering the cash balance of business as on 31.03.2022 and opening balance of personal capital account, observed that there is a difference and the same is treated as unexplained money of the assessee. However, the fact remains that if there is a difference between opening and closing cash balance, the same cannot be treated as unexplained money, because the assessee explained the said difference with personal cash flow statement. Therefore, he submitted that, the addition made by the A.O. should be deleted.
The learned counsel for the Revenue, Dr. Sachin Kumar, on the other hand, supporting the order of learned CIT(A) submitted that, as per the ITR filed by the assessee, the assessee had shown opening cash balance of Rs.19,91,554/- as on 01.04.2022 and 4 Venkata Naga Mohan Rao. B closing cash balance of Rs.25,000/- as on 31.03.2022 and opening capital balance of Rs. 19,91,554/-. The difference could not be explained. Therefore, the A.O. has rightly made the difference as unexplained money and the same should be upheld.
We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. made addition of Rs. 19,66,554/- towards the difference in cash balance as per cash flow statement submitted by the assessee and the relevant opening cash balance as on 01.04.2022 and the closing cash balance shown in the ITR filed for A.Y. 2023-24 (Financial Year 2022-23) and observed that there is a difference of Rs. 19,66,554/- which could not be explained by the assessee. It was the argument of the assessee that the assessee maintains separate set of cash flow statements, one for business and another for personal affairs, and the A.O. without considering the personal cash flow statement has arrived at the difference. Otherwise, there is no difference in cash balance as computed by the A.O., because the assessee was having sufficient cash in hand as on 01.04.2022 which is evident from the relevant cash book filed by the assessee. We find that, the assessee has furnished cash book extracts from 5 Venkata Naga Mohan Rao. B 01.04.2021 to 31.03.2023. As per cash book filed by the assessee, the closing balance as on 31.03.2022 was at Rs. 19,91,554/- and the same has been carried forward as on 01.04.2022. Therefore, the observation of the A.O. that there is a difference in cash balance when compared to ITR, is incorrect. In the present case, the A.O. without considering the personal cash flow statement of the assessee has arrived at a difference and therefore, in our considered view, the A.O. has erred in making addition of Rs. 19,66,554/- towards the difference in cash balance as unexplained money of the assessee. The learned CIT(A) without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of learned CIT(A) and direct the A.O. to delete addition made towards difference in cash balance of Rs. 19,66,554/- under Section 69A r.w.s. Section 115BBE of the Income Tax Act, 1961.
In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 27th March, 2026. (मंजूनाथ जी) श्री विजय पाल राि (MANJUNATHA G.) (VIJAY PAL RAO) लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष /VICE PRESIDENT 6 Venkata Naga Mohan Rao. B