NANJAPPA GANGADHAR,BENGALURU vs. ITO, WARD-6(3)(1), BENGALURU

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ITA 154/BANG/2026Status: DisposedITAT Bangalore20 August 2026AY 2018-197 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found merit in the assessee's contention that gross receipts and withdrawals cannot simultaneously be treated as income. It held that only the profit element from business transactions is taxable and that the matter requires factual verification.

What were the facts?

The assessee, a non-filer, made significant cash withdrawals and deposits in bank accounts. The Assessing Officer treated these transactions as unexplained income, and the CIT(A) confirmed the addition. The assessee claimed these were business receipts and payments related to grape trading.

What were the issues?

Whether the entire bank credits and cash withdrawals from bank accounts can be treated as unexplained income, or only the profit element from the alleged business activity.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 144,Section 40A(3),Section 69A,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SANDEEP SINGH KARHAIL

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER: This appeal is filed by the Assessee against the order of Ld. CIT(A)-NFAC, Delhi vide DIN: ITBA/NFAC/S/250/2025-26/1082466615(1) dated 11-Nov-2025 for the Assessment Year 2018-19.

2.

The assessee has raised multiple grounds of appeal, which interconnected deals with issue relating to the addition by the revenue on account of cash withdrawal and amount credited in the bank without considering the necessary facts.

3.

The facts in brief are that the assessee is an individual who is a non-filer of income tax returns. Information available with the department revealed that during the year relevant to A.Y. 2018-19, the assessee made cash withdrawals of Rs. 2,18,30,430/- and Rs. 76,90,000/- from the bank accounts maintained with Vijaya Bank and Yes Bank, respectively and also made cash deposits of Rs. 6000/- to the Vijaya Bank account. Accordingly, income escaping assessment under section 147 was initiated by the AO by issuing a notice under section 148 of the Act. Still, the assessee did not file the return of income. However, during the proceedings, the assessee submitted that he is a commission agent for the sales and purchases of Grapes. He claimed that he purchases grapes from farmers and sells them to Shri Vinayak Shankrappa Gadvi, who runs a proprietary concern in the name and style of SV Grapes.

3.1 The assessee further claimed that the M/s SV Grapes transfers the amount into his account through RTGS. He makes payments to the farmers either through bearer cheque or through cash, as the farmers do not accept account payee cheque. Further payments to labourers for plucking and transportation, etc., are also made in cash. Thus, he withdrew cash from the banks to make payments to the farmers or to incur expenses related to the purchase and transportation of the grapes. The assessee claimed that in this process he earns Rs. 1 to 1.5 towards commission per kg of grapes.

3.2 The AO considered the assessee’s explanation and issued notice requiring the assessee to furnish certain details such as computation of income, details of bank accounts held, cash deposits and withdrawals from such bank accounts on different dates, and the purpose of such withdrawals. Cash payment in violation of section 40A(3) of the Act etc. However, the assessee failed to make a reply and submit the required details. Hence, the AO proceeded to make a best judgment assessment as per section 144 r.w.s. 147 of the Act.

3.3 The AO further noted that a sum of Rs. 98,08,135/- was credited to the assessee's Yes Bank account, out of which Rs. 76.90 lakh was withdrawn in cash. In the absence of necessary evidence and details, the AO treated the entire credit of Rs. 98,08,135/- in the Yes Bank account and the cash withdrawal of Rs. 2,18,30,430/- from Vijaya Bank as unexplained income and added it to the total income of the assessee.

3.4 The aggrieved assessee preferred an appeal before the learned CIT(A), who confirmed the addition made by the AO by observing as under:

2.

The assessee has not objected the addition made in the assessment order. The assessee’s only plea in the grounds of appeal is to give him the best assessment order for the relevant F.Y. 3. The assessee has not filed return of income u/s.139(1) of the I. T. Act, even in response to notice u/s.148, he has not filed return of income. He has not reported any sales or not disclosed any profit by filing return of income for the year. The assessee has been non-responsive during the course of assessment proceedings. He has not filed a single reply in response to various notices/letters issued during assessment proceedings. Even though the assessee has not filed return in response to notice u/s.148 and reporting a genuine turnover, the assessee has not filed any supporting documentary evidence such as copies of Purchase & Sale Bills, Purchase & Sales Register, Cash Book, Bank Book, Party wise Purchase details etc., copies of different approvals required from local authorities/state government to prove that he was carrying out genuine business activity and hence the source of deposits by any mode could not established the genuineness of transactions and subsequently cash withdrawals therefrom of Rs.2,18,30,430/- made during the F.Y. 2017-18, relevant to the A.Y.2018-19 in his bank account with Vijaya Bank was out of his business receipts/sales. Further, total credits found during the proceedings of Rs.98,08,135/- in account no.025985800000349 with Yes Bank was also out of his business receipts/sales. Thus, in the absence of any documentary evidence as discussed above, the source of the deposits/credit entries found in assessee’s bank account no.025985800000349 with Yes Bank remained unexplained. And cash withdrawals of Rs.2,18,30,430/- made during the F.Y. 2017-18, in his bank account with Vijaya Bank, also remain unexplained. 3.1 Therefore, the amount of Rs.2,18,30,430/-, being the amount of deposits by any mode in assessee’s bank account with Vijaya Bank, and total credits found during the proceedings of Rs.98,08,135/- in account no. 025985800000349 with Yes Bank, has been treated as assessee’s Unexplained Money u/s.69A of the I. T. Act and an addition of Rs.3,16,38,565/- has been made to his total income for the A.Y.2019- 20. The tax on this addition is calculated as per the provisions of Section 115BBE of the Act.

The addition of Rs.3,16,38,565/- u/s 69A as unexplained money is confirmed. 4. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

5.

The learned AR at the time of hearing before us drew our attention to pages 18 and 26-27 of the appeal set wherein copy of acknowledgement of filing details along with Form 35 and copy of statement of facts and grounds of appeal are placed. The ld. AR accordingly submitted that the assessee before the learned CIT(A) raised specific grounds against the addition made by the AO by treating the entire credit in the Yes Bank account and the entire deposit from the Vijaya Bank as unexplained. Before the learned CIT(A) and before the AO, it was explained that the credit in the bank accounts represents consideration received from M/S SV Grapes against the sale of grapes, whereas the cash withdrawal represents payment for purchases of grapes from farmers and payments to labourers, etc. In the statement of facts, it was explained that the total sales made to M/S SV Grapes amounted to Rs. 3,39,35,637/-, on which the assessee earned a profit of Rs. 6,66,745/- only. However, the learned CIT(A) did not consider the same.

5.1 The learned AR further submitted that the entire credit in the bank and cash withdrawal from the bank cannot be treated as the assessee's income. The learned AR argued that only the profit element from the business of grapes trading can be brought to tax. The AO and learned CIT(A) erred in treating the gross receipts as the assessee's income.

6.

The learned DR supported the orders of the lower authorities and submitted that the assessee had failed to substantiate the nature and source of the bank credits and cash withdrawals despite repeated opportunities. In the absence of books, bills and supporting evidence, the addition under section 69A was justified.

7.

We have heard the rival contentions of both the parties and perused the materials available on record. The dispute before us relates to the addition of Rs. 3,16,38,565/- made by the AO by treating the bank transactions as unexplained money u/s 69A of the Act. The AO noticed credits of Rs. 98,08,135/- in the assessee's account with Yes Bank and cash withdrawals of Rs. 2,18,30,430/- from the account maintained with Vijaya Bank. In the absence of complete supporting evidence, the AO treated both the bank credits as well as cash withdrawals as unexplained income. The learned CIT(A) confirmed the same.

7.1 Before us, the assessee has explained that he was engaged in the business of trading/commission agency of grapes. According to the assessee, grapes were purchased from farmers and sold to M/s SV Grapes, a proprietary concern of Shri Vinayak Shankrappa Gadvi. The sale consideration was received from M/s SV Grapes through RTGS in the assessee's bank accounts. The amounts so received were thereafter withdrawn for making payments to farmers, labourers and towards transportation and other expenses connected with the grape business. It was also claimed that the assessee earned commission of about Rs. 1 to Rs. 1.5 per kg of grapes.

7.2 We find merit in the assessee's contention that the entire amount credited to the bank account, as well as the amount withdrawn from the bank account, cannot simultaneously be treated as income. A bank withdrawal, by itself, does not constitute income. Similarly, where the credits in the bank account represent business receipts or sale proceeds, the entire gross receipts cannot ordinarily be regarded as income. What can be brought to tax is the income or profit embedded in such business transactions, subject to verification of the nature and genuineness of the transactions.

7.3 In the present case, the assessee has specifically claimed that the bank transactions arose from his grape trading activity. It was further stated before the learned CIT(A) that the total sales made to M/s SV Grapes amounted to Rs. 3,39,35,637/- on which the assessee claimed to have earned profit of Rs. 6,66,745/- only. However, this explanation has not been examined on its merits. At the same time, we also notice that the assessee did not furnish the complete details and supporting documents called for by the AO during the assessment proceedings. Therefore, in our considered view, the matter requires proper factual verification rather than sustaining the addition of the gross bank transactions. Accordingly, in the interest of justice, we set aside the finding of the learned CIT(A) on this issue and restore the matter to the file of the AO for de novo assessment. The AO shall verify the assessee's claim that he was engaged in the trading/commission business of grapes. For this purpose, the AO shall examine the bank statements, transactions with farmers, receipts from M/s SV Grapes and such other evidence as may be furnished by the assessee. The AO may also make necessary independent verification from M/s SV Grapes and other concerned parties, if considered necessary.

7.4 We further direct that, if upon verification the AO finds that the credits in the bank accounts represent receipts arising from the assessee's grape trading business, the withdrawals shall be treated as in connection with purchases and other business payments to the extent it is genuine and reasonable. The gross bank credits and withdrawals shall not be treated as the income of the assessee. In such circumstances, only the profit element arising from such business transactions shall be brought to tax. The AO shall determine such profit on the basis of the books of accounts and supporting evidence, if found reliable, or otherwise make a reasonable estimation having regard to the nature of the business, turnover and other relevant materials available on record.

7.5 The assessee shall furnish all necessary details and supporting evidence and shall cooperate with the AO in completing the assessment. Needless to say, the AO shall afford reasonable opportunity of being heard to the assessee before passing the order in accordance with law. Accordingly, the grounds raised by the assessee on this issue are allowed for statistical purposes.

8.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 20th August, 2026

Sd/- Sd/- SANDEEP SINGH KARHAIL WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 20th August, 2026 Vms Copy to: NANJAPPA GANGADHAR, NO. 521, BHARATH NAGAR, VIJAYAPURA TOWN, DEVANAHALLI 1 TALUK, BENGALURU RURAL DISTRICT, BENGALURU-562135, KARNATAKA

ITO, WARD-6(3)(1), 2 BMTC BUILDING, KORAMANGALA, BENGALURU-560095, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE

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