SEENUVASAN KARTHIK,KACHEEPURAM vs. ITO WARD 1, KANCHEEPURAM

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ITA 455/CHNY/2026Status: DisposedITAT Chennai21 July 2026AY 2013-145 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition made by the AO treating the entire credit as unexplained money could not be sustained. The Tribunal observed that the bank statements clearly reflected cash credits immediately followed by demand draft entries, supporting the assessee's claim. Furthermore, the assessee had furnished details pertaining to 193 customers, which included names, addresses, ID proofs, cash received, DD amounts, and the payee of the DD. The Tribunal noted that neither the CIT(A) nor the AO had recorded any adverse findings regarding these submitted details. Citing a coordinate bench decision in Bose Sarvanan vs. DCIT, the Tribunal found that the assessee acted as a conduit for payment of taxes on behalf of clients, and the deposits did not belong to the assessee. The debit entries in the bank account for demand drafts substantiated this submission. Therefore, the Tribunal directed the AO to delete the addition made. No issue was expressly left undecided.

What were the facts?

The assessee, Seenuvasan Karthik, is an individual providing consultancy services at the Registrar Office, assisting customers with property registrations. The Assessing Officer (AO) received information regarding a cash deposit of Rs. 51,43,430/- in the assessee's bank account. As the assessee had not filed a return of income, the assessment was reopened under Section 148. The assessee claimed the deposits were collections from customers for demand drafts payable to the Registrar, and that the assessee earned only nominal commission. The AO demanded details of the cash collection sources. Upon review, the AO found the details insufficient and treated the entire Rs. 51,43,430/- as unexplained money under Section 69A. The Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) dismissed the assessee's appeal, sustaining the addition.

What were the issues?

1. Whether the addition of Rs. 51,43,430/- as unexplained money under Section 69A of the Income Tax Act, 1961, is justified, considering the assessee's explanation that the amounts were collections from customers for demand drafts and the immediate debit entries for demand drafts following the cash credits. Assessee's contentions: The assessee argued that the bank statements clearly showed each cash deposit was immediately followed by a demand draft entry, substantiating the claim that the amounts were collected from customers for demand drafts payable to the Registrar. The assessee also submitted details of 193 customers, including their names, addresses, ID proofs, cash received, DD amounts, and the payee of the DD. The assessee contended that the AO and CIT(A) failed to consider these details and the bank statement's immediate debit entries for demand drafts. Revenue's contentions: The revenue, through the AO and CIT(A), contended that the assessee failed to file a return of income, did not maintain or produce regular books of account, and did not furnish verifiable evidence such as client confirmations, agreements, complete bank reconciliation, or documentary linkage to establish the fiduciary nature of the deposits. The revenue argued that the onus was on the assessee to satisfactorily explain the nature and source of cash deposits, which was not discharged.

Which sections of the Income-tax Act were involved?

Section 148,Section 69A,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI GEORGE GEORGE K & MS. PADMAVATHY.S

For Respondent: Mr. Christopher Vasanth, Sr. AR

आदेश / O R D E R

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 07.01.2026 for Assessment Year (AY) 2013-14.

2.

The assessee is an individual and doing consultancy at the Registrar Office assisting the customers who come for registration of property etc. The AO received information that there is a cash deposit of Rs. 51,43,430/- in the

ITA No.455/Chny/2026 Seenuvasan Karthik :- 2 -: bank account of the assessee. Since the assessee did not file the return of income, the A.O reopened the assessment by issue of notice u/s. 148 of the Act. The assessee submitted before the AO that the amounts credited are collections from customers which are deposited into the bank account of the assessee to take demand draft in the name of Registrar. The assessee further submitted the assessee earns nominal commission income towards rendering of the said services and to substantiate the above claim the assessee submitted the bank statements. The A.O called on the assessee to furnish the details of the persons from whom the money was collected along with address, PAN number etc. After examining the details furnished, the A.O held that the assessee could not furnish all the details as required to explain the source for the cash credit and accordingly treated the entire credit of Rs. 51,43,430/- as unexplained money u/s. 69A of the Act. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) dismissed the appeal by holding that: “5.8 From the proper appreciation and evaluation of the findings of AO in his assessment order and reply/submission of the appellant furnished during the appellate proceedings, it is undisputed that the appellant failed to file a return of income and did not maintain or produce regular books of account. While a general explanation was offered that the deposits pertained to amounts collected from clients for making demand drafts, the appellant did not furnish verifiable evidence such as client confirmations, agreements, complete bank reconciliation, details of commission earned, or documentary linkage establishing that the deposits were merely fiduciary in nature. The onus under the Act lies squarely on the assessee to satisfactorily explain the nature and source of cash deposits appearing in his bank account, which has not been discharged in the present case. Mere existence of debit entries or withdrawals does not, by itself, establish that the corresponding credits are non-income, particularly when the surrounding facts, volume of transactions, and absence of corroborative evidence raise serious doubts about the veracity of the explanation. Courts have consistently held that unexplained bank deposits can be brought to tax where the assessee fails to substantiate the explanation with credible material. In the present case, the Assessing Officer has made the addition only after affording multiple opportunities and after recording reasons for rejecting the explanation. The addition is thus based on a rational appreciation of facts and cannot be said to be arbitrary or excessive.

ITA No.455/Chny/2026 Seenuvasan Karthik :- 3 -: Therefore, the addition made by AO to the tune of Rs. 51,43,430/- is hereby sustained and thereby dismissing grounds no. 5, 6 and 7.”

The assessee is in appeal before the Tribunal against the order of the CIT(A).

3.

We have heard the parties, and perused the material available on record. The Ld. Authorized Representative (AR) of the assessee, at the outset, submitted that the AO has not considered the bank statement which clearly reflects that each of the cash deposit is immediately followed by a demand draft entry which goes to prove the claim of the assessee. In this regard, we notice that the bank statements (page Nos.4 to 19 of paper book) reflect the cash credit and on the same day an entry for demand draft. Further from the perusal of the records, we notice that the assessee has furnished the details pertaining to 193 customers from whom the cash received by the assessee and the said details contained the name, address, ID proof, amount received in cash, DD amount and in whose name the DD is taken etc. However, we notice that the CIT(A) and the A.O has not recorded any finding adverse or otherwise with regard to the details submitted by the assessee. We also notice that similar issue is considered by the Coordinate Bench in the case of Bose Sarvanan vs. DCIT [ITA No.2217/Chny/2025 dated 11.05.2026], where it is held that: 5. From the perusal of the various documents submitted by the assessee (pages 1 to 433 of paper book – I and paper book II containing 119 pages), we notice that the assessee has made tax payments through his bank account to the tune of Rs. 29,83,87,572/-. We further notice that on sample basis the tax challans match with the debits reflected in the bank account of the assessee. We also notice that the lower authorities while making the addition has completely ignored the debits in the impugned bank account of the assessee which in the narration clearly mentions the various government authorities that supports the contention of the assessee that the amounts collected are used towards various tax payments on behalf of the clients of the assessee. Considering the overall facts and

ITA No.455/Chny/2026 Seenuvasan Karthik :- 4 -: circumstances, we see merit in the submission that the assessee has acted as a conduit for payment of taxes on behalf of the clients and that the deposits reflecting in the bank account of the assessee does not belong to the assessee. Further, the debits in the bank accounts reflecting the payment of taxes also substantiate the submissions of the assessee. Accordingly, we are of the considered view that the addition made treating the credits in the bank account of the assessee as unexplained cannot be sustained considering various evidences submitted by the assessee. Therefore, we direct the A.O to delete the addition made in this regard.

4.

In assessee's case also from the perusal of the materials on record we are convinced of the fact that the assessee has received cash from customers and deposited the same into the bank account for the purpose of taking demand draft for the customer in the name of the Registrar (page 75 to 78 of paper book). Further, the records also substantiates the fact that the assessee has acted only as a conduit for taking demand draft in the name of Registrar and the cash deposited does not belong to the assessee. Therefore, in our considered view the ratio laid down by the Coordinate Bench in the above case is applicable to the assessee's case also. Accordingly, we hold that the addition made by the AO treating the entire credit as unexplained money without considering the fact that each of the credit is followed by a debit entry towards DD cannot be sustained. We therefore direct the AO to delete the addition made in this regard.

5.

In the result, the appeal of the assessee is allowed. Order pronounced on 21st day of July, 2026 at Chennai.

Sd/- Sd/- (जॉज� जॉज� के) (पदमावती यस) (Padmavathy.S) (George George K) उपा�� / Vice President लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य चे�नई/Chennai, �दनांक/Dated: 21st July, 2026. EDN, Sr. P.S EJTADA Digitally signed by EJTADA DURGA NARESH DURGA Date: 2026.07.22 NARESH 17:01:05 +05'30'

ITA No.455/Chny/2026 Seenuvasan Karthik :- 5 -:

आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

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