RAJESH NAGAJOTHI,NAMAKKAL vs. ITO, NAMAKKAL

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ITA 1907/CHNY/2026Status: DisposedITAT Chennai10 July 2026AY 2020-213 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that once the source of deposits is accepted as business receipts, it cannot be treated as unexplained money under Section 69A. The AO was directed to treat the sustained additions as business income.

What were the facts?

The assessee did not file an income tax return. The Assessing Officer (AO) reopened the assessment and added Rs. 87,24,840/- as unexplained money under Section 69A, as the assessee did not respond to notices. The assessee claimed the deposits were from their retail chicken and goat business.

What were the issues?

Whether cash deposits in a bank account, linked to business activities, can be treated as unexplained money under Section 69A when proper books of account are not maintained.

Which sections of the Income-tax Act were involved?

Section 69A,Section 148A,Section 148,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI GEORGE GEORGE KAND MS. PADMAVATHY.S

For Respondent: Mr. Shivalingam, Sr. A.R

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 12.03.2026 for Assessment Year (AY) 2020-21.

2.

The assessee is an individual and did not file the return of income. Since the assessee has substantive financial transactions, the A.O issued a notice u/s. 148A(b) of the Act. Subsequently, the A.O passed an order u/s. 148A(d) of the Act and reopened the assessment by issuing notice u/s. 148 of

ITA No.1907/Chny/2026 Rajesh Nagajothi :- 2 -:

the Act. The assessee did not responded to the notices issued and therefore, the A.O made an addition of Rs. 87,24,840/- as unexplained money u/s. 69A of the Act. Aggrieved, the assessee filed further appeal before the CIT(A). Before the CIT(A), the assessee submitted that the credits in the bank account are arising out of the retail business of trading in chicken and goat carried on by the assessee in the name and style of K.K Brioller. The assessee submitted various other details including the return of income filed for subsequent AYs turnover details of subsequent years etc. The assessee also submitted that due to Covid-19 pandemic the assessee could not file the return of income for AY 2020-21. The CIT(A) after considering the submissions of the assessee held that: “5.7. Having considered the facts and circumstances of the case, I find merit in the contention that the entire cash deposits cannot be treated as unexplained income when the deposits are found to be integrally connected with the business activities of the appellant. The pattern of deposits and withdrawals in the bank accounts and the payments made to broiler suppliers indicate that the deposits represent business receipts rather than unexplained money. At the same time, the appellant has not maintained proper books of account or supporting vouchers for the relevant year and has also failed to file the return of income for the year under consideration. In such circumstances, estimation of income based on reasonable profit rate would meet the ends of justice. 5.8. Considering the nature of business carried on by the appellant, the trend of gross profit and net profit disclosed in the subsequent years and the recommendation made in the remand t, it would be reasonable to estimate the income from the business at Rs.7,50,000/- for the assessment year 2020-21 as against the addition of Rs.87,24,840/- made by the Assessing Officer. Accordingly, the addition made under section 69A of the Act is restricted to Rs.7,50,000/- and the balance addition is deleted.”

3.

We have heard the parties, and perused the material available on record. The only contention of the Ld. AR before us is that the CIT(A) though has accepted that the receipts are arising out of the business activities of the assessee has sustained the addition us/. 69A of the Act, which is not correct.

ITA No.1907/Chny/2026 Rajesh Nagajothi :- 3 -:

From the perusal of the finding of the CIT(A) as extracted herein above, we notice that the CIT(A) has accepted the contention that the cash deposits are found to be integrally connected to the business activities of the assessee. It is further noticed that the CIT(A) has estimated the income of the assessee for the reason that the assessee has not maintained any books of accounts. Accordingly, we see merit in the contention that once the source for the deposit is accepted to be from the business activities of the assessee then the same cannot be treated as unexplained money u/s. 69A of the Act. Accordingly, we hold that the CIT(A) is not correct in sustaining the addition u/s. 69A of the Act and we direct the A.O to treat the impugned additions sustained by the CIT(A) as the business income of the assessee.

4.

In the result, the appeal of the assessee is allowed.

Order pronounced on 10th 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: 10th July, 2026. EDN, Sr. P.S EJTADA Digitally signed by EJTADA DURGA DURGA NARESH आदेश क� �ितिल�प अ�े�षत/Copy to: Date: 2026.07.15 NARESH 1. अपीलाथ�/Appellant 11:25:59 +05'30' 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

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