MANJUNATH SHIVAKUMAR,BENGALURU vs. INCOME TAX OFFICER WARD NO. 5(1)(1), BENGALURU

In this appeal, the assessee has raised the following grounds:-

The solitary grievance of the assessee is against the addition made under 68 of the Act on account of cash deposits in his bank account.

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and is engaged in the business as a channel partner of Idea Cellular under the name and style of Sri Vigneshwara Enterprises, facilitating services like recharge, SIM card sales, etc. For the year under consideration, the assessee filed his return of income on 20/10/2018, declaring a total income of Rs.5,69,820. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, the assessee was asked to produce the bank account statements for all accounts held in his name, in which cash collected from customers was deposited. In response, the assessee submitted a bank account statement held with Karnataka Bank and a statement of transactions with Idea Cellular. The assessee did not submit any other details. Thus, to verify the cash transactions carried out by the assessee, a notice under section 133(6) of the Act was issued to Punjab and Maharashtra Cooperative Bank (“PMC Bank”). From the perusal of the bank statement of the account maintained with Karnataka Bank, it was observed that the assessee deposited an amount of Rs.1,98,06,040 in cash during the relevant financial year, out of which Rs. 34,70,000 was paid to Idea Cellular in the course of business transactions. It was further observed that a large amount of cash was deposited in the account, of which only a small amount was transferred to Idea Cellular, and most of the cash was transferred to accounts that the assessee did not explain. Accordingly, the Assessing Officer (“AO”) held that the assessee had used his bank account to bring his unaccounted money in the garb of a business transaction. In the absence of a satisfactory explanation, an amount of Rs. 1,63,36,040 (Rs. 1,98,06,040 – Rs. 34,70,000) was considered as unexplained cash credit under section 68 of the Act and added to the total income of the assessee.

Further, from the perusal of the statement of account maintained with PMC Bank, it was observed that the assessee deposited cash of Rs. 6,51,47,100 out of which an amount of Rs.2,06,06,774 was transferred to Idea Cellular, with whom the assessee had a business transaction. The cash balance of Rs.4,20,50,326 was transferred to other accounts. In the absence of any response from the assessee regarding the source of the cash deposit, the balance amount of Rs. 4,20,50,326 was treated as unexplained cash credit and added to the assessee's total income. Therefore, in total addition of Rs. 6,18,56,276 (i.e. Rs. 1,63,36,040 in Karnataka Bank + Rs. 4,20,50,326 in PMC Bank) was added to the total income of the assessee.

The learned CIT(A), vide impugned order, granted partial relief to the assessee and deleted the addition made by the AO in respect of the amount paid to M/s Jan Lakshmi Small Finance Bank Limited. The learned CIT(A) disagreed with the contentions of the assessee in respect of the payment made to SUN Direct and S.V. Enterprises. Accordingly, the learned CIT(A) upheld the addition to an extent of Rs. 1,81,08,632/- made by the AO under section 68 of the Act. Being aggrieved, the assessee is in appeal before us.

During the hearing, the learned Authorised Representative (“learned AR”) submitted that M/s S.V. Enterprises was a proprietary concern of a mother and due to some health issues of the mother she was not able to do banking transactions on her own, and therefore, the assessee deposited all the cash receipts in respect of his mother’s business in his bank account, even though the same were reported in the income tax return of a mother. The learned AR submitted that, accordingly, the payments were made from his bank account to SUN Direct TV and to M/s S.V. Enterprises, as those cash receipts pertain to the business of his mother.

On the other hand, the learned Departmental Representative vehemently relied upon the order passed by the learned CIT(A).

We have considered the submissions of both sides and perused the materials available on record. The assessee in the present case is a channel partner with Idea Cellular and thus, through its proprietary concern, was facilitating services like recharge, SIM card sales, etc. During the assessment proceedings, it was observed that the assessee had deposited cash in his bank accounts maintained with the Karnataka Bank and PMC Bank. It was further observed that, through his bank accounts, the assessee transferred cash to Idea Cellular, SUN Direct TV, Jan Lakshmi, Small Finance Bank Limited, and M/S S.V. Enterprises. The AO granted relief in respect of the amount transferred to Idea Cellular by considering the same as a payment made for the business transactions. The learned CIT(A), vide impugned order, granted further relief to the assessee and deleted the addition in respect of the amount transferred to Jan Lakshmi Small Finance Bank Limited. Thus, the only dispute is qua the balance amount transferred by the assessee, inter alia, to SUN Direct TV and M/s S.V. Enterprises. As per the assessee, his mother had a proprietary concern by the name of M/S S.V. Enterprises, which was a distributor of SUN Direct TV. It is the consistent plea of the assessee that due to the ill health of his mother, all her business transactions were done through the assessee’s bank account, and therefore, all the cash receipts in respect of his mother’s business were deposited in the assessee’s bank account, which were subsequently transferred, inter alia, to SUN Direct TV and M/s S.V. Enterprises. The assessee has placed on record the VAT registration certificate and Form ST-1 issued by the Central Board of Excise and Customs to M/s S.V. Enterprises to support that M/s S.V. Enterprises was a genuine concern.

As the balance impugned addition made under section 68 of the Act is only for the payment made to SUN Direct TV and M/s S.V. Enterprises, which, as per the assessee, belongs to his mother’s business, we are of the considered view that the same requires detailed verification of the records. Therefore, for this limited purpose, we restore this issue to the file of the Jurisdictional AO for consideration afresh after necessary examination of the details filed by the assessee. Further, the assessee is directed to furnish all the details in support of his contention that the money deposited in his bank accounts, which were subsequently transferred to SUN Direct TV and M/s S.V. Enterprises, pertains to his mother’s business. With the above directions, the impugned order on this issue is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open court on 22nd June, 2026