MADHUSUDHAN GADE,NIZAMABAD vs. ITO., WARD-1, NIZAMABAD

ITA 379/HYD/2025Status: DisposedITAT Hyderabad16 October 2026AY 2017-189 pages
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What did the Tribunal hold?

The Tribunal held that the addition made by the AO under Section 69C of the Income Tax Act, 1961, cannot be sustained. The Tribunal noted that the assessee is a licensed commission agent and received the entire credit in his bank account through RTGS from M/s. SDG&PF. The assessee withdrew this amount on the same day and claimed to have distributed it to farmers. The Tribunal found that the AO had not proved any expenditure incurred by the assessee that was not recorded in the books of accounts, nor had the AO established that the assessee failed to explain the source of the cash withdrawal. Therefore, the addition under Section 69C was not upheld. However, the Tribunal also observed that while the receipt of funds from M/s. SDG&PF was proven via "takpatti," the payment of cash withdrawn to farmers was not conclusively substantiated with supporting evidence for the entire amount. The assessee provided an excel sheet and some sample "takpattis" but not complete details. Consequently, for the limited purpose of verifying the "takpatti" for the entire amount, the issue was set aside to the file of the AO. The AO was directed to verify the claim in light of relevant "takpatti" issued by M/s. SDG&PF. If the assessee submits complete details, the AO is to delete the addition. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Santosh Kumar Katturi, an ITAT Hyderabad Bench appeal for AY 2023-24, is a commission agent dealing in grains and Kapas. He declared an income of Rs. 20,42,800/-. His case was selected for scrutiny due to prior large additions. The Assessing Officer (AO) noticed cash withdrawals of Rs. 31,43,00,647/- from the assessee's SBI account. The assessee explained that he received funds from M/s. Sai Datta Ginning & Pressing Factory (M/s. SDG&PF) for supplying cotton from farmers, withdrew cash to pay the farmers, and supported this with his commission agent license, sale details, and bank statements. The AO rejected this explanation, deeming the entire withdrawal as unexplained expenditure under Section 69C of the Income Tax Act, 1961. The CIT(A) upheld the AO's addition, finding the assessee failed to demonstrate creditworthiness and compliance with statutory provisions like GST.

What were the issues?

1. Whether the addition of Rs. 31,43,00,647/- as unexplained expenditure under Section 69C of the Income Tax Act, 1961, is sustainable when the source of cash withdrawal from the bank account was accepted by the AO? Assessee's Contention: The Ld. Counsel argued that Section 69C cannot be invoked as the AO accepted the source of cash withdrawal. The assessee, a licensed commission agent, received RTGS payments from M/s. SDG&PF for cotton procured from farmers and immediately withdrew and paid the farmers. They submitted "takpatti" as evidence, stating that commission agents in this business do not raise purchase or sales invoices. Revenue's Contention: The Ld. Sr. AR supported the orders of the AO and CIT(A), stating that the assessee failed to furnish any evidence to explain the reason for the huge cash withdrawal, justifying the addition under Section 69C.

Which sections of the Income-tax Act were involved?

Section 69C

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Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA.G

Pronounced: 16.10.2026

PER MANJUNATHA.G, AM:

This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), [in short “the Ld.CIT(A)”] Delhi, dated 31.10.2025, and pertains to assessment year 2023-24. ITA 2411/HYD/2025 SANTOSH KUMAR KATTURI

2.

The brief facts of the case are that the assessee is a commission agent, engaged in the business of purchase & sale of grains

The order continues below.

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