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Facts
The assessee, engaged in grain trading, filed an income return declaring Rs. 5,58,890/-. The Assessing Officer (AO) observed substantial cash deposits of Rs. 9,25,46,846/- in multiple bank accounts, treating them as unexplained income under section 69A of the Income Tax Act, 1961.
Held
The Tribunal noted that the CIT(A) had restricted the addition to 10% of the balance cash deposits after considering cash sales and withdrawals. However, the Tribunal, in the interest of substantial justice, further restricted the disallowance to 5% of the balance cash deposits.
Key Issues
Whether cash deposits in bank accounts adequately explained by the assessee as business transactions and withdrawals can be added to income as unexplained money; and the extent of disallowance to be made.
Sections Cited
250, 69A, 143(2), 143(3), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHIBENCH ‘E’, NEW DELHI
Before: Sh. Raj Kumar Chauhan & Sh. Brajesh Kumar Singh
ORDER
Per Raj Kumar Chauhan, Judicial Member:
The appeal is directed against the order dated 30.10.2025 of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the “CIT(A)/NFAC”] passed u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] wherein the appeal of the assessee was partly confirmed and addition made by the AO vide Assessment Order dated 11.06.2021 u/s 69A of the Act were confirmed.
Brief facts of the case are that the assessee is engaged in the business of trading in grains, filed his return of income for A.Y. 2018–19 on 31.08.2018 declaring total income of Rs.5,58,890/-. Subsequently, the case was selected for scrutiny through CASS and notice u/s 143(2) of the Act was issued on 22.09.2019. During the course of assessment proceedings, the Assessing Officer observed that the assessee had made substantial cash deposits in multiple bank accounts, including accounts with Kotak Mahindra Bank, ICICI Bank and Punjab National Bank, aggregating to Rs.9,25,46,846/-. The assessee explained that the cash deposits were out of business transactions and redeposit of earlier cash withdrawals. However, the Assessing Officer was not satisfied with the explanation and held that the assessee failed to substantiate the source of such deposits with proper supporting evidence. Accordingly, the entire cash deposits Rs.9,25,46,846/- were treated as unexplained money u/s 69A of the Act and added to the income of the assessee. Consequently, the assessment was completed u/s 143(3) r.w.s. 144B of the Act determining the total income at Rs.9,31,05,740/- as against the returned income of Rs.5,58,890/-. Being aggrieved, the assessee preferred an appeal before the CIT(A).
During the argument at the very outset, the ld. AR submitted that he shall not press his grounds in appeal in case the addition is restricted to 5% of the balance cash deposits instead of 10% as made by the ld. CIT(A). The ld. DR on the other hand relying upon the judgments of the ld. CIT(A) submitted that the addition @10% made by the ld. CIT(A) be confirmed as the ld. CIT(A) has taken a very lenient view in the matter.
We have heard the ld. AR and the ld. DR. We find that the ld. CIT(A) has discussed the issues in dispute elaborately by observing as under: “Thus, the assessee explains That his total cash deposits after excluding one of the ICICI Bank Account no. 092905000532 is only Rs. 5,14,56,911/- and the same were sufficiently sourced from cash generated out of cash sales and cash withdrawals totaling to Rs. 6,06,23,576/-. I have considered the assessee’s submissions. Even though, there are merits in the argument’s of the assessee, but it is not possible to make one to one reconciliation whether Cash Deposits were made out of cash sales and cash withdrawals. Cash deposits which were made out of cash sales are clearly explainable and the same are hereby fully considered amounting to Rs.2,72,49,240/- cash deposits this extent are hereby treated as explained. After excluding the above deposits, now only cash deposits of Rs. 2 42,07,671/- remains to explain, for which the assesse submits that these cash deposits were made out of cash withdrawals. Thus, assessee submitted that he has sufficient cash withdrawals of Rs. 3,33,74,736/- which were the source of the balance cash deposits . However, it is not possible to do one to one correlation of cash deposits with reference to cash withdrawals. Therefore, even though balance cash deposits of Rs. 2,42,07,671/- was substantially sourced from cash withdrawals but it is not possible to treat the same as fully explained . Therefore, to safeguard the interests of the Revenue, 10% of balance Cash Deposits are hereby treated as from unexplained sources. Thus, the addition to this extent which comes to Rs. 24,20,767/- is hereby confirmed as unexplained money and the balance addition is hereby deleted. To sum up, out of the total addition of Rs.9,25,46,846/- addition of Rs. 24,20,767/- is hereby confirmed and balance addition is deleted. In the result the appeal is partly allowed.”
Upon careful perusing the finding of the Ld. CIT(A) as reproduced above, it is evident that the AO has carried out additions under presumptions and without any evidences on record. In respect of addition on account of cash deposited, it was observed that AO has treated the cash deposited as unexplained cash credit whereas the assessee has claimed the same as cash sales and cash withdrawals. Since, the ld. CIT(A) has restricted the disallowance @10% of the balance cash deposits, therefore, in view of the peculiar facts and circumstances of the case and in the interest of substantial justice, we deem it fit and proper to restrict the said disallowance @5% instead of 10% as against the balance cash deposits of Rs.2,42,07,671/- which comes to Rs.12,10,384/-. Necessary computation shall follow as per law.