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Facts
The assessee, a mobile recharge distributor, deposited Rs. 4,94,000/- during the demonetization period of AY 2017-18. The Assessing Officer added this amount under Section 69A of the Income Tax Act, 1961, as unexplained money, which was subsequently sustained by the CIT(A). The assessee contended that these were regular business receipts from retailers for recharge coupons, remitted to the parent company.
Held
The Income Tax Appellate Tribunal (ITAT) found that the CIT(A) acted arbitrarily by not conducting an independent inquiry or verifying the assessee's explanations. The Tribunal accepted the assessee's detailed business model explanation, noting that cash deposits were made throughout the year, not just during demonetization, and originated from disclosed business sources. The ITAT, applying principles from CIT vs. P.K. Noorjahan and CIT vs. H.R. Karandikar & Ors., concluded that the addition under Section 69A was not justified.
Key Issues
Whether cash deposits made by a mobile recharge distributor during the demonetization period, claimed as regular business receipts, constitute unexplained money under Section 69A of the Income Tax Act, and whether the appellate authorities properly considered the assessee's explanation and business model as per judicial precedents.
Sections Cited
69, 69A, 69B, 69C, 69D, 115BBE, 234, 234B, 250(4), 250(6)
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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM
The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 13.10.2025 for the assessment year 2017-18 as per the grounds of appeal on record.
2. The relevant facts in this case are that the assessee is engaged in the business of mobile recharge of Vodafone Idea Ltd. The assessee had filed computation of income and copy of 26AS a/w. details of bank accounts. It was noted by the A.O during the assessment proceedings that the assessee had deposited an amount of Rs.4,94,000/- during demonetization period and since the A.O was not convinced with the documentary evidences furnished by the assessee, he made addition of the said amount u/s. 69A of the Income Tax Act, 1961 ( for short ‘the Act’) as unexplained money in the hands of the assessee.
That before the Ld. CIT(Appeals)/NFAC detailed written submissions were furnished by the assessee. In the said written submissions, the assessee had elaborately explained the modus of operation in the line of business, in which, he was involved in and accordingly, submitted that cash deposits were made in regular course of business of the assessee only. The relevant extracts of the said written submissions are as follows:
3 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) 4 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) 5 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) 6 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.)
7 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) 8 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) 9 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) 10 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.)
11 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) 12 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) ITA No.821/RPR/2025
That after considering the submissions of the assessee and the assesment order, the Ld. CIT(Appeals)/NFAC had held and observed as follows: “7. The impugned order and the submission made by the appellant have been perused. There are total four (04) grounds of appeal
raised by the appellant. The ground no. 1 raised by the appellant is related to the addition made by the AO of Rs.4,94,000/- being the unexplained money u/s 69A of the IT Act. It is seen from the impugned assessment order that the Assessing Officer has categorically stated that all the notices/letters issued to the appellant/assesse was served. The appellant was asked to submit the supporting documents with respect to the cash deposit of Rs. 4,94,000/- during the year consideration. However, the appellant has not submitted any supporting documents/evidence to substantiate its claim. There being no supporting documents/evidences submitted by the appellant during the assessment proceedings and considering the material available on record, the unexplained money deposited of Rs.4,94,000/- was added to the total income of the appellant by the AO. Burden to explain the source of cash deposit was on the appellant-assessee, who as per the finding of the Assessing Officer has not been able to discharge this burden. The evidence on record regarding cash deposits is 13. Raja Mohle Vs. ITO-1(3), Bhilai (C.G.)
AO are supported by cogent and weighty reasoning. Factual findings of the Assessing Officer need not be interfered with unless they are irrational. The only onus which lied on the appellant was to provide to the AO regarding source of cash deposit with supporting evidences and otherwise the same will be deemed as unexplained. In the absence of source of cash deposit not duly supported by evidence, the cash deposits remain unexplained and the AO can very well consider the said deposits as unexplained money.
The appellant has not clarified as to what exactly are the sources of such deposits made. No clinching or concrete documentary evidence was submitted by the appellant in support of deposits of Rs. 4,96,000/- either before the Assessing Officer or the first appellate authority. Even before this appellate authority the appellant has not furnished any concrete evidence in support of its grounds of appeal
raised in this appeal. Despite availing ample opportunities during the appellate proceedings, the appellant has been indifferent and defiant to the statutory proceedings and has failed to fight for his own cause, where an appeal is filed by his own motion. 8.1. It was obligatory on the part of the appellant to furnish proper submission with credible documents to prove the same to the Assessing/Appellate authority with the effect that the addition was wrongly made by the Assessing Officer. In this case, the assessee/appellant failed to do the same both before the Assessing Officer and subsequently before the first Appellate Authority. Reliance is placed in this regard on the decision of the Hon'ble Supreme Court in the case of Kale Khan Mohammad Hanif v. CIT [1963]
50. ITR 1 wherein it was held that "If an assessee fails to prove satisfactorily the source and nature of certain amount received during the accounting year, the Assessing Officer is entitled to draw the inference that the receipts are of an assessable nature". 8.2. In view of the above discussion, and bearing in mind the entirety of the case accompanied by the fact that appellant has not furnished any satisfactory explanation supported by cogent material evidence, either during the course of assessment proceedings or appellate proceedings. It is opined that the order of the Assessing Officer does not suffer from any infirmity to warrant interference. Therefore, the addition made therein is sustained.
14 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.)
8.3. It is pertinent to mention that the appellant was provided as many as 4 opportunities during the appellate proceedings. However, the appellant has not produced any concrete evidence in support of its claim. Also, the appellant failed to furnish proper explanation with supporting documentary evidence to prove its contentions during the course of the appellate proceedings too. Further, case laws relied upon by the appellant are not applicable in its case as facts are different. Since the appelle,nt did not produce any concrete supporting documents, and hence, the grounds no. 1 of the appeal raised by the appellant is dismissed in the absence of any supporting document. 8.4 The ground no. 2 raised by the appellant is related to calculation of tax at higher rate i.e 60% u/s 115BBE. It is pertinent to mention here that Section 115BBE deals with tax on income referred to in Sections 68, 69, 69A, 69B, 69C, and 69D, which typically includes unexplained cash credits, investments expenditures, etc. and the Taxation Laws (Second Amendment) Act, 2016, passed after demonetization, increased the tax rate under Section 115BBE to 60% (plus surcharge and cess), effective from 15.12.2016. Hence, the grourd no. 2 raised by the appellant is hereby dismissed.
As levying of interest u/s.234 & 234B is consequential in nature, the Ground no.3 does not require adjudication.
As the appellant has not raised any additional grounds during the course of the appeal proceedings. As such, Ground No. 4 does not require separate adjudication.
In the result, the appeal of the Appellant for AY 2017-18 stands Dismissed.”
I have carefully considered the documents/materials placed on record and have heard the submissions of the parties herein. The assessee is doing business of Vodafone recharge. The modus of operation in the line of business has been well explained before the Department by the assessee in the written submission filed as evident in the order of the Ld. 15 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.)
CIT(Appeals)/NFAC itself. It has been clearly demonstrated that in order to procure recharge vouchers from the parent company i.e. Vodafone Idea Ltd., the assessee had to deposit good amount of money and in lieu thereof, he would receive recharge vouchers. Meaning thereby, cash deposits in the bank account does not entirely constitute the income of the assessee. For example, against payment of of Rs.1000/- made by the assessee, the parent company would give recharge vouchers worth Rs.1040/- i.e. including 4% gross margin to distributor/retailer. The assessee’s margin is merely 1.5%. The assessee’s margin of 1.5% is reflected in the form of e-recharge. If the assessee sells e-rechrage at a turnover of Rs.1015/-, it includes profit margin of Rs.15/- only. It was explained by the assessee that in the course of his business, he received substanital amount of sale proceeds in cash from retailer and therefore, the assessee was constrained to deposit cash in his bank account. These facts were never refuted by the Department. Further, the assessee had stated that the cash deposits were made during the entire year and not only during the demonetization period, therefore, the nature and source of cash deposits is only and only from disclosed sources of business of the assesseee and not from any other undisclosed sources.
The findings of the Ld. CIT(Appeals)/NFAC is without refuting the facts on record or without negating the submissions of the assessee 16 Raja Mohle Vs. ITO-1(3), Bhilai (C.G.) placed on record is therefore an act of arbitrariness and is bad in law and facts. The Ld. CIT(Appeals)/NFAC had not conducted independent enquiry or verification of submission made by the assessee. There is no order passed u/s.250 (4) & (6) of the Act by the Ld. CIT(Appeals)/NFAC. Therefore, the mandate of the Act is not complied with by the Ld. CIT(Appeals)/NFAC and I do not find any reasoning for making this addition by the Department. The assessee had explained the entire business model and had clearly submitted on record the nature and source of cash deposits, therefore, there cannot be any addition made u/s. 69A of the Act. In view thereof, I set-aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete addition from the hands of the assesse while providing appeal effect of this order.
In the result, the appeal of the assessee is allowed as per aforesaid terms.
Order pronounced in open court on 12th day of March, 2026.