GAUTAMBHAI NANSINH CHAUHAN,ANAND vs. THE ITO, WARD-1(3)(1), PETLAD

2.3 The AO, however, observed that there was no evidence of such cash inflows being credited to the assessee’s bank accounts commensurate with the cash withdrawals. Further, the assessee failed to produce any supporting documentation, such as confirmations from parties, loan statements, invoices, or books substantiating the claimed cattle business. On this basis, the AO concluded that the cash withdrawals from Bank of Baroda were unexplained, and proceeded to make an addition of Rs.39,83,841/- under section 69A of the Act, taxing it under section 115BBE, and initiated penalty proceedings under section 271AAC.

2.4 The assessee filed an appeal before the CIT(A). Before the CIT(A) the assessee reiterated the factual background that he was engaged in CSC operations as a service delivery partner for SBI, and withdrew cash for disbursement to account holders based on Aadhaar-authenticated instructions. He also relied on the explanation that he was involved in the business of buying and selling cattle and needed cash for such transactions. In support, he submitted a copy of the cash register, bank statements, and the profit and loss account and balance sheet for F.Y. 2018–19. He contended that the AO had accepted his book results and that the cash withdrawals were duly reflected therein. It was argued that there was no rejection of books of account, and hence the addition under section 69A was not tenable.

2.5 The CIT(A), after reciting the facts and reiterating the AO’s findings, noted that although the assessee filed submissions in the assessment proceedings and the appellate stage, no credible, independent documentary evidence was furnished in support of the cattle trading business or cash movement vis-à-vis SBI customer disbursements. It was further recorded in para 5.2 of the appellate order that the appellant did not file any substantial written submission or supporting documents at the appellate stage to rebut the addition. On the basis of this reasoning, the addition of Rs.39,83,841/- under section 69A was confirmed by the CIT(A), and the appeal of the assessee was dismissed in full.

4 1. That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in making addition of Rs. 39,83,841/-u/s 69A of the act.

2. That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO passing order exparte and without considering the evidence filed before it.

4.1 The AR submitted that the bank statements of multiple accounts (at page nos. 7 to 170 and 269 to 281), CSC transaction register (pages 195 to 221), and sample receipts (page 194) were all submitted to demonstrate that there were matching credits from SBI customers before each withdrawal, the cash withdrawn was used for disbursing to respective SBI account holders, and the assessee maintained a duly signed physical register, later endorsed by SBI during verification. It was further pointed out that the CIT(A), NFAC, in the impugned order dated 13.03.2025, did not adjudicate these factual submissions on merits and erroneously recorded that “no substantial written submission or documentary evidence” was filed in support of the grounds of appeal, despite the entire compilation (running into 398 pages) being on record.

6.1 It is not in dispute that the assessee was appointed by State Bank of India (SBI) through its technology partner NICT Technologies Pvt. Ltd. as a Customer Service Centre (CSC) operator in village Khododhi, District Anand, Gujarat. A copy of the CSC agreement and related documents placed at page nos. 171–189 of the paper book clearly establish that the assessee was duly authorised to carry out banking functions such as withdrawal and deposit of cash, Aadhaar seeding, passbook printing, and other basic services on behalf of SBI for customers residing in remote rural areas. The arrangement was operational for several years, including F.Y. 2018–19. In the course of providing such services, the assessee had opened and operated accounts with SBI and Bank of Baroda, as confirmed by the bank statements placed on record. It has been explained by the assessee that, since the nearest SBI branch was about 20 km away (Khambhat), he maintained a Bank of Baroda account at Badalpur (which was only 4 km from his location) and utilised the same for withdrawing cash to be paid to SBI customers whose instructions were authenticated via Aadhaar-based digital approvals. The assessee has placed on record a CSC Cash Transaction Register (pages 195–221 of the paper book), along with sample receipts, and has explained the flow of funds, credit in the SBI account followed by transfer to Bank of Baroda and subsequent cash withdrawal. The assessee also submitted that SBI itself required him to maintain a physical register containing details of each transaction along with signatures of recipients, which was submitted during surprise verification visits by SBI officials. The explanation furnished by the assessee has not been rebutted by any contrary material or disproved by the revenue authorities.

6.2 The Assessing Officer, while making the addition under section 69A, did not dispute the genuineness of the bank accounts or the existence of the CSC arrangement. He also did not reject the assessee’s books of account or call for any further third-party verification. The addition appears to be made solely on the ground that the assessee failed to explain the source of cash withdrawals, and that there were no matching deposits immediately preceding such withdrawals. The CIT(A), in turn, confirmed the addition stating that no documentary evidence was furnished during appellate proceedings.

6.3 In our considered view, this reasoning is not sustainable in law. Cash withdrawals from disclosed bank accounts, duly reflected in the books of account, cannot per se be treated as unexplained money unless the revenue brings on record material to show that such withdrawals were not made for business purposes or were diverted for unaccounted activities. The statutory presumption under section 69A applies only to money found to be owned by the assessee, not to bank withdrawals which are already accounted for and explained. Provisions of section 69A confer a discretion on the Assessing Officer, and the mere fact that an explanation is not satisfactory does not automatically justify the addition unless there is independent material to hold that the amount represents income. Where entries are made in the regular books of account and are not disbelieved, the burden shifts to the revenue to prove otherwise. In our opinion, withdrawals from bank accounts cannot be taxed as unexplained merely because matching cash deposits are not found, when the books of account are accepted and there is no evidence of suppression.

6.4 In the present case, the assessee has not only offered a plausible explanation backed by documentation but has also demonstrated the business exigency under which such transactions were carried out. The assessee’s activity was part of a regulated system supported by SBI under the Digital India Financial Inclusion initiative, and the flow of funds, even if involving multiple accounts, was duly explained. The revenue has not brought any evidence to show that the cash withdrawals were not used for legitimate CSC-related payouts or were diverted for any undisclosed purposes. We also find that the books of account were not rejected and the assessee’s income was accepted as per the return. The CSC cash register and allied documentation were maintained under a system prescribed by SBI and not found to be unreliable. In such a factual matrix, the impugned addition lacks foundational support either in fact or in law.

6.5 In view of the above discussion, we are of the considered opinion that the addition of Rs.39,83,841/- made under section 69A of the Income-tax Act, 1961 and confirmed by the learned CIT(A), is not sustainable. Accordingly, the same is directed to be deleted.

Order pronounced in the Court on 12th August, 2025 at Ahmedabad.