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Facts
The assessee, an agent for DTM Pvt. Ltd., declared total income of ₹2,95,760/- for AY 2017-18. The AO made an addition of ₹19,04,800/- treating cash deposits during demonetization as unexplained income under Section 69A.
Held
The Tribunal held that the cash deposits were collected by the assessee as an agent on behalf of the principal (DTM Pvt. Ltd.) and were promptly deposited into the company's account with proper reconciliation. Therefore, the addition was unsustainable.
Key Issues
Whether cash deposits made during demonetization, collected by the assessee as an agent for a company, can be taxed as unexplained income in the assessee's hands when proper reconciliation and evidence are provided.
Sections Cited
143(3), 69A
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सुनवाई की तारीख/Date of Hearing : 22.09.2025 उदघोषणा की तारीख/Date of Pronouncement : 22 .09.2025 आदेश/Order PER LALIET KUMAR, J.M: This appeal by the assessee is directed against the order of the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi [“CIT(A)”] dated 20.03.2024, arising out of assessment order passed under section 143(3) of the Income-tax Act, 1961 (“the Act”) for the assessment year 2017-18.
2. The grounds of appeal raised by the assessee are as under:- A. That in the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) is not justified in upholding the addition of Rs. 19,04,800/-
received by the assessee which was deposited by him in his bank account and subsequently transferred to the Company as unexplained income under Section 69A of the Income Tax Act, 1961. The sustenance of the said addition is illegal and not sustainable in the eyes of law.
B. That the order of learned Commissioner of Income Tax (Appeals) is bad in law and facts.
1.1 Brief facts of the case are that the assessee, a resident individual engaged as a private contractor, retail trader and commission agent with DTM Pvt. Ltd., filed return of income for A.Y. 2017-18 declaring total income of ₹2,95,760/-.
1.2 The case was selected for scrutiny on the issue of large cash deposits during demonetization period. The AO noted cash deposits of ₹19,04,800/- in various bank accounts and treated the same as unexplained money u/s 69A, completing assessment on 19.12.2019. 1.3 Feeling aggrieved by the order passed by the Assessing Officer, the assessee preferred the appeal before the Ld. CIT(A), NFAC. Ld. CIT(A), after considering the evidence and documents, upheld the addition, observing that the assessee failed to produce sufficient evidence. Aggrieved, the assessee has preferred this appeal.
The Ld. AR submitted that the assessee was merely a working agent of DTM Pvt. Ltd. and was drawing only commission income for his services. The sums deposited in bank accounts did not belong to him personally but represented membership fees collected on behalf of the company.
2.2 Our attention was drawn to the paper book containing ledger accounts and bank statements. It was demonstrated that the amount received from members was promptly deposited in the company’s account. For instance, the amount received on November 21, 2016, was deposited into the company’s bank account on the same day, demonstrating entry-to-entry matching. 2.3 It was further contended that the assessee had not only furnished the list of persons from whom such collections were made but also showed reconciliation between receipts and deposits in the company’s bank. Therefore, the deposits were fully explained and could not be regarded as unexplained income in the assessee’s hands. 2.4 The AR stressed that since the source of the deposits was duly established, no addition u/s 69A was warranted. It was prayed that the addition of ₹19,04,800/- be deleted in full.
The Ld. DR supported the orders of the authorities below. It was submitted that the assessee deposited the cash in his personal accounts and failed to establish a clear nexus with the company. In the absence of acknowledgments from DTM Pvt. Ltd. or independent confirmation from the alleged contributors, the explanation remained unsubstantiated. 3.1 It was, therefore, urged that the addition made by the AO and sustained by the CIT(A) be upheld.
We have heard rival submissions and perused the record. The narrow controversy is whether the cash deposits of ₹19,04,800/- made during the demonetization period represent unexplained income of the assessee or explained collections on behalf of DTM Pvt. Ltd. 4.1 The AO had tabulated the deposits made in various bank accounts of the assessee during the demonetization period as under: Sl. No.Bank & Branch Account No. Amount Deposited (₹) 1. UCO Bank, Theog (SB) 132901100012451 58,000 2. UCO Bank, Theog (CA) 13290200030166 17,82,300 3. PNB, Theog (SB) 6520000100000310 – 4. PNB, Theog (CC) 6520008700000268 50,000 5. SBI, Theog (SB) 10437700296 14,500 Total 19,04,800 4.2 The assessee has placed on record ledger extracts, bank statements, and supporting details establishing that the amounts received from members were promptly deposited in the company’s account. Though it is correct that the amounts were first obtained from the sub-agents/dealers in the bank accounts of the assessee, however, on the very same day, such amounts were transferred by the assessee to the company. We have examined the various entries in the company's bank account, as well as the accounts maintained by the assessee for his sub-dealers/agents. For instance, the receipt dated 21.11.2016, which was deposited on the same day into the company’s account, evidences a proper entry via e-entry matching. Similarly, the position is the same with respect to the other deposits made in the assessee’s bank account , which were promptly routed to the company’s account.
4.3 In our considered view, this evidence satisfactorily discharges the initial onus placed on the assessee. Once such reconciliation is established, the burden shifts on the Revenue to bring cogent material to rebut the assessee’s explanation. We find that no such contrary material has been brought on record by the AO.
4.4 The settled law is that amounts collected by an agent on behalf of the principal cannot be taxed as unexplained in the agent’s hands when proper reconciliation is available. In the present case, the explanation is supported by documents and remains uncontroverted. It is very disturbing that despite filing of the evidences by the assessee before the Ld. CIT(A), not even a word has been expressed either approving or disapproving the evidences filed by the assessee. The Ld. CIT(A) had merely passed a cryptic order without discussing the merit of the evidence. In view of the above, we therefore, hold that the addition of ₹19,04,800/- made by the AO and confirmed by the CIT(A) is unsustainable. The same is directed to be deleted.
In the result, the appeal of the assessee is allowed. Order Pronounced in the open Court on 22/ 09/2025.