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Facts
The assessee, an advocate, had Rs.4,49,000/- added to his income under section 69A for A.Y. 2017-18 by the Assessing Officer, an addition subsequently confirmed by the CIT(A). The assessee explained that these cash deposits, made during the demonetization period, belonged to his clients (mostly rural petty traders) and were collected to facilitate payment of their GST and other government taxes, citing this as a common practice. The lower authorities dismissed this explanation without conducting any proper inquiry or verification.
Held
The Tribunal found that the Revenue authorities failed to conduct any inquiry or verification into the assessee's detailed submissions and supporting evidence, which included over 100 challans, and did not provide any contrary evidence. Since the assessee had discharged the initial onus by providing a plausible explanation and evidence for the cash deposits, the addition made under section 69A was deemed arbitrary, bad in law, and unsustainable. Consequently, the order of the CIT(A)/NFAC was set aside, and the addition was deleted.
Key Issues
Whether an addition under section 69A of the Income Tax Act, 1961, for unexplained cash deposits is justified when the assessee provides a detailed explanation, supported by evidence, which the department fails to investigate or disprove.
Sections Cited
68, 69A, 142(1), 143(2), 250(4), 250(6)
AI-generated summary — verify with the full judgment below
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 07.11.2025 for the assessment year 2017-18 as per the following grounds of appeal:
1. That the appellate order is not justified.
2. That on the fact and in the circumstances of the case, CIT(A) has erred in confirming addition of Rs.4,49,000/- made by assessing officer by invoking provision of section 68 of alleged unaccounted sum by ignoring that provision of section 68 is applicable to the sum credited in the books of account. The Assessee prays that the addition of Rs.4,49,000/- made u/s. 68 be deleted.
3. That assessee reserves the right to add or alter/withdraw any ground/grounds of appeal at the time of hearing.”
Brief facts in this case are that the assessee is an advocate and practicing in Income Tax and GST. He had e-filed his return of income for A.Y. 2017-18 declaring total income at Rs.3,98,320/- and the return was duly processed. The case was selected for limited scrutiny through CASS for verification of cash deposits during the demonetization period. Statutory notices u/s.142(1) and 143(2) of the Income Tax Act, 1961 ( for short ‘the Act’) were issued to the assessee and finally, the A.O treating the amount of Rs.4,49,000/- as unexplained money, added the same u/s. 69A of the Act in the hands of the assessee. The A.O observed that the assessee has not furnished any acceptable and cogent explanation regarding the source of sum credited in his bank account and the amount of Rs.4,49,000/- comprises of an amount of Rs.3,41,000/- deposited in the current account and Rs.45,000/- deposited in savings bank account in old denomination. The assessee has explained that this amount belongs to his clients and it is through his net banking, he used to pay GST challan and other government taxes for and on behalf of his clients by using his account. Most of his clients belongs to rural areas from whom the assessee used to collect amount in cash and deposited the same in his bank account, from therein, he has used to pay the GST and other taxes for and on behalf of those clients through online banking. The assessee further contended that always he had paid taxes and had always disclosed his true and fair source of income.
It is a matter of common practice in the field of GST and considering rural areas from where his clients belonged that since they are not well aware with the online procedure of banking, they generally pay the amount in cash and they are all small traders doing petty business, so once these amounts are accumulated, it is deposited in the bank account of the assessee from where the money is used for settlement of government taxes and other disputes for and on behalf of the said assessees. These submissions of the assessee were summarily dismissed by the A.O without any specific enquiry and reasoning.
That even the Ld. CIT(Appeals)/NFAC had upheld the said addition even without independent application of mind and enquiry as mandated u/s. 250(4) & (6) of the Act.
At the time of hearing, the assessee who himself had appeared before the Bench vehemently contended that it is regular way of practice in the field of GST where the petty business persons are involved and that they would pay to the advocate in cash and the advocate would do the needful in complying with the notices from government authorities, paying taxes etc. and therefore, it is nothing absurd and unknown which has been done by the assessee in this case. He submits that always he has stood by department as honest tax payer and that in the relevant year, he had uploaded more than 100 challans substantiating the nature and source of the cash deposits that they were made for and on behalf of his clients only and that those vouchers/evidence were summarily dismissed by the department without any comment regarding the same. The orders of the A.O as well as the Ld. CIT(Appeals)/NFAC is absolutely silent regarding any enquiry conducted as regards the submission made by the assessee. The quasi-judicial authorities have on summary basis dismissed the appeal of the assessee without any reason and independent application of mind. There is no iota of evidence to show that either the A.O or the Ld. CIT(Appeals)/NFAC has conducted any enquiry/verification of the facts as per submission made by the assessee nor they have negated the customary practice as envisaged in the assessee’s submission that those amounts deposited in the bank account of the assessee actually belongs to the clients of the assessee. The department has also not brought out any other sources which is undisclosed by the assessee while making addition u/s. 69A of the Act in the hands of the assessee. The department has also remained silent regarding challans/evidence that were uploaded by the assessee. The Revenue has even accepted the source of professional income of the assessee as an advocate. When the department does not have any evidence to demonstrate any undisclosed source of the assessee for depositing such money, when the department has not denied the claim of the assessee that it is a matter of common practice where an advocate would collect money in cash from petty business persons and deposit it in his bank account for online banking transaction to comply with the government notices and tax liabilities for his clients, when the department has not brought out any findings on facts so to justify the addition u/s. 69A of the Act that those amounts deposited were actually of the assessee that remained unexplained, in such scenario, the addition made u/s. 69A of the Act in the hands of the assessee is only arbitrary, bad in law and misplaced, hence, liable to be deleted.
The Revenue authorities have simply shifted the onus of proving the entire spectrum of facts as embedded in the submissions of the assessee to assessee himself without bothering to verify those facts and submission through its internal machinery and then coming to a conclusion. The Revenue has entire machinery to conduct relevant enquiry regarding verification as per submission made by the assessee and it is pertinent for the quasi-judicial authority to conduct such enquiry before coming to a certain conclusion or making certain addition. That once the assessee had made submissions a/w. evidence regarding challans paid for and on behalf of the clients, the department could not be allowed to summarily make additions without bringing on record any contrary evidences negating the submission/evidences which had been filed by the assessee. It is correct that the primary onus regarding explaining the sources of cash is on the assessee and in this case, the assessee has clearly submitted reasons for his claim that such money is neither unexplained nor it belongs to him, therefore, it was now for the department to conduct enquiry and verify the correctness of the claim made by the assessee. In absence of such exercise by the Revenue authorities, making addition blindfoldedly is against the principles of natural justice is arbitrary, bad in law and hence, the said addition is quashed.
The order of the Ld. CIT(Appeals)/NFAC is set-aside and the A.O is directed to provide appeal effect of this order deleting the addition made u/s. 69A of the Act from the hands of the assessee.
In the result, appeal of the assessee is allowed. Order pronounced in open court on 03rd day of December, 2025.