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Income Tax Appellate Tribunal, DEHRADUN “DB” BENCH: DEHRADUN
Before: SHRI YOGESH KUMAR U.S & SHRI MANISH AGARWAL
Year : 2022-23] Ritu Singhal vs DCIT/ACIT 34F, Narendra Vihar, Central Circle Kaulagarh Road, Dehradun Uttarakhand-248001 Uttarakhand PAN-BAYPS8429Q APPELLANT RESPONDENT Assessee by Shri Harshit Gupta, CA Revenue by Shri S.K.Chaterjee, CIT DR Date of Hearing 04.08.2025 Date of Pronouncement 29.10.2025 ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 30.01.2025 by Ld. Commissioner of Income Tax (A)-3, Noida [“Ld.CIT(A)”] in Appeal No. CIT(Appeal), Kanpur-4/10023/2021-22 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 25.01.2024 passed u/s 143(3) of the Act pertaining to assessment year 2022-23.
Brief facts of the case are that assessee is an individual, filed her return of income on 30.09.2022, declaring total income of INR 49,61,640/-. Subsequently, a search and seizure operation was conducted at the assessee’s residential and business premises on 17.12.2021. As a result of search, reassessment proceedings were initiated in the case of assessee and re-assessment order was passed Page | 1 u/s 147 on 25.01.2024, making an addition of INR 40,91,770/- to the assessee’s total return income.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 30.01.2025, partly allowed the appeal of the assessee.
Aggrieved by the order of Ld.CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:-
1. “The learned Ld. CIT (Appeal) has erred both in law and on facts by confirming an addition of Rs. 1,74,709/- alleging that the amount remained credited in the accounts of employees allegedly controlled by the appellant. The Ld. CIT (Appeal) failed to properly and adequately appreciate the facts and evidence on record, which demonstrate that the appellant had no control over these accounts.
2. The learned Ld. CIT (Appeal) has wrongly made an addition of Rs. 1,74,709/- by adopting an arbitrary "ad hoc approach, even after allowing a deduction of Rs. 1,91,805/- for cash withdrawals utilized for employee salaries. The total deposits in these accounts were in the nature of salary payments, which were duly recorded in the books of accounts, and the addition lacks any legal or factual basis.
3. The learned Ld. CIT (Appeal) has erred in fact by confirming that the appellant controlled the passbooks and ATM cards associated with the employees' accounts, In reality, the passbooks and ATM cards were kept at the business premises where the employees worked. The employees' statements clearly confirm that these accounts were owned and controlled by the employees, and not by the appellant. 4. The learned Ld. CIT (Appeal) has erred in law and on facts by upholding the addition of Rs. 4,87,000/- under Section 69A of the Income Tax Act, 1961, on account of cash found during the search proceedings. The appellant had clearly explained that the cash represented legitimate sales receipts from the appellant's petrol pump business. This cash was part of the regular business income, already declared in the audited financial statements, supported by the books of accounts and daily sales registers that were verified during the search proceedings.
The learned Ld. CIT (Appeal), in their order, stated that the appellant failed to justify the sources of cash. In fact, the cash book was duly submitted during the written submissions to substantiate the source of cash, but it was rejected with the remark that its "production is an afterthought." The Ld. CIT (Appeal) should have given due consideration to this crucial evidence before finalizing the order, rather than dismissing it without proper review. Furthermore, the evidence produced during the appellate proceedings should have been evaluated on reasonable grounds, as it was critical in supporting the appellant's case and justifying the cash sources.
6. The appellant craves leave to add, amend, alter, or modify any of the grounds of appeal at or before the hearing, as may be necessary.”
In Ground of appeal Nos. 1 to 3, at the outset, the Ld.AR for 5. the assessee submitted that this issue is came up before the Co- ordinate Bench of Tribunal in assessee’s own case in for AY 2019-20 wherein Co-ordinate Bench has decided the issue in favour of the assessee by observing as under:-
7. “First of all, the addition has been made by the lower authorities u/s 69A of the Act, for which purpose the revenue is duty bound to prove that assessee is the owner of the monies lying to the credit of bank account of the employees. It is not in dispute that additions sustained by the ld CIT(A) to the tune of Rs. 7,01,769/- represent amounts lying to the credit of the employees of the assessee. The assessee is having control over its employees only for the limited purpose of extracting the work from them for the salary paid to them. The assessee has given a plausible explanation by explaining the modus operandi which remain undisputed that bank accounts were opened in the name of the employees with the scheduled bank wherein, the salaries are directly credited in the employees bank account. The assessee had also given explanation that passbooks and ATM cards of some employees found at the time of search in view of the fact that the assessee’s manager Shri Sandeep Sangal was assisting those employees to enable them to withdraw cash from the bank account as and when they required the monies. This certainly amounts to a plausible explanation. In any event, the assessee cannot be construed as a person owning the said cash lying in the bank account of the employees of the assessee. It is not the case of the revenue that the employees does not exist at all whereby the assessee had merely used certain names of persons in fictitious names and had taken money from the system in the form of booking of salary. This proposition argued by the ld AR has lot of force in view of the fact that employees were indeed found present at the time of search itself and statements were even recorded from Page | 3 them in post search proceedings. Hence, we have no hesitation to hold that the monies lying in the bank account of the employees of the assessee are owned and belonging only to the employees and not the assessee herein. Accordingly, the provisions of Section 69A of the Act per se could not be pressed into service. Consequentially there is no requirement at all for the assessee to explain those credits in the bank account under any provisions of the Act. Accordingly, the grounds raised by the assessee are allowed.”
The Ld.AR for the assessee also filed written submission in support of her claim. The relevant contents of written submission are reproduced as under:-
Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and objected the submissions of the assessee.
Heard the contentions of both parties and perused the material available on record. Facts as existed in the year under appeal are identical to the facts of AY 2019-20 in for AY 2019-20 and the allegation made by the AO for making disallowance. Therefore, respectfully following the judgement of Co-ordinate Bench of the Tribunal in assessee’s own case for AY 2019-20, we hold that bank accounts of the employees belonged to them and the credits entries appearing therein are for the transactions carried out by the employees themselves and the same cannot be held that carried out by the assessee out of her undisclosed income. Accordingly, we Therefore, Grounds of appeal Nos. 1 to 3 raised by the assessee are allowed.
Grounds of appeal Nos. 4 & 5 raised by the assessee are with 9. respect to the addition of INR 4,87,000/- made u/s 69A of the Act.
The Ld.AR for the assessee filed a written submission in support of her claim. The relevant contents of written submission are reproduced as under:-
Per contra, Ld. Sr. DR for the Revenue supported the orders of the lower authorities and objected the submissions of the assessee.
Heard the contentions of both parties and perused the material available on record.
After considering the arguments of both the parties and further, looking to the facts of the case that the assessee is engaged in the business of petrol pump where daily cash sales was not doubted by the AO who accepted the results declared by the assessee. Further, assessee has made explanation before the AO alongwith certificate of the auditor which was not considered by the AO before making the additions. It is further seen that as per the cash book of the assessee, sufficient cash balance was available in the cash book which was not doubted.
In view of these facts, we find that the assessee has been able to establish the source of the cash found during the course of search as duly recorded in the books of accounts maintained in the regular course of business. Accordingly, we direct the AO to delete the addition on this score. The grounds of appeal No. 4&5 are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 29.10.2025.