Facts of the Case

The assessee, M/s Deepak Auto Sales, engaged in the business of purchase and sale of two-wheelers as a sub-dealer of Honda motorcycles at Kunda, Pratapgarh, did not file its return of income for Assessment Year 2019-20. Consequently, reassessment proceedings were initiated by issuance of notice under Section 148 of the Income Tax Act, followed by notice under Section 142(1).

The Assessing Officer completed the assessment under Sections 147 read with 144 of the Act and determined total income at ₹2,70,75,760 by making an addition of ₹2,70,75,740 under Section 69A on account of alleged unexplained money, being cash deposits in the bank account, and a minor addition on account of TDS.

The assessee’s appeal before the Commissioner of Income Tax (Appeals) was dismissed vide order dated 29.03.2025. Aggrieved, the assessee preferred an appeal before the Income Tax Appellate Tribunal.

 

Issues Involved

  1. Whether the entire cash deposits in the disclosed bank account could be treated as unexplained money under Section 69A.
  2. Whether reassessment proceedings were initiated due to incorrect linkage of PAN and misunderstanding of facts.
  3. Whether the bank account transactions representing business sales required holistic examination instead of piecemeal addition.

 

Petitioner’s (Assessee’s) Arguments

The assessee submitted that it is a proprietorship concern of Shri Satish Chandra Kesarwani and has been regularly filing returns under the correct PAN. It was contended that due to inadvertent allotment and linking of an incorrect PAN by the bank, the disclosed bank account was wrongly treated as undisclosed.

It was further argued that the bank account was a regular business account, duly reflected in the books of account, financial statements, and GST records. The cash deposits represented sale proceeds of business and corresponding withdrawals were payments to the main dealer. It was emphasized that sales cannot be treated as income and, at most, only net profit could be considered.

 

Respondent’s (Revenue’s) Arguments

The learned Departmental Representative supported the orders passed by the Assessing Officer and the CIT(A). However, no objection was raised to the request for remand.

 

Court Order / Findings

The ITAT observed that the dispute involved factual verification relating to the nature of bank deposits, linkage of PAN, and treatment of business receipts. Considering the submissions made by the assessee and the concurrence of the Revenue for remand, the Tribunal held that the matter required fresh examination.

Accordingly, the ITAT set aside the impugned appellate order and restored the matter to the file of the Assessing Officer with a direction to pass a de novo assessment order in accordance with law after considering the submissions of the assessee and after providing reasonable opportunity of being heard.

 

Important Clarification / Legal Principle

Entire bank deposits cannot be treated as unexplained money under Section 69A without examining whether such deposits represent disclosed business receipts. Bank accounts and financial documents must be considered as a whole, and additions cannot be made in a piecemeal manner without proper verification and opportunity of hearing.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1770872210_DEEPAKAUTOSALESKUNDAPRATAPGARHPRATAPGARHVS.INCOMETAXOFFICERPRATAPGARHPRATAPGARH.pdf 

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