Facts of the Case

The assessee, an individual, was subjected to assessment proceedings during which the Assessing Officer noticed substantial cash deposits in the assessee’s bank account for the relevant assessment year. The deposits were treated as unexplained money under Section 69A of the Income-tax Act, 1961 on the ground that the assessee allegedly failed to satisfactorily explain their source.

The assessee furnished explanations regarding the nature and source of the deposits. However, the Assessing Officer rejected the explanation and made additions to income. The CIT(A) confirmed the addition. Aggrieved, the assessee preferred an appeal before the ITAT.

 Issues Involved

  1. Whether cash deposits can be treated as unexplained money under Section 69A without cogent evidence.
  2. Whether addition can be sustained merely due to perceived inadequacy of explanation.
  3. Scope of burden of proof in unexplained money cases.

Petitioner’s Arguments (Assessee)

  • The cash deposits had identifiable and legitimate sources.
  • The explanation furnished was reasonable and consistent with surrounding circumstances.
  • The Assessing Officer did not bring any material evidence to establish that the deposits represented undisclosed income.
  • Addition was made on assumptions rather than factual findings.

 Respondent’s Arguments (Revenue)

  • The assessee failed to conclusively establish the source of deposits.
  • In absence of satisfactory documentary evidence, the deposits were rightly treated as unexplained money.
  • The orders of the Assessing Officer and CIT(A) were justified.

Court Order / Findings (ITAT Allahabad)

  • Section 69A requires clear evidence that the money belongs to the assessee and represents unexplained income.
  • Mere disbelief of the assessee’s explanation is insufficient to justify addition.
  • The Revenue failed to bring any adverse material to disprove the explanation offered.

 Important Clarification

  • Section 69A is a stringent deeming provision requiring evidentiary support.
  • The assessee must offer an explanation, but the Revenue must disprove it with material evidence.
  • Additions cannot be based on conjectures or subjective dissatisfaction.
  • Proper factual investigation is essential before treating deposits as unexplained income.

Link to download the order –

https://itat.gov.in/public/files/upload/1628243919-251%20Ajay%20Kumar%20Gupta.pdf

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