Facts of the Case

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

The assessee contended that the deposits were from known and explained sources and did not represent undisclosed income. However, the Assessing Officer rejected the explanation and made the addition, which was subsequently confirmed by the CIT(A). The assessee filed an appeal before the ITAT.

Issues Involved

  1. Whether cash deposits can be treated as unexplained money under Section 69A without concrete evidence.
  2. Whether addition can be sustained merely due to perceived inadequacy of explanation.
  3. Burden of proof in cases involving alleged unexplained income.

Petitioner’s Arguments (Assessee)

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

Respondent’s Arguments (Revenue)

  • The assessee failed to conclusively prove the source of the 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)

  • Section 69A requires clear evidence that the money represents unexplained income of the assessee.
  • Mere disbelief of the explanation is not sufficient to justify addition.
  • The Revenue failed to bring any material on record disproving the assessee’s explanation.

 Important Clarification

  • Section 69A is a strict deeming provision and must be applied cautiously.
  • The assessee must offer an explanation, but the Revenue must disprove it with evidence.
  • Additions cannot be based on conjectures or subjective dissatisfaction.
  • Proper factual investigation is essential in unexplained money cases.

Link to download the order –      

https://itat.gov.in/public/files/upload/1631010717-ITA%2002%20GULAB%20SINGH.pdf

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