Facts of the Case

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

The assessee contended that the deposits represented explained funds and were not undisclosed income. However, the Assessing Officer made the addition, which was subsequently confirmed by the CIT(A). The assessee preferred 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 on suspicion or inadequate explanation.
  3. Burden of proof in cases involving alleged unexplained income.

 Petitioner’s Arguments (Assessee)

  • The cash deposits had identifiable sources and were not undisclosed income.
  • The Assessing Officer did not bring any material evidence to prove that the money belonged to the assessee as unexplained income.
  • Addition was made on assumptions rather than factual findings.
  • The explanation offered was reasonable and supported by surrounding circumstances.

 Respondent’s Arguments (Revenue)

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

Court Order / Findings (ITAT Allahabad)

  • Addition under Section 69A requires cogent evidence showing that the money represents undisclosed income.
  • Mere suspicion or disbelief of explanation cannot justify addition.
  • The Revenue failed to bring material on record disproving the assessee’s explanation.

 Important Clarification

  • Section 69A is a deeming provision and must be applied strictly.
  • The burden initially lies on the assessee to explain the source; however, once an explanation is given, the Revenue must disprove it with evidence.
  • Additions cannot be made merely on conjectures or lack of satisfaction.
  • Evidence-based assessment is essential in unexplained money cases.

Link to download the order - 

https://itat.gov.in/public/files/upload/1641541032-ita%20no.%2012%20Alld%202021%20Laxmi%20Rathaur.pdf

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