Case Law Details
Mohamed Asmi Vs ITO (ITAT Chennai)
Goat Trader Fails to Explain ₹7.10 Crore Bank Deposits: ITAT Upholds Section 69A Addition Despite 44AD Claim
The Chennai ITAT upheld massive addition of ₹7.10 crore under Section 69A against a goat trader who claimed that huge bank deposits represented cash-based business receipts from rural goat trading and commission transactions. The Tribunal held that presumptive taxation under Section 44AD cannot be used as a shield to regularize unexplained money when the assessee fails to substantiate the nature and source of deposits.
The assessee, engaged in goat trading and animal husbandry activities under the name M/s Asmi Agro Traders, had not originally filed return of income. Reassessment proceedings were initiated after the department detected substantial cash deposits and bank credits exceeding ₹8.39 crore across multiple bank accounts. In response to notice under Section 148, the assessee declared turnover of only ₹92.10 lakh and offered presumptive income under Section 44AD.
During assessment proceedings, the assessee contended that goat trading in rural markets is largely informal, trust-based and cash-driven, where bills, vouchers and formal documentation are generally unavailable. A reconciliation statement was also furnished claiming that part of the deposits represented inter-bank transfers and non-business transactions, while the remaining amounts related to goat trading turnover and commission business.
However, the Tribunal observed that except for broad assertions regarding rural business practices, the assessee failed to produce any meaningful documentary evidence such as purchase records, sale bills, stock details, transport documents, customer confirmations, auction records or commission agreements. The ITAT noted that the magnitude of deposits running into several crores was wholly disproportionate to the turnover disclosed in the return and the reconciliation statement itself remained unsupported by independent evidence.
Rejecting the plea that only profit element should be taxed, the Tribunal held that such estimation is possible only where existence of genuine business turnover is first reasonably established. Since the assessee failed to prove that the deposits actually arose from goat trading activity, the authorities were justified in invoking Section 69A.
On the legal issue relating to validity of notice under Section 148 issued by the Jurisdictional Assessing Officer after CBDT Notification No.18/2022 introducing faceless reassessment mechanism, the Tribunal noted that the controversy is presently pending before various High Courts pursuant to Supreme Court directions. The issue was therefore kept open without rendering any conclusive finding.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the appellant is directed against the order passed by the Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter referred to as “CIT(A)”] dated 31.10.2025 for the Assessment Year 2020-21.
2. The assessee has raised the following grounds of appeal:
1. The order of the ld. CIT(A) is without jurisdiction, contrary to law, facts and circumstances of the case and is opposed to the principles of natural justice.
2. The Id. CIT erred in upholding the reassessment proceedings which are bad in law and void ab initio, as the notice u/s. 148 dated 27-02-2024 was issued by the Jurisdictional Assessing Officer instead of through faceless mode, despite CBDT Notification No. 18/2022 dated 29-03-2022 having come into force with effect from 29-03-2022, notifying the e-Assessment of Income Escaping Assessment Scheme, 2022 u/s. 151A, mandating automated allocation and faceless conduct of reassessment proceedings. Hence, reopening is liable to be quashed as JAO lacked authority, in this case, to issue Section 148 notice post 29-3-2022.
3. The AO made additions far beyond the escapement recorded in the 148A(d) order. Against alleged escapement of only 21.08 crore, an addition of 27.10 crore was made without new material or fresh opportunity u/s 148A(b), rendering the reassessment bad in law.
4. The Id. CIT(A) failed to appreciate that all bank deposits represented business receipts from goat trading-an unorganized, cash-based rural trade and could not be treated as “unexplained money” merely due to absence of books. The appellant furnished a complete reconciliation of ₹90 crore of credits, segregating non-business and business receipts. The rejection of reconciliation without pointing out specific defects is unjustified.
5. The authorities erred in invoking section 69A, which applies only when the assessee is found to be the owner of unexplained money. Where the assessee has explained the source as business receipts and such receipts are fully routed through banking channels, the ingredients of section 69A are not met.
6. The Ld. CIT(A) erred in ignoring that the nature of trade-goat market auctions is informal, rural and trust-based, where documentary evidence like bills or sale memos are generally not maintained.
7. The Ld. Authorities selectively accepted turnover of ₹92,10,000 declared in the ITR but arbitrarily rejected the balance business receipts, though both formed part of the same banking channels and business activity. Such selective acceptance is legally untenable.
8. Without prejudice, even assuming (without admitting) that the deposits represent turnover, only presumptive profit u/s 44AD could be brought to tax and not the entire deposits.
9. That the appellant craves leave to add, amend or withdraw any ground at the time of hearing.
10. For the above reasons and reasons that may be adduced at the time of hearing, additions made u/s. 69A may kindly be deleted to meet justice.
2.1 Brief facts of the case are that the assessee is an individual engaged in trading of goats and animal husbandry activities under the name and style of M/s Asmi Agro Traders. The assessee stated that the business was carried on through direct sales as well as commission-based transactions in rural and semi-urban markets. For the Assessment Year 2020-21, the assessee had not originally filed return of income u/s. 139(1) of the Income-tax Act, 1961 (“the Act”). Based on information available with the Department that the assessee had made cash deposits aggregating to Rs.1,08,57,188/-and substantial bank credits during FY 2019-20, proceedings u/s. 147 were initiated. Notice u/s. 148 dated 27.02.2024 was issued by the Jurisdictional Assessing Officer. In response thereto, the assessee filed return declaring income under presumptive taxation scheme u/s.44AD and disclosed gross receipts of Rs.92,10,000/-and presumptive income of Rs.7,36,800/-.
2.2 During reassessment proceedings, the Assessing Officer obtained bank statements and noticed total credits aggregating to Rs.8,39,73,464/- in various bank accounts maintained by the assessee. The assessee furnished reconciliation stating that total bank credits were Rs.8,90,55,209/- wherein credits of Rs.95,86,651/- represented inter-bank transfers, cheque returns, creditor receipts and non-business transactions and balance represented turnover from goat trading and commission business. The assessee explained that goat trading in rural areas is predominantly cash-based and conducted through trust-based auction systems without formal documentation. The Assessing Officer, however, held that no documentary evidence such as bills, vouchers, purchase registers or sale records were produced. Accordingly, the AO treated a sum of Rs.7,10,37,643/- as unexplained money u/s. 69A and taxed the same u/s. 115BBE. Further additions/disallowances were made of Rs.3,588/- as income from other sources and disallowance of deduction u/s. 80D amounting to Rs.50,000/-. Assessment u/s.147 r.w.s. 144B was completed on 11.03.2025 determining total income at Rs.7,17,18,031/-. The Assessing Officer (“AO”) observed that the assessee had failed to file the original return of income and had also not furnished any satisfactory explanation regarding substantial cash deposits and bank credits reflected in the bank accounts. Despite repeated opportunities, the assessee did not produce books of account, vouchers, bills, or any supporting documentary evidence to substantiate the nature and source of the transactions. The AO further noted that the turnover disclosed in the return was only Rs.92.10 lakhs, whereas the aggregate bank credits exceeded Rs.8.39 crores, indicating a significant mismatch. The explanation offered by the assessee that the deposits pertained to goat trading and commission business was found to be unsupported by any documentary evidence and remained wholly unsubstantiated. In the absence of credible evidence establishing the source and genuineness of the credits, the AO concluded that the amount of Rs.7,10,37,643/- constituted unexplained money liable to be taxed u/s. 69A of the Income-tax Act, 1961. In support of the addition, reliance was placed on the decisions in K. Chinnathamban v. CIT, Fakir Mohmed Haji Hasan v. CIT and Krishan Kumar v. ITO.
3. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [“CIT(A)”]. During the remand proceedings, the Assessing Officer reiterated the findings recorded in the assessment order and stated that no additional evidence had been furnished before the CIT(A) to substantiate the assessee’s claims. The AO further observed that the reconciliation statement submitted by the assessee was not supported by any documentary evidence. No proof whatsoever was produced in respect of the alleged commission transactions or the claimed goat trading activity. According to the AO, the explanation offered by the assessee was merely an afterthought and lacked credibility. Therefore, AO maintained that the assessee had failed to discharge the burden cast upon him u/s. 69A of the Income-tax Act, 1961, to satisfactorily explain the nature and source of the impugned credits. The AO also contended that the provisions of presumptive taxation u/s. 44AD do not preclude or override the applicability of Section 69A where unexplained money or unexplained credits are detected. Accordingly, the addition made u/s. 69A was stated to be justified and liable to be sustained.
4. The ld.CIT(A) after getting the remand report, confirmed the additions as under:
7. Discussion and Decision:
7.1 I have carefully considered the assessment order, statement of facts, grounds of appeal and submissions filed during the appellate proceedings and the remand report submitted by the Ld.AO.
7.2 Background The appellant is an individual engaged in the business of trading agricultural products, particularly dealing in purchase and sale of goats and animal husbandry through wholesale and retail under direct sale and commission basis in the name of M/s. Asmi Agro Traders. The case was reopened for scrutiny assessment u/s. 147 of the Income Tax Act, 1961, as the appellant had not filed return of income for A.Y. 2020-21 despite having made substantial cash deposits aggregating to Rs.1,08,57,188/- during F.Y. 2019-20.In response to notice u/s 148, the appellant filed return of income declaring turnover of Rs.92,10,000/- from sale of vegetables, rice and agricultural business, and claimed presumptive income u/s 44AD of Rs.7,36,800/- Investigation revealed total bank credits of Rs.8,39,73,464/- across five bank accounts maintained with Axis Bank Ltd., Canara Bank Ltd., Indian Bank Ltd., and Tamilnad Mercantile Bank Ltd. The Assessing Officer made the following additions:
Rs.7,10,37,643/- as unexplained money u/s 69A
Rs.3,588/- as income from other sources (TDS on payments to non-residents)
Rs.50,000/- disallowance of deduction claimed u/s 80D
Total assessed income was determined at Rs.7,17,18,031/- with demand of Rs.11,47,74,251/-.
7.3 GROUNDS OF APPEAL
7.3.1 Ground Nos. 2-14 are regarding the Addition u/s 69A of Rs.7,10,37,643/-.
AO’S FINDINGS: the Ld AO has passed the order under consideration on the basis of his findings that the Appellant failed to provide documentary evidence for cash deposits. No bills, vouchers, or purchase/sale records maintained or produced. And the business explanation given by the appellant lacks credibility and supporting documentation.
SUBMISSIONS BY THE APPELLANT
The appellant submitted that he is engaged in sale of goats and animal husbandry through Direct sales to commercial goat farms, farmers, agents, and meat shop owners, Commission-based sales acting as intermediary between buyers and sellers, Orders for family functions, festivals, and political meetings.
The appellant contended that all cash deposits represent legitimate business proceeds, business is conducted primarily in cash due to its unorganized nature Sales are made on same day of purchase through auction basis. Most business receipts are collected in cash and deposited by parties directly.
The appellant has argued that the Return was filed under presumptive business scheme u/s 44AD and once income is declared u/s. 44AD, no further explanation is required and the provisions of section 69A cannot be invoked when business income is already declared.
Factual Position: Record shows that the total bank credits during F.Y. 2019-20 was Rs 8,39,73,464/-, Whereas the appellant had a declared business turnover. Rs 92,10,000/-. Therefore, an unexplained balance of Rs 7,10,37,643/- (as per final computation) exists.
Section 69A of the Income Tax Act, 1961 provides that:
“Where in any financial year the assessee is found to be the owner of any money. bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory. the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee of such financial year.”
For application of Section 69A of the Act, two conditions are required to be satisfied. They are:
1. Investment/expenditure are not recorded in the books of account of assessee.
2. The nature and source of acquisition of assets or expenditure are not explained or not explained satisfactorily. The expression “nature and source” used in this section should be understood to mean requirement of identification of source and its genuineness. To explain “Nature” it would require the assessee to explain what is the description of investment or expenditure, period and the manner in which it was done. To explain the source it would require the assessee to explain the corpus or fund from where investment or expenditure has been met.
In the present case, the assessee has deposited Cash in its bank account, but the nature and source of such deposits made in the bank accounts were not at all explained and no satisfactory explanation offered.
Further, for invoking deeming provisions u/s. 69A of the act, there should be clearly identifiable asset or unexplained money. It is amply proved beyond doubt that the assessee has deposited Cash and other credits appearing in bank accounts stands unexplained, and the sum of Rs 7,10,37,643/- is identifiable as unexplained assets.
All three limbs of Section 69A of the Act stand qualified in the case of the assessee, i.e. the assessee was found to be owner of the money; such money was not recorded in the books of accounts; and its nature and source is not identifiable.
Reliance is placed upon the decision in K. Chinnathamban [2007] 162 Taxman 459 (SC)/[2007] 292 ITR 682 (SC)/[2007] 211 CTR 86 (SC) wherein it is held that u/s. 69A Burden of Proof The onus of proving the source of deposit primarily rests on the person in whose name the deposit appears in various banks.
Fakir Mohmed Haji Hasan Vs CIT 2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] held that the Scheme of sections 69, 69A and 69C shows that where nature and source of investments or source of acquisition of money, bullion, etc., owned by assessee are not explained satisfactorily and same are not recorded in books of account or expenditure incurred is unexplained, then same may be deemed to be income of such assessee.
In Krishan Kumar Vs ITO [2019] 107 taxmann.com 464 (SC)/[2019] 265 Taxman 227 (SC) the Hon’ble Supreme Court held that where High Court upheld Tribunal’s order confirming addition made by AO u/s. 69A on ground that during relevant year, assessee made cash deposits of more than 37 lakhs in saving bank account whereas its entire sales as per VAT return was only Rs. 9.65 lakhs, SLP filed against High Court’s order was to be dismissed.
Thus the burden of proof lies on appellant to explain source of credits. Mere assertion without evidence is insufficient.
In the present case the appellant’s explanation regarding goat trading business, while plausible in nature, lacks, substantive documentary support. Business nature claimed is highly suspicious given the quantum.
The quantum of cash deposits (Rs 8.39 crores) vis-à-vis declared turnover (Rs 92.10 lakhs) without any supporting evidences, creates serious doubt about the genuineness of the business explanation.
Presumptive Taxation No Blanket Protection: While the appellant relies on presumptive taxation u/s. 44AD, this provision does not provide blanket immunity from additions u/s. 69A. The appellant admits to lack of proper books of account and supporting documents, stating business is conducted on “trust and faith. “Filing return u/s. 44AD does not absolve the assessee from explaining the source of credits u/s. 69A. These are independent provisions with different objectives. Further the Udyam Registration certificate alone cannot substantiate the scale of business claimed. No evidence of purchase transactions, auction receipts, or commission agreements provided either at the time of assessmnet of during appeal proceedings.
Excess Deposits Beyond Declared Turnover. The assessee declared gross receipts of Rs. 92.10,000/- but had net cash deposits of Rs. 7,94,68,557/-. Even after considering direct sales of Rs. 84,30,914/-, the remaining deposits of Rs. 7,10,37,643/- are approximately 7.7 times the declared turnover, which is disproportionate and requires explanation. The appellant’s claim of commission-based goat trading lacks substantiation. No bills, vouchers, or documentary evidence was provided to establish the identity of parties involved in commission transactions; rate of commission earned (claimed 1-1.5%); details of auction/sale locations Records of amounts collected and paid to farmers.
In view of the above facts, legal and judicial precedents and further applying the principle of human probability as laid down in Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal [1995] 80 Taxman 89 (SC)/[1995] it is held that the the Assessing Officer rightly invoked Section 69A for the entire sum of Rs 7,10,37,643/-. Thus the addition u/s 69A is SUSTAINED.
Accordingly these grounds of appeal are dismissed.
Hence, the present appeal before the Tribunal.
5. Before us, the ld.AR submitted as under:
a. notice u/s.148 issued by Jurisdictional AO on 27.02.2024 is invalid in view of CBDT Notification No.18/2022 dated 29.03.2022 issued u/s.151A mandating faceless reassessment mechanism and automated allocation;
b. reassessment is invalid since additions made exceeded alleged escapement recorded in 148A proceedings without fresh opportunity;
c. deposits represented business turnover from goat trading and commission business;
d. business was conducted in unorganized rural markets where formal vouchers are generally unavailable;
e. once receipts are treated as business turnover, only profit element can be taxed and not entire deposits;
f. section 69A is inapplicable where source is explained as business receipts routed through bank accounts;
g. at best, income could be estimated u/s. 44AD.
He placed reliance on the judicial precedents which hold that entire sales cannot be added u/s 69A and only profit embedded in turnover can be assessed.
6. Per contra, the ld.DR for the Revenue supported the orders of lower authorities and submitted assessee failed to discharge burden u/s. 69A of the Act. Assessee had failed to produce the books or corroborative evidence. Even explanation regarding goat trading remained unsupported. We observe that huge deposits were wholly disproportionate to returned turnover. It was argued that section 44AD cannot regularize unexplained deposits where assessee’s explanation lacked credibility.
7. We have heard the rival submissions and perused the material available on record. The assessee has challenged both the validity of reassessment proceedings as well as the addition made u/s. 69A of the Income-tax Act, 1961.
7.1 The first legal ground raised by the assessee is that the notice issued u/s. 148 dated 27.02.2024 by the Jurisdictional Assessing Officer is invalid in law in view of CBDT Notification No.18/2022 dated 29.03.2022 issued u/s. 151A of the Act, which according to the assessee mandated that reassessment proceedings ought to have been initiated only through faceless mechanism and automated allocation.
7.2 We observe that identical legal issue regarding validity of notices issued by the Jurisdictional Assessing Officer post issuance of Notification No.18/2022 dated 29.03.2022 is presently the subject matter of adjudication before various Hon’ble High Courts on the directions of the Hon’ble Supreme Court in [Diary No.55409/2025] CIVIL APPEAL NO. OF 2026 (Arising out of SLP(C) No. of 2026) [Diary No.32669/2025] dated 10.04.2026. Para 28 of aforesaid direction of the Hon’ble Supreme Court reads as under:
28. The High Courts are requested to decide the matters preferably by 30.09.2026. Learned counsel for the parties undertake to extend full cooperation to the High Courts in this regard. No adjournments may be granted by the High Courts on mere asking of the parties.
Since the issue is presently sub-judice before the Hon’ble High Courts and no authoritative finality has yet emerged, we refrain from rendering any conclusive finding on the broader legal controversy. Accordingly, while dismissing the legal ground raised by the assessee in the facts of the present case, we keep the larger legal issue open to be decided in an appropriate case upon authoritative pronouncement by the Hon’ble High Courts.
7.3 Coming to the merits of the addition, the undisputed facts are that the assessee had not filed the original return of income for the relevant assessment year. Information available with the Department revealed substantial cash deposits and bank credits in the bank accounts maintained by the assessee. During reassessment proceedings, the Assessing Officer noticed aggregate credits exceeding Rs.8.39 crores in various bank accounts, whereas the assessee disclosed turnover of only Rs.92.10 lakhs in the return filed in response to notice u/s. 148.
7.4 The explanation of the assessee before the lower authorities as well as before us is that the deposits represented business receipts arising out of goat trading and commission transactions carried on in rural markets where transactions are predominantly cash based and documentary evidences such as bills and vouchers are generally not maintained. However, except making general assertions regarding the nature of trade, the assessee failed to furnish any cogent documentary evidence to substantiate the claim. No purchase records, sale bills, stock details, transportation records, details of counterparties, commission agreements, auction records or confirmations from customers or suppliers were produced either before the Assessing Officer, the ld. CIT(A), or even before this Tribunal.
7.5 We find that the assessee’s explanation remained wholly unsubstantiated. The magnitude of deposits running into several crores vis-à-vis the meagre turnover disclosed in the return creates serious doubt regarding the genuineness of the explanation offered. The reconciliation statement furnished by the assessee was also unsupported by independent evidence. Mere routing of funds through bank accounts by itself does not establish the nature and source of such deposits. The burden cast upon the assessee u/s. 69A to satisfactorily explain the nature and source of money found credited in the bank accounts has not been discharged.
7.6 We also do not find merit in the contention that once income is offered under presumptive taxation scheme u/s. 44AD, no addition u/s. 69A can be made. The provisions of section 44AD and section 69A operate in distinct fields. Presumptive taxation cannot be used as a shield to regularize unexplained money or unexplained credits where the assessee fails to establish the source and genuineness thereof. In the present case, the assessee failed to prove that the impugned deposits actually represented business turnover from goat trading activity.
7.7 The contention that only profit element should be estimated also cannot be accepted in the facts of the present case. Such estimation may be possible where existence of genuine business activity and turnover is reasonably established. However, in the instant case, the very nature and source of substantial deposits remained unproved. Therefore, the authorities below were justified in invoking section 69A of the Act.
7.8 The Assessing Officer as well as the ld. CIT(A) have elaborately discussed the factual deficiencies and absence of supporting evidence. We do not find any infirmity in the concurrent findings recorded by the lower authorities warranting interference. The reliance placed by the Revenue on the decisions in K. Chinnathamban v. CIT, Fakir Mohmed Haji Hasan v. CIT and Krishan Kumar v. ITO supports the proposition that the burden lies upon the assessee to satisfactorily explain the source of deposits appearing in bank accounts and in absence of satisfactory explanation, addition u/s. 69A is justified.
7.9 In view of the foregoing discussion, we uphold the order of the ld. CIT(A) sustaining the addition of Rs.7,10,37,643/- made u/s. 69A of the Act. Grounds raised by the assessee on merits are accordingly dismissed.
8. In the result, the appeal of the assessee is dismissed, however, the larger legal issue relating to validity of notice issued u/s. 148 by the Jurisdictional Assessing Officer in the context of Notification No.18/2022 dated 29.03.2022 and section 151A of the Act is kept open in view of pendency of the issue before various Hon’ble High Courts.
Order pronounced on the 15th day of May 2026, in Chennai.
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