Asif Imran Iftakhar Ahmed Vs ITO (ITAT Pune)
Cash Deposits in Medical Store Bank Account Not Taxable U/s 69A as Such- ITAT Holds Only Profit Element Can Be Assessed
The Pune ITAT held that where bank transactions are demonstrably linked to a running business, the entire cash deposits cannot be treated as unexplained money under section 69A. In such cases, only the profit element embedded in the business receipts can be brought to tax.
The assessee, engaged in the business of purchase and sale of medicines, had not filed a return of income for AY 2012-13. Based on information regarding cash deposits of ₹25.77 lakh in an HDFC Bank account, reassessment proceedings were initiated. Due to non-compliance during the assessment proceedings, the Assessing Officer treated the entire cash deposits as unexplained money under section 69A and assessed income at ₹25.77 lakh.
Before the Tribunal, the assessee produced a licence issued by the Food and Drug Administration and bank statements evidencing that he was carrying on a medical business. It was contended that the deposits represented business receipts from medicine sales and that the profit margin in the trade was only around 2-3%. The assessee also pointed out that the total credits in the bank account exceeded the impugned cash deposits and included business-related transactions.
The Tribunal examined the bank statement and observed that the transactions bore the characteristics of regular business activity in the pharmaceutical trade. It therefore accepted the contention that the cash deposits formed part of business receipts and that taxing the entire deposits as unexplained income was unjustified.
Since complete details of turnover were not available on record, the ITAT restored the matter to the Assessing Officer for verification of total business turnover and directed that income be estimated on a reasonable basis. The Tribunal specifically held that the addition should be restricted to the net profit element, not exceeding the presumptive rate under section 44AD or the peak credit in the bank account, whichever is lower.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to the Assessment Year 2012-13 is directed against the order dated 23.10.2025 of Addl/JCIT(A), Visakhapatnam passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the Assessment Order dated 12.12.2019 passed u/s.144 r.w.s.147 of the Act.
