Ahmedabad ITAT Deletes Section 69A Addition on Cash Deposits; Accepts Cash Savings and Bank Withdrawals as Explained Source

PramodarayNaranaprasad Pathak Vs ITO (ITAT Ahmedabad)

Ahmedabad ITAT Deletes Section 69A Addition on Cash Deposits; Accepts Cash Savings and Bank Withdrawals as Explained Source

The Ahmedabad ITAT allowed the assessee’s appeal and deleted the addition of ₹5,00,100 made under section 69A, holding that the cash deposited in the post office account stood satisfactorily explained through cash savings from earlier years and withdrawals from bank accounts.

The assessee, who earned his livelihood through priesthood and catering, had not filed a return of income for AY 2020-21 as his total income of ₹2.27 lakh was below the basic exemption limit. Reassessment proceedings were initiated based on information that cash deposits of ₹46 lakh had been made in his account. During assessment, it was established that the figure had been erroneously inflated by ₹41 lakh due to a clerical mistake by the Post Office, and the Assessing Officer restricted the addition to ₹5,00,100.

Before the Tribunal, the assessee explained that the deposit of ₹5 lakh, made in April 2019 in a newly opened post office account, represented cash income accumulated over preceding years together with withdrawals from bank accounts. The assessee also produced the relevant bank statements and profit and loss statements for FYs 2018-19 and 2019-20 to substantiate the source of funds.

The Tribunal observed that the cash deposit had been made almost two years after demonetisation, lending support to the assessee’s explanation. Accepting the documentary evidence and the explanation regarding the source of the cash, it held that the deposit could not be treated as unexplained money under section 69A. Accordingly, the Tribunal deleted the entire addition of ₹5,00,100 and allowed the appeal.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

1. This appeal has been preferred by the Assessee against the Order, dated 09/01/2026, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 03/03/2025 passed under Section 147 r.w.s. 144 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment year 2021-202.

2. The Assessee has raised the following grounds of appeal:

1. The Learned CIT (A) has erred in law & facts of the case in confirming the addition of deposit of Rs 5,00,100/- as unexplained money u/s 69A of without considering the facts that there of corresponding withdrawals of Rs 4,10,000/- which is used for business expenses.

2. The Learned CIT (A) has erred in law & facts of the case in sustaining the addition made by assessing officer by not considering the business expenses and total income remaining below basic exemption.

3. Your appellant respectfully submits that the source of the amount of cash deposited in bank account is duly established in support of documentary evidences. In view of this the appellant submits that no addition be made u/s 69A of the Act for the above assessment year.

3. We have heard both the sides and have perused the material on record including the orders passed by the authorities below and the documents/details forming part of paper-book filed by the Assessee.

4. The Assessee is an individual residing in a Parvala Village, District Bhavnagar, Gujarat and has been earning livelihood from priesthood and catering. For the Assessment Year 2020-2021, the Assessee earned income of INR.2,26,836/-. Since the income was below taxable limit, no return of income was filed. On the basis of information to the effect that cash deposits had been made in the bank account of the Assessee, reassessment proceedings were initiated. Vide Assessment Order, dated 03/03/2025, passed under Section 147 read with Section 144 of the Act, the Assessing Officer made addition of INR.5,00,000/-in the hands of the Assessee holding that same to be unexplained money under Section 69A of the Act. The aforesaid addition was confirmed by the Learned CIT(A). Therefore, the Assessee has carried the issue in appeal before this Tribunal.

5. We note that reassessment proceedings were initially initiated as the Assessing Officer had information that the Assessee had deposited cash of INR.46,00,100/-. During the assessment proceedings it was explained by the Assessee that there was a clerical mistake by the Post Officer because of which cash deposit figure was inflated by 41,00,000/-. The Assessing Officer accepted the aforesaid explanation and restricted the addition to INR.5,00,100/-. The Assessee has explained that the Assessee had deposited the cash of INR.500,100/-in April 2019 in a newly opened account opened with post office. In response to query raised during the course of hearing, the Learned Authorised Representative for the Assessee has filed bank statement for the relevant period which shows an entry of cash deposit of INR.500,000/-. It is pertinent to note that the cash deposit was made in April 2019 almost two years after the demonetization. The Assessee has explained that the source of cash deposits was income earned in cash during the preceding years as well as withdrawals made from the bank account. In support the Assessee has filed statement of Profit & Loss earned during the financial year 2018-2019 and 2019-2020. Therefore, accepting the contention of the Assessee we delete the addition of INR.500,100/- made in the hands of the Assessee under Section 69A of the Act. In terms of the aforesaid Ground No. 1 to 3 raised by the Assessee are allowed.

6. In result, the present appeal preferred by the Assessee is allowed.

Pronounced on 24.06.2026