ITAT Remands Section 69A Addition for Cash Never Deposited in Bank

V. S. Brothers & Co. Vs Ward 23(3)(6) (ITAT Mumbai)

Summary:

Information Reports ₹1.62-Crore Cash Deposit

V.S. Brothers & Co., a partnership firm, had not filed its return of income u/s 139(1) for AY 2018-19.

Information available with the Income-tax Department indicated that the assessee had allegedly deposited cash aggregating to ₹1,62,20,500 in an account maintained with Punjab & Sind Bank during the relevant previous year.

Based solely on this information, the AO reopened the assessment u/s 147. The AO also alleged that the assessee had not complied with the notice issued u/s 148.

However, in response to a subsequent notice u/s 142(1), the assessee categorically stated that it had not deposited any cash in the concerned Punjab & Sind Bank account during the relevant year.

AO Prefers Portal Information Over Bank Statement

The assessee furnished a copy of its bank statement to demonstrate that no cash deposits of the alleged amount appeared in the account.

The AO was nevertheless unconvinced. Without reconciling the departmental information with the actual bank statement or referring to any independent confirmation from the bank, he treated the entire amount of ₹1,62,20,500 as unexplained money u/s 69A.

The foundation of the addition was thus not any entry appearing in the bank account but information available with the Department alleging that such deposits had been made.

The assessee challenged the addition before the first appellate authority.

Bank Itself Denies the Deposit

Before the NFAC, the assessee again filed its written submissions & produced the bank statement. More importantly, it furnished a copy of a letter dated 13 June 2019 issued by Punjab & Sind Bank directly to the AO.

The bank had written the letter in response to a notice issued by the AO u/s 133(6). According to the letter, no such cash deposits had been made by the assessee in the concerned account.

Thus, the assessee’s consistent denial was supported by two pieces of documentary evidence:

• the actual bank statement, which contained no entry for the alleged cash deposits; &
• the bank’s own direct response to the AO u/s 133(6), confirming that the deposits had not occurred.

Despite appreciating the evidentiary value of these documents, the NFAC confirmed the addition.

NFAC Accepts Evidence, Yet Demands Its Proof

The first appellate authority acknowledged that the letter issued by Punjab & Sind Bank was a strong piece of evidence. However, it still sustained the addition on the reasoning that the assessee was required to prove the correctness of the bank’s letter.

The ITAT found this approach unsustainable. The letter had purportedly been issued by the bank directly to the AO in response to a statutory notice u/s 133(6). Once such a response formed part of the departmental proceedings, it was unreasonable to insist that the assessee should independently establish the correctness of the bank’s own confirmation.

If the departmental authorities had any doubt about the authenticity or contents of the letter, they could have verified it directly from the bank.

Minimum Expected Was an Enquiry

The ITAT noted that the assessee had maintained a consistent stand throughout the assessment & appellate proceedings that it had not deposited the alleged cash.

The bank statement supported this stand. The bank’s response u/s 133(6) also supported it. Yet the AO had completely ignored both the assessee’s submissions & the documentary evidence.

The Tribunal observed that the minimum the departmental authorities could have done was to conduct a thorough enquiry with Punjab & Sind Bank before making an addition of ₹1.62 crore.

This was particularly necessary when the assessee’s bank statement did not reflect any such transaction & the bank had itself denied the existence of the alleged deposits.

Significantly, the assessment order was completely silent regarding the bank’s response to the notice u/s 133(6). There was no discussion explaining why the response was rejected, considered unreliable or found factually incorrect.

Addition Prima Facie Unsustainable

Based on the material available on record, the ITAT held that the addition was prima facie unsustainable.

However, instead of ordering an unconditional deletion, the Tribunal directed the AO to delete the addition after factual verification of:

• the assessee’s bank statement; &
• the letter dated 13 June 2019 purportedly issued by Punjab & Sind Bank in response to the notice u/s 133(6).

Accordingly, the assessee’s appeal was allowed.

Key Takeaway

An addition u/s 69A requires proof that the assessee actually possessed unexplained money. Departmental information may justify an enquiry or reopening, but it cannot substitute evidence at the assessment stage. Where the bank statement shows no deposit & the bank itself confirms the same u/s 133(6), the AO cannot simply ignore both and tax an imaginary entry. Before asking the assessee to explain unexplained money, the Department must first establish that the money existed.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI

This appeal by the assessee is against order dated 19.03.2026 of National Faceless Appeal Centre (NFAC) Delhi, for the A.Y.2018-19.

2. The dispute in the present appeal is confined to addition of an amount of Rs.1,62,20,500/- u/s.69A of the Income Tax Act, 1961.

3. Briefly the facts are that the assessee is a partnership firm. As observed by the Assessing Officer, for the assessment year under dispute the assessee did not file any return of income u/s.139(1) of the Act. Whereas, the information available with the department indicated that during the previous year relevant to assessment year under dispute, the assessee had deposited cash amounting to Rs.1,62,20,500/- in an account held with Punjab & Sind Bank. Based on such information, the Assessing Officer reopened the assessment u/s.147 of the Act. It was further alleged by the Assessing Officer that the assessee did not comply with the notice issued u/s.148 of the Act. However, in response to notice issued u/s.142(1) of the Act, the assessee submitted its reply stating that it had not deposited any cash in the account held with Punjab & Sind bank in the year under consideration. The Assessing Officer however was not convinced with the submissions of the assessee. Ultimately, he proceeded to treat the amount of Rs.1,62,20,500/- as ‘unexplained money’ u/s.69A of the Act and added to the income of the assessee. Assessee contested the aforesaid addition before the First Appellate Authority. In the course of proceedings the assessee again furnished written submissions alongwith bank statement copy and a letter written by the concerned bank to the Assessing Officer, in response to the notice issued u/s.133(6) of the Act, stating that no such deposits have been made by the assessee. Though, ld. First Appellate Authority appreciated the evidences furnished by the assessee however, ultimately, he confirmed the addition.

4. We have considered rival submissions and perused the materials available on record. Undoubtedly, assessment in case of the assessee was reopened based on information that the assessee had deposited cash amounting to Rs.1,62,20,500/- in an account held with Punjab & Sind Bank. It is evident in course of assessment proceedings, in response to the statutory notices issued by the Assessing Officer from time to time, the assessee had consistently taken a stand that it had not deposited any cash in the bank account held with Punjab & Sind Bank. In fact, the copy of the said bank account was furnished before the Assessing Officer to demonstrate that no cash was deposited. However, the Assessing Officer has completely ignored, both, the submissions of the assessee and also the documentary evidence. Even, before the First Appellate Authority, the assessee did furnish the bank statement and also a letter dated 13.06.2019 purportedly issued by Punjab & Sind bank to the Assessing Officer in response to notice issued u/s.133(6) of the Act. Both, bank statement of the assessee as also the letter issued by the concerned bank clearly establish that during the year under consideration, the assessee had not deposited any cash as alleged by the Assessing Officer. Pertinently, though, having taken note of the letter issued by the bank, ld. First Appellate Authority accepts that it is a strong piece of evidence however, he still confirmed the addition stating that the assessee was required to prove the correctness of the letter. In our view, when the assessee had consistently taken a stand that it had not deposited any cash during the year in the stated bank account, the minimum departmental authorities could have done was to conduct thorough enquiry with the bank before making the addition. More so, when the bank statement furnished by the assessee does not reflect any such transaction. Notably, the assessment order is completely silent on the response from the bank in pursuance to notice issued u/s.133(6) of the Act. Thus, primafacie, based on the materials available on record, we are of the view that the addition is unsustainable. Accordingly, we direct the Assessing Officer to delete the addition after factual verification of the bank statement and the letter dated 13.06.2019 stated to have been issued by the concerned bank u/s.133(6) of the Act.

5. In the result, appeal is allowed.

Order pronounced in the open court on 31/08/2026.