Soupal Kumar Nath Vs ITO (ITAT Kolkata)
Customers’ Stamp Duty Funds Remitted to Government Are Not Unexplained Cash Credits: ITAT Deletes ₹4.17 Crore Addition
Facts of the case
The assessee worked as a computer operator, professional typist and deed writer and was also an authorised stamp vendor of the Government of West Bengal. In connection with property transactions, he received cash and cheques from customers for payment of stamp duty and registration charges.
These amounts were deposited into his bank accounts and thereafter remitted to the Government treasury for obtaining stamp papers and facilitating execution and registration of sale and purchase deeds. The deposits thus represented money received from customers for a specific purpose, rather than amounts retained by the assessee as his own earnings.
For AY 2018-19, the assessee filed a return declaring total income of ₹3,03,010. His case was selected for limited scrutiny to verify cash deposits. During assessment proceedings, he responded to the notices and questionnaire and furnished details and supporting evidence.
The aggregate cash deposits during the year amounted to ₹4,16,62,280. The bank accounts were disclosed in the balance sheet, and the transactions were recorded in the books.
Assessment and first appeal
Despite the explanation, the Assessing Officer treated the entire cash deposits of ₹4,16,62,280 as unexplained cash credits under section 68. The addition was made in the assessment completed under section 143(3) read with sections 143(3A) and 143(3B).
The assessee challenged the addition before the CIT(A), explaining that the deposits represented customer advances received for purchasing stamp papers and paying statutory charges on their behalf.
The CIT(A), however, confirmed the addition on the ground that the assessee had failed to establish the source of the cash deposits. The assessee consequently approached the Tribunal.
The central question was whether funds received from customers, deposited into disclosed bank accounts and subsequently transferred to the Government treasury could be treated as unexplained credits in the assessee’s hands.
Tribunal’s findings on the nature of the deposits
The Tribunal examined the assessee’s business activity and the movement of funds. It recorded that he was an authorised stamp vendor, receiving money from property purchasers for buying stamps and remitting that money to the Government.
The Bench specifically distinguished these transactions from a situation in which unexplained money accumulated in the assessee’s bank accounts throughout the year. Here, the amounts were deposited and thereafter transferred to the Government treasury, following which stamps were issued for property registration.
The Tribunal also found that the money had been fully recorded in the books of account. The bank deposits were therefore part of an explained transaction cycle involving customer collections and corresponding Government payments.
On these facts, the conclusion that the entire deposits constituted unexplained credits under section 68 was held to be incorrect and unsustainable.
Earlier scrutiny assessment and the rule of consistency
The Tribunal found further support in the assessee’s assessment for AY 2017-18, completed under section 143(3). In that year, the Assessing Officer had specifically recognised the same arrangement: the assessee received cash and cheques from customers, deposited them into his bank account and transferred the funds to the West Bengal Government for issuance of stamp papers.
Since the facts for AY 2018-19 were similar, the Tribunal held that the rule of consistency also supported deletion of the addition.
The order discussed PCIT v. Quest Investment Advisors (P.) Ltd., (2018) 409 ITR 545 (Bom.), which emphasised the need for a reasoned basis when departing from an accepted position without any change in facts or law.
It also referred to Radhasoami Satsang v. CIT, (1992) 193 ITR 321 (SC). Although each assessment year is separate and strict res judicata does not apply, an established fundamental factual position should not ordinarily be reversed without a material change. The discussion in Quest Investment Advisors additionally referred to Bharat Sanchar Nigam Ltd. v. Union of India, (2006) 282 ITR 273 (SC).
Decision
The Tribunal set aside the CIT(A)’s order and allowed the assessee’s appeal, holding that the addition of ₹4,16,62,280 could not be sustained.
This was a deletion on merits, supported additionally by consistency with the preceding year’s scrutiny assessment. The matter was not remanded for another round of verification.
Author’s comments
The decision illustrates why the purpose and movement of money matter more than the size of bank deposits. A professional facilitating property registration may handle substantial customer funds while earning a comparatively modest fee. Treating every deposit as his unexplained income ignores the underlying activity when the collection and remittance trail is established.
The practical strength of such a defence lies in maintaining customer-wise collections, treasury challans, stamp purchase particulars and a bank reconciliation linking receipts with payments. Disclosure of a bank account alone does not explain every credit; here, relief rested on the recorded transactions, identified purpose and corresponding treasury remittances.
The earlier scrutiny assessment strengthened the case because it had expressly examined and accepted the same business arrangement. Consistency therefore reinforced the factual explanation rather than substituting for it. The ruling provides useful support where customer funds pass through an intermediary’s account and their destination and purpose are demonstrable.
Cases Discussed
- Principal Commissioner of Income-tax-8 Vs Quest Investment Advisors (P.) Ltd. (Bombay High Court) – [2018] 409 ITR 545; dated 28/06/2018. Relied upon. The Tribunal reproduced the High Court’s reasoning that an accepted treatment should not be changed without identifying a material difference in facts or law or providing reasons for departure.
- Bharat Sanchar Nigam Ltd. Vs Union of India (Supreme Court) – [2006] 282 ITR 273. Referred to through Quest Investment Advisors. The quoted reasoning distinguished the doctrine of res judicata from the precedential value of an earlier factual or legal determination where the position remained unchanged.
- Radhasoami Satsang Vs Commissioner of Income-tax (Supreme Court) – [1992] 193 ITR 321. Relied upon. The Tribunal reproduced the Supreme Court’s observations that a fundamental factual position accepted in earlier assessment years should not ordinarily be disturbed without a material change.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 31.10.2025 for the AY 2018-19.
2. The only issue raised by the assessee in the various grounds of appeal is against the order of ld. CIT (A) confirming the addition of ₹4,16,62,280/- as made by the ld. AO in respect of cash deposited in the disclosed bank accounts which represented the advances received from the customers against the purchase of stamp papers and also adjusted against the stamp paper purchased on their behalf.
3. The facts in brief are that the case of the assessee was selected for limited scrutiny under e-assessment scheme 2019 to verify the issues of cash deposits. The assessee filed the return, declaring total income at ₹3,03,010/-, which was processed u/s 143(1) of the Act. Thereafter, the notices u/s 143(2) and 142(1) of the Act along with questionnaire were duly issued and served upon the assessee and the assessee also complied with the questionnaire. The assessee also complied with the said questionnaire by filing all the details and evidences before the ld. AO. The assessee is engaged in the business of computer operator cum professional typist and is a deed writer and accepts cash and cheques from the customers /clients for purchase and payments of property registration fees and stamp duty charges, which used to be deposited in the bank account of the assessee and immediately thereafter remitted to the Government treasury and stamp duty documents were purchased on behalf of the customers so that the sale deed could be executed. The assessee accordingly deposited the cash of ₹4,16,62,280/- to bank accounts throughout the year which were duly disclosed in the balance sheet. Finally, the ld. AO treated the said amount as unexplained cash credit u/s 68 of the Act and added to the income of the assessee in the assessment framed u/s 143(3) read with section 143(3A) and 3B of the Act.
4. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO by simply recording a finding that assessee could not prove the source of cash deposits in the bank account.
5. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is a authorized stamp vendor by the Government of West Bengal. He received money from the land/ property purchasers for buying stamp duty and used to deposit the same into his bank account and then remitted the money to the Government treasury. We note that it is not the case that the assessee has deposited money which was got accumulated in the bank accounts over the year. The money is deposited and thereafter remitted to the Government treasury and stamps are issued so that the registration of the properties could be done. Therefore, the conclusion drawn by the Ld. AO and as sustained by the Ld. CIT (A) with regard to the cash deposited of ₹4,16,62,280/- in the bank accounts as an unexplained money u/s 68 of the Act, 1961 is incorrect and cannot be sustained. In the present case, the assessee has fully recorded the money in the books of account and deposited the same into the bank accounts and then remitted to the Government treasury for issuance of stamp papers for execution of registration of sale/purchase deeds by the stamp valuation authority.
6. We also note that the similar cash deposited in A.Y. 2017-18 by the assessee has been accepted by the ld. AO in the assessment framed u/s 143(3) of the Act which is available at page no.8 to 9 of the Paper Book. We note that in the said assessment year in Para no.3, the ld. AO specifically noted that the assessee is a computer operator cum professional typist and the assessee used to receive cash / cheques from the customers and deposited the same in the bank account and thereafter the money was transferred to Government account of West Bengal so that the stamp paper could be issued and sale deeds / purchase deeds could be executed. The facts in the instant case is similar, hence, following the rule of consistency the addition is liable to be deleted. In our opinion the confirmation of addition is unfair and cannot be sustained. Even on the principle of consistency, the disallowance is uncalled for. The assessee relied on following decisions:
a) Hon’ble Bombay High Court in case of Principal Commissioner of Income-tax-8 vs. Quest Investment Advisors (P.) Ltd. [2018] 409 ITR 545 (Bombay)[28-06-2018] has held as under:
“7. We note that the impugned order of the Tribunal records the fact that the Revenue Authorities have consistently over the years i.e. for the 10 years years prior to Assessment Years 2007-08 and 2008-09 and for 4 subsequent years, accepted the principle that all expenses which has been incurred are attributable entirely to earning professional income. Therefore, the Revenue allowed the expenses to determine professional income without any amount being allocated to earn capital gain. In the subject assessment year, the Assessing Officer has deviated from these principles without setting out any reasons to deviate from an accepted principle. Moreover, the impugned order of the Tribunal also records that the Revenue was not able to point out any distinguishing features in the present facts, which would warrant a different view in the subject assessment year from that taken in the earlier and subsequent assessment years. So far as the decision of Radhasoami Satsang (supra) is concerned, it is true that there are observations therein that restrict its applicability only to that decision and the Court has made it clear that the decision should not be taken as an authority for general applicability.
8. However, subsequently the Apex Court in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 282 ITR 273 has after referring to the decision of Radhasoami Satsang (supra) has observed as under :—
“20. The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision of where the earlier decision is per incuriam. However, these are fetters only on a co-ordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior strength or in some cases to a Bench of superior jurisdiction.” (emphasis supplied)
9. The principle accepted by the Revenue for 10 earlier years and 4 subsequent years to the Assessment Years 2007-08 and 2008-09 was that the entire expenditure is to be allowed against business income and no expenditure is to be allocated to capital gains. Once this principle was accepted and consistently applied and followed, the Revenue was bound by it. Unless of course it wanted to change the practice without any change in law or change in facts therein, the basis for the change in practice should have been mentioned either in the assessment order or atleast pointed out to the Tribunal when it passed the impugned order. None of this has happened. In fact, all have proceeded on the basis that there is no change in the principle which has been consistently applied for the earlier assessment years and also for the subsequent assessment years. Therefore, the view of the Tribunal in allowing the respondent’s appeal on the principle of consistency cannot in the present facts be faulted with, as it is in accord with the Apex Court decision in Bharat Sanchar Nigam Ltd.’s case (supra).”
b) The Hon’ble Supreme Court in case of Radhasoami Satsang vs. Commissioner of Income-tax [1992] 193 ITR 321 (SC) has held as under:
“13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assess ment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter—and if there was no change it was in support of the assessee—we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12.”
7. Accordingly, we set aside the order of ld. CIT (A) and allow the appeal of the assessee.
8. In the result, the appeal of the assessee is allowed.
Order pronounced on 07.10.2026.
