Section 69A Addition of ₹83.25 Lakh Deleted as Cash Deposits Came From Recorded Business Receipts: ITAT Jaipur

ITO Vs Sardar Shahr Kray Vikray Sahakari Samiti Limited (ITAT Jaipur)

Recorded Business Receipts Cannot Be Treated as Unexplained Cash Merely on Suspicion: ITAT Upholds ₹83.25 Lakh Deletion

Background of the dispute

The assessee was a cooperative society registered under the Rajasthan Co-operative Societies Act. It purchased agricultural produce from farmers under the minimum support price scheme for sale to the Rajasthan State Co-operative Marketing Federation Ltd. It also sold seeds, fertilisers and pesticides to its members.

The society had not originally filed its return. Following reopening based on cash deposits, it furnished a return declaring nil income and a current-year loss. During assessment, it submitted audited financial statements and a cash flow statement, explaining that the deposits represented business receipts and redeposit of cash withdrawn earlier.

The AO remained dissatisfied and treated deposits of ₹71,55,300 in Axis Bank and ₹11,70,025 in Churu Central Co-operative Bank, aggregating ₹83,25,325, as unexplained money under section 69A.

CIT(A) accepted the business explanation

Before the CIT(A), the society explained that the deposits arose from cash sales, recovery of credit extended to members and cash previously withdrawn and remaining available.

The CIT(A) examined both bank accounts and found frequent deposits in modest amounts, interlinked with withdrawals and business payments. These were consistent with the cash sales reflected in GST returns.

The explanation was supported by bank statements, audited accounts, sample invoices and the cash flow statement. The AO had neither rejected the books nor identified a particular deposit inconsistent with available cash or business receipts. The CIT(A) consequently deleted the entire addition.

Section 69A requires money not recorded in the books

The Tribunal relied on D.N. Singh v. CIT [2023] 150 taxmann.com 301 (SC) to explain the statutory ingredients of section 69A.

Apart from ownership and absence of a satisfactory explanation, the provision requires that the money should not be recorded in the books of account, where books are maintained.

Here, the AO accepted the recorded turnover of ₹3,592.56 lakh and did not find the audited accounts unreliable. Crucially, there was no finding that the deposited money was unrecorded.

The Tribunal expressly accepted that non-rejection of books does not, by itself, prevent application of section 69A. However, where the claimed source was recorded business receipts which had been accepted, the AO had to explain why the deposits should nevertheless be regarded as originating from an unrecorded source. That exercise was missing.

Revenue’s objections did not displace the evidence

The Revenue alleged that no cash flow statement had been furnished. The Tribunal found this contrary to the assessment order itself, which expressly acknowledged its submission.

The further contention that it was merely a summary rested on a scrutiny report not placed before the Tribunal. The assessment order also did not record that the AO had specifically called for the cash book, sales register or stock register and that the society failed to produce them.

The Tribunal rejected the allegation of a shifting explanation. Cash sales, redeposit of withdrawals and recovery of member credit were complementary components of the explanation that the deposits arose from business transactions.

The deposits represented approximately 2.3% of turnover. The society had not claimed that its entire turnover, including sales to the State federation, was received and deposited in cash.

The CIT(A)’s reference to six deposits was illustrative. Its findings followed examination of both bank accounts for the entire year. Accepting supporting evidence and noticing the absence of a specific unmatched deposit did not reverse the initial burden of proof.

Fresh shortfall calculation and remand rejected

The Revenue alternatively calculated an unexplained balance of ₹18,53,271, after allowing claimed cash sales of ₹64,72,054 against the total deposits.

The Tribunal declined to accept this calculation. It was advanced for the first time before it, relied on material not placed on record and omitted member recoveries and available cash balances. The AO had instead added every deposit, including amounts covered even by the Revenue’s own calculation.

The Rule 46A objection also failed because the documents relied upon had been submitted during assessment.

The Tribunal upheld the deletion and rejected remand as an unwarranted second opportunity for the Revenue to reopen the assessment exercise. The Revenue’s appeal was dismissed, giving final relief on the disputed addition.

Author’s comments

The decision distinguishes doubt about an explanation from proof of the statutory conditions for section 69A. Cash deposits warrant examination, but their aggregate cannot automatically become unexplained income when recorded business receipts and supporting records explain them.

Equally, audited accounts are not an absolute shield. The Tribunal expressly preserved the possibility of section 69A being invoked without rejection of books. What mattered was the evidence and the absence of an identified unexplained deposit.

The practical lesson is reconciliation: connect deposits with sales, recoveries, withdrawals and available cash. For the Department, an addition must rest on demonstrated deficiencies rather than a blanket rejection subsequently repaired through fresh appellate calculations

Cases Discussed

• D.N. Singh v. CIT, [2023] 150 taxmann.com 301 (Supreme Court) — Relied upon for the essential conditions governing section 69A, particularly the requirement that the relevant money or assets must not be recorded in the books of account maintained by the assessee.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR

1. This appeal by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the learned CIT(A)”] dated 19.12.2025 for the assessment year 2018-19, arising out of the assessment order dated 25.03.2023 passed by the Assessing Officer (hereinafter referred to as “the AO”) under section 147 read with section 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

2. The grounds of appeal raised by the Revenue before us in the memorandum of appeal in Form No. 36 read as under:

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)(NFAC) is justified in deleting entire addition made under section 69A of the Act ignoring the fact that the assessee failed to substantiate its claim with documentary evidence to support claim of cash deposits which have claimed to made out of the cash sales as well as through cash withdrawals

2. Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A)(NFAC) is justified in allowing the appeal ignoring the facts that no cash book OR cash flow statement as well as documentary evidence of cash sales were produced by the assessee during entire assessment proceedings and thus the source of cash deposits remain unexplained in the hands of the assessee. Merely a summary of cash related transaction in its books was furnished

3. Whether, on the facts and circumstances of the case and in law, the Ld CIT(A)(NFAC) is justified in ignoring the facts that as per details provided by the assessee during the assessment proceedings and as per bank account statements, cash was also paid by the assessee through cheque to some persons. This clearly shows that the contention of the assessee that cash deposits were made out of cash withdrawal is incorrected

4. The appellant craves leave to add, alter, amend, OR withdraw any of the above grounds of appeal at OR before the time of hearing of the appeal.”

3. Briefly stated, the facts of the case are that the Assessee is a co-operative society registered under the Rajasthan Co-operative Societies Act. It purchases agricultural produce from farmers under the minimum support price scheme for sale to the Rajasthan State Co-operative Marketing Federation Ltd., and also sells seeds, fertilisers and pesticides to its members. The Assessee had not filed a return of income for the year under consideration. The case was reopened on the basis of cash deposits in the bank account and a notice under section 148 of the Act was issued on 29.03.2022. In response, the Assessee filed a return on 22.04.2022 declaring nil income and a current year loss. Though the Assessee did not respond to the notices under section 142(1) of the Act issued on 26.09.2022 and 13.10.2022, later, it furnished its audit report, balance sheet, profit and loss account, report and cash flow statement, and explained that its sales were in cash and that the sale proceeds were deposited in the bank. The AO noted that the turnover of the Assessee was Rs 3592.56 lakh. In reply to the show cause notice dated 08.03.2023, the Assessee stated that the deposits came from its sales and from cash withdrawn from the bank and available on rotation. The AO held that the Assessee had not furnished evidence to show that the cash deposits came from cash sales, and that the explanation of redeposit of cash withdrawn was not acceptable, since the details furnished showed that some payments had been made by cheque to other persons. The AO accordingly treated the cash deposits as unexplained money under section 69A of the Act, as under:

4. Before the learned CIT(A), the Assessee did not press Grounds 1, 3 and 4, which were dismissed. On Ground 2, relating to the addition under section 69A of the Act, the Assessee explained that the deposits represented cash sales of seeds, fertilisers and pesticides, recovery in cash of credit extended to members, and cash withdrawn earlier and remaining in hand. It referred to its letters dated 19.11.2022 and 14.03.2023 submitted before the AO, with the bank statements, audit report, sample sale invoices, GST returns and cash flow statement. The learned CIT(A) examined the statements of both the bank accounts and found that the deposits were frequent, in modest amounts, interlinked with withdrawals and business payments, and consistent with the cash sales reflected in the GST returns. The learned CIT(A) also noted that the AO had neither rejected the books of account under section 145 of the Act nor pointed out any specific deposit which remained unexplained with reference to the available cash balance or business receipts. The addition of Rs 83,25,325 was accordingly deleted.

5. At the time of hearing, none appeared on behalf of the Assessee and no written submissions have been filed on its behalf. As the issue can be decided on the material on record, we proceed to dispose of the appeal on merits after hearing the learned Departmental Representative (hereinafter referred to as “the learned DR”).

6. The learned DR relied on the assessment order and on written submissions dated 22.09.2026. The principal contentions are summarised below:

7. In the alternative, the learned DR prayed that the matter be restored to the AO for fresh verification.

8. We have heard the learned DR and perused the material on record. The three substantive grounds of the Revenue raise one issue, namely whether the learned CIT(A) was justified in deleting the addition of Rs 83,25,325 made under section 69A of the Act. They are therefore taken up together.

9. The ingredients of section 69A of the Act have been explained by the Hon’ble Supreme Court in D.N. Singh v. CIT [2023] 150 taxmann.com 301 (SC). At paragraphs 26 and 27 of the judgment, the Hon’ble Supreme Court observed as under:

“26. … Both Sections require that the subject matter of the provisions, viz., investments in the case of Section 69 and money, bullion, jewellery or other valuable articles in the case of Section 69A are not recorded in the Books of Account. That is, in a case where Books of Accounts are maintained. … In both cases, if the assessee is able to offer an explanation for the nature and the source for the investments and money, bullion, jewellery or other valuable articles, respectively, and it is not found unsatisfactory, there can be no deemed income under either Section.

27. Turning more to Section 69A, it may be broken down into the following essential parts:

a. The assessee must be found to be the owner;

b. He must be the owner of any money, bullion, jewellery or other valuable articles;

c. The said articles must not be recorded in the Books of Account, if any maintained;

d. The assessee is unable to offer an explanation regarding the nature and the source of acquiring the articles in question; or The explanation, which is offered, is found to be, in the opinion of the Officer, not satisfactory;

e. If the aforesaid conditions are satisfied, then, the value of the bullion, jewellery or other valuable article may be deemed as the income of the financial year in which the assessee is found to be the owner;

f. In the case of money, the money can be deemed to be the income of the financial year;”

10. At paragraph 77 of the same judgment, the Hon’ble Supreme Court observed that “The intention of the law-giver in introducing Section 69A was to get at income which has not been reflected in the books of account but found to belong to the assessee.” Thus, the condition that the money is not recorded in the books of account maintained by the assessee is an essential ingredient of section 69A of the Act, in addition to the want of a satisfactory explanation.

11. We have no difficulty in accepting the proposition, laid down in the decisions relied upon by the learned DR, that the onus to explain the nature and source of the cash lies on the Assessee and that the explanation must satisfy the test of human probabilities. The question, however, is whether that onus was discharged on the facts of this case. The Assessee is a co-operative society whose accounts are audited. The AO has not found the audited accounts to be unreliable and has not rejected them under section 145 of the Act. The turnover of Rs 3592.56 lakh, including the sales of seeds, fertilisers and pesticides to members, has been accepted as recorded. The AO has not recorded any finding that the cash deposited in the bank accounts of the Assessee is not recorded in its books. The addition has been made only because the AO was not satisfied that the deposits came from cash sales. In our view, the learned DR is right that non-rejection of books is not by itself a bar to section 69A of the Act. But where the source claimed is the recorded business receipts of the Assessee, and those receipts are accepted, it was for the AO to show why the deposits should be regarded as coming from an unrecorded source. This has not been done.

12. The contention that no cash flow statement was filed, which is the foundation of Ground 2, is contrary to paragraph 3 of the assessment order itself, where the AO has recorded that the Assessee furnished the audit report, balance sheet, profit and loss account, report and cash flow statement. The learned DR contends that the document was only a summary and that the AO has so reported in the scrutiny report. That report is not part of the papers placed before us. In any event, the assessment order does not record that the AO called for the cash book, sales register or stock register and that the Assessee failed to produce them. The validity of the assessment has to be judged on the basis of the reasons recorded by the AO in the assessment order.

13. We are also unable to accept that the explanation shifted from stage to stage. The statement that sales were in cash, the statement that cash withdrawn was also redeposited, and the reference to recovery of credit from members, are parts of the same explanation that the deposits came from the business receipts of the Assessee. The reference to recovery of credit was also not new at the appellate stage. The learned CIT(A) has recorded that the Assessee relied on its letter dated 19.11.2022 submitted before the AO in this regard. As regards the sales to the State federation, the deposits of Rs 83,25,325 constitute about 2.3 per cent of the turnover. The Assessee has never claimed that the entire turnover was received in cash and deposited in the bank.

14. The learned DR has contended that the learned CIT(A) examined only six deposits. We do not read the order in that manner. The learned CIT(A) has recorded that the statements of both the bank accounts for the previous year were examined, has cited the deposits dated 12.07.2017, 14.07.2017, 17.07.2017, 19.07.2017, 04.01.2018 and 09.01.2018 as instances, and has recorded that similar deposits in modest amounts were noticed throughout the year. The finding is thus a finding on the whole of the deposits, illustrated by examples. Nor did the learned CIT(A) reverse the burden of proof. Having found the explanation supported by the bank statements, the cash flow statement, sample invoices and GST returns, the learned CIT(A) noticed that the AO had not pointed out any deposit which could not be matched with the available cash. That is an appreciation of evidence, not a shifting of the onus.

15. We now come to Ground 3 and the computation in the written submissions. The observation of the AO, that some amounts withdrawn were paid by cheque to other persons, bears only on the claim of redeposit of cash withdrawn. It does not affect the principal source, namely the cash sales and recoveries. The computation of Rs 18,53,271 is made for the first time before us. It is based on a summary of cash transactions and on bank narrations which are not part of the papers placed before us. The AO did not make any such computation and did not restrict the addition to any shortfall. On the other hand, the AO added the entire deposits, including the part which, even on the Revenue’s own computation, would be covered by the cash sales claimed. The computation also leaves out the recoveries from members and the cash balance available as per the books. It is, therefore, not a reconciliation which can form the basis of a finding by us that any identified part of the deposits came from an unrecorded source.

16. The material relied upon by the learned CIT(A) was filed before the AO with the letters dated 19.11.2022 and 14.03.2023, as recorded in the impugned order and as partly acknowledged in paragraph 3 of the assessment order. No ground has been raised by the Revenue that the learned CIT(A) admitted additional evidence. These decisions do not, therefore, apply to the facts before us.

17. For the reasons given above, we find no infirmity in the conclusion of the learned CIT(A) that the cash deposits were sourced from the recorded business receipts of the Assessee and that section 69A of the Act was not attracted. The learned DR has not placed any material to show that the findings of the learned CIT(A) are contrary to the record. The alternative prayer for restoring the matter to the AO would only give the Revenue a second opportunity to reinitiate the assessment proceedings not allowed under the law, and we do not find it a fit case for doing so. The deletion of the addition of Rs 83,25,325 is upheld. Grounds 1 to 3 of the Revenue are dismissed. Ground 4 is general in nature and requires no adjudication.

18. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the Open Court on 08.10.2026.