ADJ Agri International LLP Vs ITO (ITAT Rajkot)
Explained Cash Redeposits Cannot Be Taxed Under Section 69A: ITAT Deletes ₹20.26 Lakh Addition
Introduction
The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, deleted an addition of ₹20,25,800 under Section 69A after accepting the assessee’s explanation that the cash deposits arose from business receipts and earlier bank withdrawals.
The Tribunal noted that documented cash withdrawals of ₹1,00,67,000 substantially exceeded the disputed deposits. The assessee had furnished bank statements and supporting cash-flow details demonstrating the availability and source of cash.
It held that a cash deposit cannot, by itself, justify an addition where the assessee satisfactorily explains its nature and source through relevant records.
Background of the Reassessment
The assessee, ADJ Agri International LLP, was engaged in trading in agricultural commodities. Its case for assessment year 2018-19 was reopened under Section 147 based on information concerning transactions in its bank accounts.
The information showed cash deposits aggregating to ₹20,25,800 in accounts maintained with City Union Bank Limited and Lakshmi Vilas Bank Limited, alongside cash withdrawals aggregating to ₹1,00,67,000.
A notice under Section 148 was issued on 29.03.2022. During the proceedings, the Assessing Officer obtained bank statements through notices under Section 133(6).
The reassessment order dated 03.03.2026 treated the disputed deposits as unexplained money. The CIT(A), through an order dated 11.08.2026, confirmed the addition, prompting the assessee’s appeal before the Tribunal.
Verification of Receipts from Milan Seeds Corporation
The City Union Bank account reflected total deposits of approximately ₹10,41,83,162 during the financial year. A significant portion originated from Milan Seeds Corporation (India).
The Assessing Officer sought details from that entity regarding its business relationship with the assessee, ledger account, invoices, payments and account confirmation.
Milan Seeds Corporation explained that it had purchased agricultural commodities in the preceding year and made the corresponding payments during financial year 2017-18.
It furnished its ledger account, account confirmation and certified bank statements. It also explained that no purchases occurred during the relevant year and that no corresponding current-year invoices were available.
After considering this information, the Assessing Officer did not make an addition concerning those receipts. The dispute remained confined to the cash deposits in the two bank accounts.
Cash Deposits Treated as Unexplained Money
The disputed amount comprised ₹5,00,300 deposited in City Union Bank and ₹15,25,500 deposited in Lakshmi Vilas Bank, totalling ₹20,25,800.
The assessee argued that these deposits were explained by cash generated from agricultural commodity transactions and cash previously withdrawn from the same or related bank accounts.
It emphasised that cash dealings formed part of its business and that earlier withdrawals of ₹1,00,67,000 provided sufficient available cash.
The assessee also pointed to the volume of bank receipts accepted by the Assessing Officer. The Revenue, meanwhile, supported the assessment and the CIT(A)’s confirmation of the addition.
Tribunal Explains the Requirements of Section 69A
The Tribunal observed that Section 69A concerns money or specified valuable assets owned by an assessee that are not recorded in the books, where no explanation regarding their nature and source is offered or the explanation is unsatisfactory.
Accordingly, the existence of a bank deposit does not dispense with examination of the assessee’s explanation.
Where contemporaneous records establish that deposits represent recorded cash sales or identifiable earlier withdrawals that remained available, the basis for treating the money as unexplained substantially weakens.
The Tribunal therefore examined the supporting records and cash availability rather than treating the deposits themselves as sufficient evidence of unexplained income.
Bank Statements and Cash-Flow Records Support the Explanation
On the facts, the Tribunal found that the assessee had furnished relevant bank statements and supporting cash-flow details demonstrating the source and availability of cash.
It noted that agricultural commodity trading involved cash transactions and accepted the explanation connecting the deposits with business receipts and earlier withdrawals.
The substantially higher withdrawals were particularly relevant. However, the decision rested on the explanation supported by records, rather than merely comparing the aggregate figures.
The Tribunal also referred to Gaurav Harshadbhai Chokshi Vs. ITO, ITA No. 552/Ahd/2026, dated 30.09.2026. In that decision, earlier withdrawals exceeding subsequent deposits were accepted where no material established that the withdrawn cash had been utilised elsewhere.
Final Decision and Significance
The Tribunal deleted the entire addition of ₹20,25,800 and allowed the assessee’s appeal.
The ruling recognises the importance of bank statements, books of account and cash-flow records in explaining cash deposits. A documented explanation linking deposits to disclosed business receipts or available earlier withdrawals cannot be rejected merely on suspicion.
The decision does not establish that every withdrawal automatically explains every later deposit. Its application depends on identifying the source, demonstrating continued cash availability and supporting the explanation with records, as the Tribunal found had been done in this case.
Cases Discussed
- Gaurav Harshadbhai Chokshi Vs ITO (ITAT Ahmedabad); ITA No. 552/Ahd/2026; 30/09/2026 – The Tribunal accepted the explanation of cash deposits where documented earlier withdrawals exceeded subsequent deposits and no evidence established that the withdrawn cash had been utilised elsewhere. Relied upon in the present case while deleting the addition under Section 69A.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2018-19, is directed against the order under section-250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Appeal Centre (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 11.08.2026, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 of the Act, dated 03.03.2026.
2. The Solitary grievance of the assessee in this appeal is that learned CIT(A) erred in confirming the addition of Rs.20,25,800/- made by the Assessing Officer under section 69A of the Income tax Act, 1961 treating the cash deposits, as unexplained money, without appreciating that the assessee had fully explained the nature and source of the said deposits as re- deposits of cash earlier withdrawn from the same / related bank accounts, of Rs.1,00,67,000/-, as the assessee, engaged in the business of trading in agricultural commodities, where customers receive and pay cash only and the amount of Rs.20,25,800/-, was deposited by the assessee out of sale of agricultural commodities and earlier withdrawn from the same / related bank accounts, of Rs.1,00,67,000/-, therefore, addition made by the assessing officer may be deleted.
3. The relevant material facts, as culled out from the material on record, are as follows. The case of the assessee for the Assessment Year 2018-19 was reopened under section 147 of the Income Tax Act, 1961, based on information pertaining to financial transactions in the assessee’s bank accounts. The specific reason for reopening was the detection of cash deposits aggregating to Rs. 20,25,800/- in accounts with City Union Bank Limited and The Lakshmi Vilas Bank Limited, coupled with cash withdrawals aggregating to Rs. 1,00,67,000/- from an account with City Union Bank Limited during the financial year 2017-18. Consequently, a notice under section 148 was issued on 29.03.2022 and duly served upon the assessee, directing the filing of a return of income within the stipulated time. Concurrently, to independently verify the information on record, notices under Section 133(6) of the Act were issued to City Union Bank and DBS Bank India Limited (Laxmi Vilas Bank) on 06.10.2025, requiring submission of bank statements and related information by 10.10.2025. Both banks complied and furnished the requisite bank statements on 14.10.2025 and 16.10.2025, respectively. The statements so received corroborated the initial information pertaining to cash deposits during the relevant period.Upon perusal of the bank statement of City Union Bank, it was observed that the assessee’s account reflected total deposits of approximately Rs.10,41,83, 162/- during the financial year. A significant portion of these receipts originated from a single entity, Milan Seeds Corporation (India).In view of the above, a notice under Section 133(6) of the Income-tax Act, 1961 was issued to Milan Seeds Corporation (India) on 06.10.2025, requiring the following information to be furnished by 10.10.2025.
1. Ledger account of M/s. ADJ Agri International LLP in their books for F.Y. 2017-18.
2. Nature of transactions/business relationship with the assessee.
3. Copies of invoices/bills relating to transactions during F.Y. 2017-18.
4. Mode and purpose of payments made to the assessee.
5. Confirmation of account as on 31.03.2018.
6. TDS details, if any, are deducted on such payments.
7. GST details, if applicable, relating to transactions with the assessee.
4. In response to the notice, the Milan Seeds Corporation (India), submitted its reply, which are summarised as under:
(1) Ledger Account. The ledger account of M/s. ADJ Agri International LLP for F.Y. 2017-18 was furnished. It was submitted that the payments pertained to agricultural commodities purchased in the preceding year, with the corresponding payments being made during F.Y. 2017-18.
(2). Nature of Transaction: It was reiterated that the relationship was that of a buyer-seller for agricultural commodities, with the purchases having occurred in the earlier year.
(3). Invoices/Bills: It was clarified that no purchases were made during F.Y. 2017-18. Accordingly, no invoices or bills pertaining to the said financial year were available.
(4). Mode and Purpose of Payment Payments were made through proper banking channels. Certified bank statements evidencing the same were enclosed.
(5). Account Confirmation: Confirmation of the account as on 31.03.2018 was provided.
(6). TDS Details: Since no purchase transaction took place during the year, no TDS was deducted.
(7). GST Details: Similarly, no GST implications arose during the year under consideration.
Further, in order to independently verify the financial transactions, notices under section 133(6) of the Act were issued to the concerned banks, namely City Union Bank Limited and DBS Bank India Limited (erstwhile Lakshmi Vilas Bank Limited). The City Union Bank Limited duly furnished authenticated bank statements which confirm that the assessee had made cash deposits during the Financial Year 2017-18. On perusal of the bank account statement, it is seen that the most of the credit transactions pertain to Milan Seeds Corporation(India) Limited and as per the information received from the party, the payments are outstanding dues of previous year. Therefore, credit transactions from Milan Seeds are considered to be the receipt of the previous year, therefore, assessing officer did not make addition. However, the assessing officer made addition in respect of cash deposits amounting to Rs. 5,00,300/- in City Union Bank Limited (Account No. 0607639000000314) and cash deposits amounting to Rs. 15,25,500/- in Lakshmi Vilas Bank Limited, totalling to Rs. 20,25,800/- (Rs. 5,00,300 + Rs. 15,25,500).
5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer, therefore, further aggrieved by the order of Ld. CIT(A), the assessee is in appeal before this Tribunal.
6. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the Ld. CIT(A) and other materials brought on record. Learned Counsel for the assessee argued that the assessee’s account reflected total deposits of approximately Rs.10,41,83,162/- during the financial year, which was treated by the assessing officer, correct, however, a small addition to the tune of Rs.20,25,800/- was made by the assessing officer, which is not justified, considering the volume of deposits made in the bank account, which was treated by the assessing officer as genuine. The learned Counsel submitted that assessee is engaged in the business of trading in agricultural commodities where cash transactions are involved. Therefore, such a small amount of Rs.20,25,800/-, should not be treated by the assessing officer, as an unexplained deposits in the bank account, considering the fact that assessing officer has himself treated genuine deposits in the bank account to the tune Rs.10,41,83,162/-. The addition of Rs.20,25,800/- made by the Assessing Officer under section 69A of the Income tax Act, 1961 treating the cash deposits, as unexplained money, without appreciating that the assessee had fully explained the nature and source of the said deposits as re- deposits of cash earlier withdrawn from the same / related bank accounts, of Rs.1,00,67,000/-, and as the assessee, is engaged in the business of trading in agricultural commodities, where customers receive and pay cash only and the amount of Rs.20,25,800/-, was deposited by the assessee out of sale of agricultural commodities and earlier withdrawn from the same / related bank accounts, of Rs.1,00,67,000/-, therefore, addition made by the assessing officer may be deleted.
7. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.
8. I have considered the submissions of both the parties. I note that Section 69A applies where the assessee is found to be the owner of money, bullion, jewellery or other valuable article, such asset is not recorded in the books, and the assessee either offers no explanation regarding its nature and source or the explanation is not satisfactory in the opinion of the Assessing Officer. Therefore, once the assessee demonstrates, through contemporaneous records, that the impugned cash deposits represent either (i) cash sales duly recorded in the books, or (ii) redeposit of identifiable earlier cash withdrawals for which cash remained available, the statutory foundation for section 69A substantially weakens and addition should not be made by the assessing officer.In the present facts, the figure of Rs.1,00,67,000/- of earlier cash withdrawals is particularly relevant because it substantially exceeds the impugned deposits of Rs.20,25,800/-. The assessee is engaged in the business of trading in agricultural commodities, wherein cash transactions are an integral part of the business. The assessee has explained that the impugned cash deposits of Rs.20,25,800/- were sourced from cash generated from business receipts and, to the extent applicable, from cash earlier withdrawn from the same/related bank accounts. During the relevant period, cash withdrawals aggregating to Rs.1,00,67,000/- were made from the same/related bank accounts. Thus, the availability of cash was substantially higher than the amount subsequently redeposited. The assessee has furnished the relevant bank statements and supporting cash-flow details to demonstrate the availability and source of the cash. It is a settled principle that an addition under section 69A cannot be sustained merely because cash has been deposited in a bank account. The statutory requirement is that the assessee must be found to be the owner of money which is not recorded in the books and for which no satisfactory explanation regarding its nature and source is furnished. Where the assessee establishes, on the basis of bank statements, books of account and cash-flow records, that the cash deposits represent earlier withdrawals or disclosed business receipts, the explanation cannot be rejected merely on suspicion or The Ahmedabad Bench of the Tribunal in Gaurav Harshadbhai Chokshi v. ITO, ITA No.552/Ahd/2026, order dated 30.09.2026, accepted the explanation of cash deposits where earlier withdrawals from the same bank account exceeded the subsequent deposits. The Tribunal held that, in the absence of material establishing that the withdrawn cash had been utilised elsewhere, the availability of cash arising from documented withdrawals could not be ignored and deleted the addition under section 69A. Therefore, based on this factual position, I delete the addition of Rs.20,25,800/-.
9. In the result, appeal of the assessee is allowed.
Order is pronounced in the open Court on 21/10/2026.
