Rameshbhai M. Patel Vs DCIT (ITAT Ahmedabad)
Auto-Sweep Entries Allegedly Inflated Bank Deposits: ITAT Orders Verification of Section 69A Addition
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) restored a disputed addition under Section 69A of the Income-tax Act, 1961 to the Assessing Officer for verification of bank entries. The assessee contended that automatic sweep transfers and their reversals had resulted in duplication of deposits. The Tribunal directed that no addition be made on this issue if the assessee successfully reconciled the entries.
The assessee challenged the CIT(A)/NFAC’s order dated 26 August 2025 confirming an addition of ₹3,14,38,851 as unexplained money.
Assessee attributed receipts to joint development agreement
The Assessing Officer noticed aggregate credits of ₹3,21,45,937 across four bank accounts and sought an explanation.
The assessee submitted that he had entered into a Joint Development Agreement with M/s Bluets Infra and received total consideration of ₹2.85 crore. Of this, ₹1.57 crore was received during Financial Year 2017-18, relevant to the assessment year under consideration.
He explained that the remaining entries included automatic sweep transfers and reversals, resulting in duplication in the aggregate credits considered by the Assessing Officer. He also stated that the developer’s payments were received through banking channels and that capital gains had been offered in Assessment Year 2019-20.
The Assessing Officer held that the assessee had failed to correlate and reconcile the bank entries and made the addition under Section 69A. The CIT(A) sustained the addition.
Sweep transfers and reversals required reconciliation
Before the Tribunal, the assessee’s counsel referred to the bank statements and reiterated that actual receipts during the year were ₹1.57 crore.
He explained that the bank’s sweep facility automatically transferred money from the savings account into fixed deposits. When funds were required following withdrawals, the amounts were transferred back to the savings account.
According to the assessee, these movements generated multiple entries involving the same funds and inflated the aggregate credits without representing fresh receipts.
No addition if entries satisfactorily reconciled
The Tribunal held that the explanation required factual examination by the Assessing Officer.
It directed the assessee to furnish bank statements clearly identifying the amounts actually deposited during the year and the duplicate entries arising from auto-sweep transfers and reversals.
The Assessing Officer was directed to examine the entries. The Tribunal expressly stated that, if the assessee reconciled them, no addition should be made on this issue.
Accordingly, the CIT(A)’s order was set aside and the matter restored to the Assessing Officer for de novo assessment on the disputed issue. The appeal was allowed for statistical purposes; relief remains dependent on verification of the reconciliation.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 26.08.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2018-19.
2. The assessee has taken following grounds in this appeal:
“1. That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition of Rs. 3,14,38,851/- on account of unexplained money under section 69A of the Income Tax Act, 1961.
2. That the CIT(A) failed to appreciate the documentary evidences & explanation filed during appellate proceedings.
3. That the addition is bad in law and liable to be deleted.
4. That the appellant craves leave to add, amend, alter, or withdraw any of the above grounds at the time of hearing.”
3. Brief facts of the case are that the Assessing Officer (in short ‘the AO’) has noticed that there were certain credit entries in the different bank account of the assessee, totaling to Rs. 3,21,45,937/-, which are tabulated as under:
| Sr. No. | Bank A/c No. | Aggregate amount deposited during AY 2018-19 (in Rs.) | Bank Name |
|---|---|---|---|
| 1 | 02060100000374 | 2,19,784/- | Bank of Baroda, Bhaily, Vadodara |
| 2 | 02060100008508 | 98,639/- | Bank of Baroda, Bhaily, Vadodara |
| 3 | 02060100011393 | 3,17,93,969/- | Bank of Baroda, Bhaily, Vadodara |
| 4 | 20068062095 | 33,545/- | State Bank of India, Vadodara |
| Total aggregate deposits | Rs.3,21,45,937/- |
On being asked to explain, in this respect, the assessee explained that the assessee had entered into a Joint Development Agreement with M/s. Bluets Infra and that the assessee had received a total amount of Rs.2.85 Crores, out of which, Rs.1.57 Crore was received during the Financial Year (in short ‘F.Y.’) 2017-18 relevant to the assessment year under consideration. It was further explained that the remaining entries were Auto Sweep entries, which means, it was duplication of the entries and, therefore, the figure arrived at by the AO was not correct. It was further explained that all the amounts were received by the assessee from the Developer through banking channel and, further that, the assessee had already offered capital gains in A.Y. 2019-20. The AO, however, held that the assessee had failed to co-relate and reconcile the various entries in the bank account. He, therefore, treated the entire deposits as ‘unexplained income’ of the assessee and made the addition u/s 69A of the Act. The Ld. CIT(A) confirmed the addition so made by the AO.
4. Before us, Ld. Counsel for the assessee has referred to the bank statement of the assessee to submit that the assessee, during the year, had received Rs.1.57 Crores through banking channel only. He has also referred to the Sweep account statement, whereby, the amount lying in the savings bank account got automatically transferred to the Fixed Deposits and then again reversed to the savings account, when, the amounts lying in the savings account stood withdrawn. The Ld. Counsel, therefore, has submitted that because of this, Auto Sweep and reverse entries, there is duplication of entries, but, the actual amount of deposit was Rs.1.57 Crore during the year only.
5. We note that the issue is required to be factually examined at the ends of the AO. The assessee is directed to furnish the statement of account from the bank, clearly revealing as to what was the amount actually deposited during the year in the bank account of the assessee and of what were duplicate entries because of the auto sweep / Reverse entries in the account of the assessee. The AO will examine the entries and, if the assessee will be able to reconcile the entries, no addition will be made on this issue. With the above observations, the impugned order of the Ld. CIT(A) is set aside and the matter is restored to the file of the AO for de novo assessment on this issue.
6. In the result, the appeal of the assessee is treated as allowed for statistical purposes.
This Order is pronounced on 15/10/2026
