Business Income Declared, Rs.4.50-Lakh Cash Deposits Unexplained u/s 69A

Kishor Suresh Shinde Vs ITO (ITAT Pune Bench)

Business Income Declared, but Business Proof Missing—Rs.4.50-Lakh Cash Deposits Remain Unexplained u/s 69A

Summary:

Non-filer enters the reassessment net

The assessee, Kishor Suresh Shinde, had not filed a return of income u/s 139(1) for AY 2017-18, although several financial transactions appeared against his PAN. Information available with the Department initially indicated that the assessee had made time deposits of Rs.1,01,50,000 with HDFC Bank Ltd.

The AO initiated reassessment proceedings & issued notice u/s 148 dated 28.02.2024. The assessee filed his return in response on 11.11.2024, declaring total income of Rs.9,74,976. This comprised interest income of Rs.8,36,166 & business income of Rs.1,38,810, allegedly earned on turnover of Rs.6,12,475.

The assessment was eventually completed u/s 147 r.w.s. 144 & 144B, adding cash deposits of Rs.4,50,000 as unexplained money u/s 69A. The CIT(A), NFAC, confirmed the addition, bringing the matter before the Pune ITAT.

AO accepts renewed deposit & declared interest

During assessment, the AO verified the HDFC Bank records & found that the alleged time deposit of Rs.1.01 crore was merely a renewal of an earlier deposit. Since no fresh investment had been made during the relevant year, no addition was made on this count.

The AO also noticed interest receipts of Rs.49,993 from Shree Ganesh Co-operative Bank Ltd., Rs.6,31,732 from HDFC Bank Ltd. & Rs.1,31,020 from Union Bank of India Ltd., aggregating to Rs.8,12,745. As the assessee had disclosed interest income of Rs.8,36,166 in the return filed in response to notice u/s 148, the interest component stood fully covered.

The surviving controversy concerned two cash deposits in the assessee’s HDFC Bank account—Rs.2,50,000 deposited on 25.10.2016 & Rs.2,00,000 deposited on 27.10.2016.

Business receipts claimed as the source

Before the Tribunal, the assessee contended that he was a civil contractor who had not maintained regular books of account. The cash deposits were stated to represent receipts generated in the ordinary course of business, and business income had already been offered in the return filed pursuant to notice u/s 148.

According to the assessee, once the cash deposits formed part of disclosed business turnover, treating the same amount separately as unexplained money u/s 69A would result in an unjustified addition.

However, the Tribunal noticed a fundamental difficulty in this explanation. During assessment, the assessee had described himself as being engaged in the business of construction, development of land & functioning as a builder through a partnership firm. Before the ITAT, the description changed to that of a small civil contractor.

When specifically questioned about this inconsistency, the assessee’s representative was unable to provide a satisfactory explanation.

Five notices, one late reply & no supporting records

The Revenue pointed out that the assessee did not respond to the notice u/s 148A(b), following which the AO passed the order u/s 148A(d) & issued notice u/s 148. Even during the reassessment proceedings, nearly five or six notices were issued. The assessee eventually furnished a reply only on 24.02.2025.

The AO observed that although business income of Rs.1,38,810 was declared on turnover of Rs.6,12,475, the assessee did not produce any trade licence, books, invoices, receipts, contract details, work orders or customer confirmations to establish that a business generating the alleged cash receipts was actually carried on.

A show-cause notice dated 27.02.2025 specifically proposed to treat the two cash deposits as unexplained money u/s 69A. Yet, even in the subsequent reply dated 05.03.2025, the assessee did not furnish any particular explanation or evidence tracing the deposits to identifiable business transactions.

The AO therefore concluded that the business income had been disclosed merely to create an explanation for the cash deposits, without any evidence correlating the deposits with the alleged turnover.

A general business story cannot explain specific deposits

The ITAT noted that the deposits stood established from the assessee’s own HDFC Bank statement & were never denied. Consequently, the onus lay upon the assessee to explain their nature & source.

The assessee failed to furnish any documentary evidence before the AO or CIT(A). Even before the Tribunal, the representative merely repeated that the deposits arose from normal business receipts. No material was produced to identify the customers, contracts, dates of work, bills raised or cash collected.

The Tribunal distinguished between merely declaring a figure as turnover & proving that the particular cash deposits represented genuine business receipts. Offering a small amount as presumptive or estimated business income cannot, by itself, provide an umbrella explanation for every cash credit appearing in a bank account.

The inconsistent descriptions of the business further weakened the explanation. If the assessee was a builder or land developer through a partnership at one stage & a small civil contractor at another, some supporting evidence was necessary to establish the true nature of the activity & its connection with the deposits.

Addition & penalty consequences remain

Since the assessee failed to discharge the onus regarding Rs.4,50,000, the ITAT upheld its treatment as unexplained money u/s 69A. Grounds Nos.1 to 3 were dismissed & the assessee’s appeal failed in full. The assessment order had also proposed penalty proceedings u/s 270A, 271AAC & 271F, though those proceedings were not the subject of adjudication in this appeal.

The ruling’s lesson is straightforward: declaring business income may open the account, but without invoices, records or a consistent business identity, it cannot automatically close a cash-deposit enquiry.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, PUNE BENCH

This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2017-18 on 20.02.2026, emanating from the Assessment Order u/s 147 r.w.s. 144 r.w.s. 144B of the Act, dated 13.03.2025.

Submission of Ld. AR:

2. The Ld. AR submitted that the assessee is a civil contractor. The assessee had not maintained books of account. The cash deposits are part of the business and have been shown in the return of income filed in response to notice u/s 148 of the act.

2.1 We specifically asked the Ld. AR that as per submission made by the assessee before the Assessing Officer (AO) during the assessment proceedings which has been reproduced by the AO at page 7 of the assessment order, the assessee claimed that he is in the business of construction and development of land and builder in partnership firm. Therefore, we asked the Ld. AR to explain, but Ld. AR could not explain.

Submission of Ld. DR:

3. The Ld. DR submitted that the assessee had not filed return of income for the relevant assessment year. The assessee is a builder. There was cash deposits, hence, the AO issued notice u/s 148A(b) of the Act. There was no reply. Then the AO passed order u/s 148A(d) and issued notice u/s 148 of the Act. The Ld. DR further submitted that though the AO issued almost 5-6 notices. The assessee only filed reply on 24.02.2025 which has been reproduced by the AO in the order. No documentary evidence filed by the assessee to explain the cash deposits. The Ld. DR submitted that hence addition may be confirmed.

Findings and analysis:

4. We have heard both the parties and perused the record. Admittedly, the assessee had not filed return of income u/s 139(1) of the Act. Notice u/s 148 dated 28.02.2024 was issued to the assessee. The assessee filed return of income in response to notice u/s 148 on 11.11.2024. The relevant paragraph of the assessment order is reproduced here as under :

“3.5 Conclusion drawn:-

3.5.1 As discussed above, as per order under section 148A(d) of the Act dated 28/02/2024, the assessee did not filled its return of income during the year in spite of the facts there are various transactions in the assessee PAN during the F.Y. 2016-17. As per the information, the assessee had made time deposits of Rs. 10150000/- in the HDFC Bank Limited. However, in the assessment proceedings the matter was verified and it is found that the time deposit is renewed from previous year and no fresh time deposit made during the year.

Furthermore, as per the information the assessee had received the Interest of Rs. 49,993/- from Shree Ganesh Cooperative Bank Limited and Rs. 631732/- from the bank HDFC Bank Limited and Rs. 131020/- from the Union Bank of India Limited. Hence, the assessee had received the Interest of Rs. 812745/- during the year from different bank however the assessee did not filled its return of income under section 139(1) of the Act. Thereafter, the assessee had filled its return of income under section 148 of the Act after receiving the notice under section 148 of the Act with disclosing his total income of Rs. 974976/- [Interest income of Rs. 836166/- Plus Business Income of Rs. 138810/-). As the assessee had disclosed his interest income fully in his return under section 148 of the Act but the assessee had also disclosed his business income of Rs. 138810/- on the turnover of Rs. 612475/-. The assessee did not furnish any trade license of in this regards. The assessee had disclosed business income only to cover his cash deposits in the bank but the said cash deposits is pertains to the assessee not co-related by the assessee in his submission.

Furthermore, it’s is appears from the bank statement of HDFC bank whereas the assessee had deposit the cash amount of Rs. 450000/- on 25/10/2016 and 27/10/2016 that was made in cash deposits and the assessee could not furnished any source regarding the said cash deposits. Hence, in this connection the show-cause notice was issue to the assessee on 27/02/2025 with treating the said income as unexplained money under section 69A of the Act but the assessee did not furnished any explanation in this regards in his submission dated 05/03/2025. Hence, the cash deposits of Rs. 450000/- is hereby treated as unexplained money under section 69A of the Act.

[Variation:- Rs. 450000/-)

Proposed Penalties:-

[1] It is decided to initiated the penal provision under section 270A of the Act on the under reporting of income of Rs. 974976/- during the year.

[2] It is decided to initiate the penal provision under section 271AAC of the Act for income referred under section 69A of the Act.

[3] It is decided to initiate the penalty under section 271F for non-filing of the ITR during the year even having the taxable income during the year.”

5. During the appellate proceedings before the Ld. CIT(A), the assessee had not filed any specific documentary evidence to prove the source of cash deposits. As per the assessment order, the assessee had deposited Rs.2,50,000/- on 25.10.2016 and Rs.2,00,000/- on 27.10.2016 in the HDFC Bank Account maintained by the assessee. The AO has verified the bank statement of assessee and the assessee has confirmed the said deposits. It is observed that the assessee had not filed any specific reply to explain the cash deposits made by the assessee in HDFC Bank Account. Even before us, the Ld. AR merely submitted that receipts are out of normal business of the assessee, however, no documentary evidence has been filed before us to prove that the cash deposits of Rs.4,50,000/- were made out of normal business receipts of the assessee. We have already mentioned that even before the AO the assessee had not filed any documentary evidence explaining cash deposits of Rs.4,50,000/-. The onus was on assessee to explain the source of cash deposits of Rs.4,50,000/- duly made in HDFC Bank Account by the assessee. The assessee has failed to prove the source of cash deposits made by the assessee in HDFC Bank Account. The assessee initially before the AO claimed that the assessee is into business of construction and builder. However, then the assessee before us pleaded that the assessee is a small civil contractor. There is no consistency in the submission of the assessee.

6. Since, the assessee has failed to explain the source of cash deposits of Rs.4,50,000/- in the HDFC Bank Account, we uphold the addition made by the AO in the assessment order. In these facts and circumstances of the case for all the reasons discussed above, ground Nos. 1, 2 and 3 raised by the assessee are dismissed.

7. In the result, the appeal of the assessee is dismissed.

Order pronounced in the open Court on 31st August, 2026