ITO Vs Raj Kumar (ITAT Chandigarh)
The Chandigarh Bench of the ITAT dismissed the Revenue’s appeal and upheld the order of the CIT(A) deleting an addition of ₹1.95 crore made under section 69A for alleged unexplained cash deposits for AY 2017-18.
The assessee, an authorised distributor of mobile recharge coupons for Bharti Airtel Ltd., had deposited large amounts of cash in his bank account, which were subsequently transferred to Airtel for purchase of recharge coupons. The Assessing Officer, without conducting any enquiry and in an ex parte assessment, treated the entire cash deposits as unexplained money merely because the return of income was not filed.
The CIT(A) examined the agreement with Bharti Airtel, bank statements, cash book and past assessment records, and accepted the explanation that the assessee acted in a fiduciary capacity, collecting cash from retailers and remitting the same to Airtel, earning only commission income. It was also noted that on identical facts, no addition was made in the assessee’s case for AY 2015-16.
The Tribunal strongly criticised the Assessing Officer for failing to conduct even basic enquiries and for ignoring the flow of funds clearly evident from the bank statements in the follwing words:
“The AO was not only acting as a prosecutor but he was an adjudicator also. He miserably failed in his duty while framing the assessment.”
It held that the cash deposits did not represent the assessee’s own income but were business receipts held temporarily under a distributorship arrangement. Finding no infirmity in the CIT(A)’s reasoning, the ITAT dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The Revenue is in appeal against the order of the Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 29.01.2025 passed for assessment year 2017-18.
