Mala Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, considered an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Year 2017-18, which had confirmed an addition of ₹27,97,670 under Section 69A of the Income-tax Act, 1961 as unexplained money.
The assessee, an individual deriving income from house property and other sources, had filed a return declaring a total income of ₹5,71,900. The case was selected for limited scrutiny to verify cash deposits made during the demonetisation period. The Assessing Officer noticed cash deposits of ₹27,97,670 in the assessee’s Axis Bank account and treated the amount as unexplained money under Section 69A. The CIT(A), in an ex parte order passed in the absence of the assessee, confirmed the addition.
Before the Tribunal, the assessee explained that her mother, Smt. Shashikala, had purchased a liquor shop licence from Mr. C. Srinivas during the relevant assessment year and had taken over the business. Although the formal transfer of the licence was delayed due to procedural formalities, the business was effectively managed by the assessee’s mother.
The assessee submitted that she merely assisted her mother in operating the business and facilitating online banking transactions. According to the submissions, the sale proceeds of the liquor business were deposited into the assessee’s bank account and were subsequently transferred to the Karnataka State Beverages Corporation Limited (KSBCL) for purchasing liquor stock. It was further submitted that the assessee neither derived any income nor received any remuneration from the business. The business income had already been offered to tax by Mr. C. Srinivas for Assessment Year 2017-18 and thereafter by the assessee’s mother for Assessment Year 2018-19 following the formal transfer of the licence.
The Authorised Representative further contended that the utilisation of the cash deposits was not disputed, as the bank statements demonstrated that the deposits were used to make payments to KSBCL for procurement of liquor stock. The deposits and withdrawals, according to the bank records, corresponded to the liquor business operations. It was therefore submitted that the deposits represented business sale proceeds and that making a separate addition in the assessee’s hands would amount to double taxation since the business income had already been offered to tax by the persons carrying on the business.
The Departmental Representative submitted that the assessee had not appeared either before the Assessing Officer or before the CIT(A). It was therefore requested that the matter be restored to the Assessing Officer for fresh adjudication after considering the documentary evidence produced by the assessee.
The Tribunal examined the bank statements and observed that the cash deposits were immediately utilised for making payments to KSBCL towards the purchase of liquor stock. It held that the utilisation pattern substantiated the assessee’s contention that the deposits represented sale proceeds of the liquor business rather than unexplained money.
The Tribunal also noted that the subsequent conduct of the parties supported the assessee’s explanation, as the liquor licence was transferred to the assessee’s mother in the following assessment year and the corresponding business income was offered to tax by her.
The Tribunal found merit in the assessee’s contention that the cash deposits could not be treated as unexplained under Section 69A since the trail of deposits and payments established a clear nexus with the regular business operations carried out under the liquor licence originally held by Mr. C. Srinivas. It observed that the lower authorities had not considered these factual aspects.
However, since the Assessing Officer and the CIT(A) had not examined the detailed documentary evidence now placed before the Tribunal, it considered it appropriate to set aside the impugned order and restore the matter to the file of the Assessing Officer for fresh adjudication.
The Tribunal directed the Assessing Officer to verify the bank statements, KSBCL payment details, and other supporting documents and decide the matter afresh in accordance with law and the Tribunal’s observations. It further directed that if the nexus between the cash deposits and the business receipts was established upon verification, the addition made under Section 69A should stand deleted.
Accordingly, the Tribunal set aside the order of the CIT(A), restored the matter to the Assessing Officer for fresh consideration, and treated the assessee’s appeal as allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee against the order passed dated 31-07-2025 for the assessment year 2017-18.
2. This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2017-18, wherein the addition of T27,97,670/- was made under section 69A of the Income Tax Act, 1961 as unexplained money vide order dated 31-07-2025.
3. The assessee is an individual deriving income from house property and other sources. For A.Y. 2017-18, she filed her return declaring total income of T5,71,900/- only. The case was selected for limited scrutiny for verification of cash deposits made during the demonetisation period. The Assessing Officer noticed cash deposits of T27,97,670/- in the assessee’s Axis Bank account and treated the same as unexplained under section 69A of the Act. The learned CIT(A) also confirmed the impugned addition in his ex-parte order in the absence of the assessee.
4. Being aggrieved by the order of the Id. CIT-A, the assessee is in appeal before us.
5. It was explained by the Id. AR that the appellant’s mother, Smt. Shashikala, had purchased a liquor shop licence from one Mr. C. Srinivas during A.Y. 2017-18 and had taken over the business. However, the official transfer of licence was delayed due to procedural formalities, but the business operations were effectively managed by the appellant’s mother.
6. The appellant merely assisted her mother in operating the business and in facilitating online banking transactions. The sale proceeds of the liquor business were deposited in the appellant’s bank account and subsequently transferred to the Karnataka State Beverages Corporation Limited (KSBCL) for purchase of stock.
7. The appellant did not derive any income or remuneration from this business, and the business income had already been offered to tax in the hands of the rightful owner — first by Mr. C. Srinivas for A.Y. 2017-18, and thereafter by the appellant’s mother for A.Y. 2018-19 when the licence was formally transferred.
8. The Learned Authorised Representative (AR) before us further submitted that:
- The utilisation of the cash deposits is not in dispute, as the deposits were used for payments to the KSBCL for the purchase of liquor stock. Bank statement was enclosed in support of the contentions.
- The bank statement clearly evidences that the deposits and withdrawals correspond to the business operations of the liquor shop.
- Hence, it is established that the cash deposited represented sale proceeds of the liquor business.
- It was further contended that since the income from such business was already offered to tax by Mr. C. Srinivas, no separate addition can be made in the assessee’s hands, as it would amount to double taxation.
9. The Learned Departmental Representative (DR), on the other hand, submitted that the assessee neither appeared during the assessment nor before the Id. CIT(A). He therefore prayed that the matter may be restored to the Assessing Officer for fresh adjudication after considering the documents and evidence furnished by the assessee.
10. We have heard the rival contentions and perused the materials available on record. On perusal of the bank statement placed on record, it is evident that the cash deposits were immediately utilised for making payments to KSBCL towards purchase of liquor. Thus, the utilisation pattern substantiates the contention that the deposits represented sale proceeds of the liquor business and not unexplained money.
10.1 The argument of the learned AR is also supported by the subsequent conduct of the parties, as in the next assessment year, the liquor licence stood transferred to the appellant’s mother, and the corresponding business income was duly offered to tax by her.
10.2 We therefore find merit in the plea of the assessee that the cash deposited cannot be treated as unexplained under section 69A of the Act, since the trail of deposits and payments establishes a clear nexus with the regular business operations carried out under the liquor licence originally standing in the name of Mr. C. Srinivas.
10.3 The finding of the lower authorities ignoring these factual aspects cannot be sustained. However, since the lower authorities did not have the benefit of examining the detailed documentary evidence now produced, we consider it appropriate to set aside the matter to the file of the Assessing Officer for fresh adjudication as per law and in the light of above stated discussion.
10.4 The Assessing Officer shall verify the bank statements, KSBCL payment details, and other supporting documents, and decide the issue afresh in the light of the above observations. If the nexus between deposits and business receipts is found established, the addition made under section 69A shall stand deleted.
10.5 In view of the foregoing discussion, we set aside the impugned order of the Id. CIT(A) and restore the matter to the file of the Assessing Officer for fresh consideration as per law and in the light of the above observations. Hence, the ground of appeal of the assessee is treated as allowed for statistical purposes.
11. In the result, the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in court on 8th day of December, 2025
