Ashesh Maheshbhai Kothari Vs ITO (ITAT Ahmedabad)
Section 69A Addition Deleted as AO Failed to Examine Individual Bank Transactions: ITAT
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition of ₹5,19,500 under Section 69A of the Income-tax Act, 1961, finding that the Assessing Officer had aggregated different bank credits and cash deposits without independently examining their nature and source. On the facts of the case, the Tribunal held that the addition could not be sustained merely because the assessee had not furnished a satisfactory explanation, without sufficient independent material establishing that the entire amount represented unexplained money.
The assessee, a salaried individual, had originally declared gross total income of ₹14.21 lakh and claimed Chapter VI-A deductions of ₹4.28 lakh. These included a deduction of ₹2 lakh under Section 80GGC for a political donation.
A search conducted on 7 September 2022 in the case of the RUPPs group of Ahmedabad revealed alleged bogus political donations and the return of donations to donors in cash through intermediaries. Based on these findings, the Assessing Officer initiated reassessment proceedings under Section 148.
In the return filed in response to the notice, the assessee withdrew the ₹2 lakh deduction under Section 80GGC and declared Chapter VI-A deductions of ₹2.28 lakh.
During reassessment, the Assessing Officer also questioned bank credits and cash deposits aggregating to ₹5,19,500. Finding the explanations unsatisfactory, he added the amount under Section 69A read with Section 115BBE.
Different transactions aggregated without independent enquiry
The disputed amount comprised three non-cash credits of ₹70,000, ₹90,000 and ₹1,10,000 in the assessee’s ICICI Bank account, totalling ₹2,70,000. It also included cash deposits of ₹1,50,000, ₹49,500 and ₹50,000 in the ICICI Bank and Union Bank accounts, totalling ₹2,49,500.
The Tribunal observed that the assessment order did not demonstrate an independent enquiry into the nature of these individual transactions. Instead, the Assessing Officer had treated the aggregate amount as unexplained because the assessee had not furnished the required details.
The three non-cash credits had been received from identified persons: Hemal Hardikbhai, Mrs. Arunaben Cheta and Chetankumar Jethal. The Tribunal held that these credits could not be rejected merely by combining them with cash deposits without examining the persons’ identities, the nature of the transactions and the surrounding circumstances.
Non-prosecution does not remove CIT(A)’s duty to decide merits
The CIT(A) had dismissed the appeal for non-prosecution, observing that the assessee had not effectively pursued the proceedings despite several notices. The Tribunal noted that the CIT(A) had also considered the issues on the available material.
It clarified that dismissal for non-prosecution did not dispense with the appellate authority’s statutory duty to adjudicate the grounds on merits. The correctness of the addition therefore required independent examination.
The assessee had specifically contended before the CIT(A) that the sources were explainable and that supporting evidence was available. The Tribunal observed that the material concerning individual credits ought to have been examined rather than sustaining the entire addition on the basis of non-compliance or non-prosecution.
Finding insufficient independent material to establish that the entire ₹5,19,500 represented unexplained money, the Tribunal deleted the addition.
No separate ruling on political donation or reopening
Regarding the Section 80GGC deduction, the Tribunal noted that the assessee had withdrawn the ₹2 lakh claim in the return filed in response to Section 148 and paid the consequential tax and interest. The assessment order recorded that no separate addition had been made on this account, although penalty proceedings under Section 270A had been initiated. Consequently, no separate adjudication on the deduction issue was required in this appeal.
The assessee had also challenged the reassessment proceedings and the approval under Section 151. The Tribunal did not give a specific adverse finding on these legal grounds, noting the absence of the complete relevant statutory record and approval, particularly since relief was being granted on the substantive addition.
Eligible tax credits to be allowed after verification
The assessee also sought credit for TDS of ₹1,36,825 and self-assessment tax of ₹62,580. The Tribunal treated this issue as consequential and directed the Assessing Officer to grant eligible credit for prepaid taxes and TDS after verification from departmental records.
Accordingly, the assessee’s appeal was allowed, the ₹5,19,500 addition under Section 69A was deleted, and verification-based relief for eligible tax credits was directed.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order dated 29.10.2025 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2019- 2020. 2. The Assessee has raised the following grounds of Appeal:-
1. The learned CIT(A) erred in law by not considering the fact that the learned Assessing Officer has erred in law by not completing the assessment proceeding on or before 31.03.2024, by virtue of the third and fourth provisos to section 149(1) r.w.s. 153(2) of the Act.
2. The learned CIT(A) erred in law by not considering the fact that the prior approval given by the Hon’ble PCIT u/s 151 of the Act is invalid and without jurisdiction.
3. The learned CIT(A) erred in both the facts as well as the law by not considering the fact that the learned Assessing Officer failed to appreciate the fact that the credit transactions amounting to Rs. 2,70,000 and the cash deposits amounting to Rs. 2,49,500 (totalling to Rs. 5,19,500) in the bank accounts are out of explainable sources.
4. The learned CIT(A) erred in both the facts as well as the law by not considering the fact that the learned Assessing Officer has erred in law as well as the facts by making addition of Rs. 5,19,500 u/s 69A of the Act.
5. The learned CIT(A) erred in law by not considering the fact that the learned Assessing Officer erred both in law and on facts by failing to grant credit of tax deducted at source (TDS) amounting to Rs. 1,36,825 and self- assessment tax amounting to Rs. 62,580 claimed by the Appellant in the income tax return.
6. Your Appellant, therefore, requests Your Honor to delete the unjustified addition amounting to Rs. 5,19,500, along with the incorrect demand of Rs. 2,49,500 raised along with interest u/s 234B and 234C of the Act.
7. Your Appellant reserves the right to alter, modify, add or delete any ground of appeal.
3. Brief facts of the case are that assessee filed his return of income declaring gross total income of Rs.14.21 lakhs and claimed Chapter VIA deductions of Rs.4.28 lakhs, including deduction of Rs.2 lakhs under section 80GGC towards donation to a political party. A search conducted on 07.09.2022 in the case of RUPPs group of Ahmedabad revealed alleged bogus political donations and return of such donations in cash to the donors through intermediaries. Based on the search findings, the Assessing Officer initiated reassessment proceedings under section 148 of the Act. In response, the assessee filed a return withdrawing the claim of Rs.2 lakhs under section 80GGC and declared Chapter VIA deductions of Rs.2.28 lakhs. During the reassessment proceedings, the Assessing Officer also noticed bank credits and cash deposits aggregating to Rs.5.19 lakhs and called upon the assessee to explain the sources thereof. As the assessee did not furnish satisfactory details, the Assessing Officer treated the amount of Rs.5.19 lakhs as unexplained money under section 69A read with section 115BBE of the Act.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who dismissed it for non-prosecution on the ground that the assessee had not effectively pursued the appellate proceedings despite several notices.
5. We have carefully considered the assessment order, the order of the Ld. CIT(A), the grounds of appeal and the material available on record. The principal grievance of the assessee is against the addition of Rs.5,19,500/- made under section 69A of the Act in respect of certain bank credits and cash deposits. From the assessment order, it is noticed that the Assessing Officer treated the aggregate credits/deposits of Rs.5,19,500/- as unexplained money under section 69A of the Act. The said amount comprises credit entries of Rs.70,000/-, Rs.90,000/- and Rs.1,10,000/- in the ICICI Bank account and cash deposits of Rs.1,50,000/-, Rs.49,500/- and Rs.50,000/- in the ICICI Bank and Union Bank accounts. The Assessing Officer observed that the assessee had not satisfactorily explained the sources of these transactions and accordingly made the addition under section 69A of the Act.
5.1 We find that the assessee had raised a specific ground before the Ld. CIT(A) contending that the sources of the bank credits/deposits were explainable and that adequate evidence regarding the source of funds was available. The assessee had also challenged the applicability of section 69A and alternatively pleaded that the addition ought not to have been made where the sources of the funds were supported by evidence.
5.2 The Ld. CIT(A), however, dismissed the appeal for non- prosecution on the ground that the assessee did not effectively pursue the appellate proceedings despite several notices. The Ld. CIT(A) thereafter proceeded to consider the appeal on the basis of the material available on record.
5.3 In this regard, we find that the dismissal of an appeal for non- prosecution does not dispense with the statutory duty of the appellate authority to adjudicate the grounds of appeal on merits. In the present case, the Ld. CIT(A) has, in fact, also considered the issues on merits. Therefore, the correctness of the addition is required to be examined independently on the basis of the material available on record.
5.4 On examination of the assessment order, we find that the Assessing Officer has aggregated different types of bank credits and cash deposits amounting to Rs.5,19,500/- and treated the entire amount as unexplained under section 69A. However, the assessment order does not demonstrate any independent enquiry with respect to the nature of the individual credit entries or establish that the entire amount represented unexplained money belonging to the assessee. The assessment records merely state that the sources remained unsubstantiated because the assessee did not furnish the required details.
5.5 It is also relevant that the three non-cash credits of Rs.70,000/-, Rs.90,000/- and Rs.1,10,000/- were received from identified persons, namely Hemal Hardikbhai, Mrs. Arunaben Cheta and Chetankumar Jethal. Thus, the nature of these credits could not have been rejected merely by aggregating them with the cash deposits without examining the identity of the persons, the nature of the transactions and the surrounding circumstances. Further, the assessee is admittedly a salaried individual. The addition under section 69A requires a finding that the assessee was the owner of money, bullion, jewellery or other valuable article and that such money, bullion, jewellery or valuable article was not recorded in the books of account, if any, or the explanation regarding its nature and source was not satisfactory. In the present case, the Assessing Officer has not brought any independent material on record to establish that the entire amount of Rs.5,19,500/- represented unexplained income of the assessee. The addition has essentially been made because the explanation was not furnished to the satisfaction of the Assessing Officer. We also take note of the fact that the assessee had challenged the addition before the Ld. CIT(A) and specifically stated that adequate evidence regarding the sources of the funds was available. In the interest of substantial justice, the material relating to the individual credits ought to have been examined rather than sustaining the entire addition merely on the ground of non- compliance/non-prosecution.
5.6 In view of the above discussion, we are of the considered opinion that the addition of Rs.5,19,500/- under section 69A of the Act has been made without bringing sufficient independent material on record to establish that the entire amount represented unexplained money of the assessee. The addition, therefore, cannot be sustained merely on the basis of non-furnishing of satisfactory explanation without examining the nature and source of the individual transactions. Accordingly, the addition of Rs.5,19,500/- made under section 69A of the Act is deleted and the grounds of appeal relating to the said addition are allowed.
5.7 As regards the issue of deduction claimed under section 80GGC, it is noticed that the assessee had himself not claimed the deduction of Rs.2,00,000/- in the return filed in response to notice under section 148 and had paid the consequential tax and interest. The assessment order itself records that no separate addition was made on this account, though penalty proceedings under section 270A were initiated. Therefore, no separate adjudication of the said ground is called for in the present appeal. Insofar as the grounds challenging the validity of reopening under sections 148/149 and the approval under section 151 are concerned, the same involve pure questions of law. However, in the absence of the complete relevant statutory record and approval being demonstrated before us, no specific adverse finding on these grounds is considered necessary, particularly when the appeal is being allowed on the substantive addition.
5.8 The ground relating to credit of prepaid taxes/TDS is consequential in nature. The Assessing Officer is directed to grant the assessee due credit of prepaid taxes/TDS as allowable in accordance with law, after verification from the departmental records.
6. In view of the above discussion, the impugned addition of Rs.5,19,500/- under section 69A of the Act is deleted. The Assessing Officer is also directed to allow the eligible credit of prepaid taxes/TDS in accordance with law.
7. In the result, the appeal of the assessee is allowed
The order pronounced in the open Court on 15.10.2026.
