ITO Vs Dugdh Utpadak Sahakari Samiti (ITAT Jaipur)
Jaipur ITAT: Explained Bank Credits Cannot Be Taxed u/s 69A Merely Because Assessee Was Non-Compliant Before AO
The assessee, a village milk cooperative society established in 1975, collected milk from its members and supplied it to Ajmer Zila Dugdh Utpadak Sahakari Sangh (AZDUSS), a government-controlled cooperative dairy. Since nobody appeared during reassessment proceedings, the AO treated the entire bank credits of ₹81,82,058 as unexplained money u/s 69A and subjected them to tax u/s 115BBE.
Before the CIT(A), the assessee produced bank statements, milk purchase invoices, audited accounts and payment vouchers. These established that substantial bank credits were transfers from AZDUSS marked as “MILK PAYMENT” and corresponded with the 10-day milk purchase invoices specifying quantity, FAT, SNF, rate and amount payable. The audited accounts disclosed milk and related sales aggregating to ₹82.05 lakh, substantially reconciling with bank credits of ₹81.82 lakh.
The CIT(A) consequently deleted the addition. The Revenue challenged the deletion principally on the ground that the CIT(A) had considered additional evidence without obtaining a remand report from the AO as contemplated by Rule 46A.
The ITAT rejected the Revenue’s contention. It observed that the bank statement and audited financial statements were already part of the assessment record—indeed, the bank statement containing the large credits itself formed the basis for reopening. Therefore, these documents could not be regarded as additional evidence requiring confrontation to the AO.
More importantly, the bank narration identified AZDUSS as the source of the credits, AZDUSS was admittedly the party to whom the assessee sold milk, and the credits correlated with the sales disclosed in the audited financial statements. The Tribunal held that these facts themselves were sufficient to establish the source of the bank credits. Since the Revenue could point out no infirmity in the CIT(A)’s factual findings, the ₹81.82 lakh addition u/s 69A and consequential taxation u/s 115BBE remained deleted and the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The present appeal has been filed by the Revenue against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 11.12.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The grounds raised by the Revenue read as under:-
1. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 81,82,058/- made u/s 69A r. w.s. 115BBE of the Act, despite the admitted fact that the assessee had not filed any return of income and had completely failed to offer any explanation or supporting evidence before the Assessing Officer during the course of the assessment proceedings u/s 147 of the Act?
2. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in admitting & relying upon additional evidences under Rule 46A of the Income Tax Rules, 1962, including affidavit, bank statements, invoices and audited accounts, without recording cogent & legally sustainable reasons as mandated under Rule 46A(2) and without providing a reasonable opportunity to the Assessing Officer as required under Rule 46A(3)?
3. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the explanation regarding the source of bank credits solely on the basis of documents furnished at the appellate stage, without subjecting the same to verification, examination or rebuttal by the Assessing Officer, thereby violating the mandatory procedure prescribed under Rule 46A and principles of natural justice?
4. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the credits in the bank account cannot be treated as unexplained money u/s 69A r.w.s. 115BBE of the Act, ignoring the fact that during the entire reassessment proceedings, the assessee remained non-compliant and failed to discharge the primary onus cast upon it under the Act to satisfactorily explain the nature and source of such credits?
5. Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the plea of alleged non-receipt of notices based on a self-serving affidavit filed at the appellate stage, without any independent verification and without confronting the Assessing Officer, thereby rendering the impugned order procedurally defective and legally unsustainable?
6. That the appellant craves to add, amend, alter, delete or modify any or all the above grounds of appeal before or at the time of hearing.
3. The solitary issue in the present appeal is the deletion of addition made by the AO of Rs.81,82,058/- on account of credits in the bank account of the assessee, the source of which remained unexplained.
4. Before the AO none appeared and therefore the AO added the entire credits in the bank account of the assessee during the impugned year amounting to Rs.81,82,058/-, to the income of the assessee treating it as unexplained money u/s 69A of the Act. The Ld. CIT(A) however deleted the addition considering all evidences produced by the assessee before him under Rule 46A of the Income Tax Rules, 1962, being bank statements, milk purchase invoices, audited financial accounts and payment vouchers as also the affidavit of newly appointed secretary of the assessee society, noting the same to reveal that the credits in the Bank account were through bank transfer from Ajmer Zila Dugdh Utpadak Sahakari Sangh (AZDUSS)- a Government controlled cooperative dairy to whom milk was sold by the assessee after collecting the same from village members. He noted the credits directly corresponded to the ten day milk purchase invoices issued by Ajmer Zila DugdhUtpadak Sahakari Sangh(AZDUSS), specifying milk quantity, FAT, SNF, rate per litre, and the exact amount payable, all of which, he found, reconciled with the bank entries. He also noted that the assessee cooperative society was a long established cooperative society formed in 1975 for the sale of milk collected from village members sold exclusively to Ajmer Zila Dugdh Utpadak Sahakari Sangh (AZDUSS).
5. Ld. CIT(A) further found the total milk sales disclosed in the books of the assessee to be fully consistent with the bank credits of Rs.81,82,058/-.Accordingly based on the above factual findings, he held that the credits in the bank account were duly explained and deleted the addition made by the AO. His findings in this regard are contained at para 4.4 to 4.6 of his order as under:-
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4.4 After a thorough examination of the assessment records, the appellant’s detailed submissions, the affidavit of the newly appointed secretary, and the extensive documentaryevidence produced under Rule 46A including bank statements, milk purchase invoices. audited financial accounts, and payment vouchers, I find that the AO’s addition of Rs. 81,82,058/- under section 69A is unsustainable. The appellant is a long-established cooperative society formed in 1975 for the sole purpose of collecting milk from village members and supplying it exclusively to Ajmer Zila DugdhUtpadak Sahakari Sangh Ltd. (AZDUSS), a government-controlled cooperative dairy. The bank statements clearly show that every substantial credit is received through bank transfers from AZDUSS, marked as “MILK PAYMENT”. These credits directly correspond to the 10-day milk purchase invoices issued by AZDUSS, which specify milk quantity, FAT, SNF, rate per litre, and the exact amount payable, all of which reconcile with the bank entries.
4.5 Further, the audited accounts of the cooperative for FY 2018-19 disclose total milk sales. of Rs. 80,42,428/- and related sales of Rs. 1,52,597/- aggregating to Rs.82,05,025/-which is fully consistent with the bank credits of Rs. 81,82,058/-. The appellant has also demonstrated that cash withdrawals from the same account were used solely for disbursing milk payments to the member-farmers, which is supported by vouchers and fulfils the operational structure of a village dairy system. Further, the non-compliance of the appellant during assessment proceedings occurred because the earlier secretary, whose mobile number was linked with the PAN, failed to forward notices after handing over charge, a fact established through a sworn affidavit.
4.6 Since the credits are clearly traceable to genuine, recorded, audited business receipts from a single identifiable government dairy federation, they cannot be treated as unexplained money under section 69A, nor can section 115BBE be invoked. Accordingly, the addition of Rs. 81,82,058/- is hereby deleted, hence the consequential tax under section 115BBE is also cancelled. The AO is directed to delete the addition made of Rs.81,82,058/- under section 69A of the act. The appeal is therefore allowed infavor of the appellant.
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6. The solitary contention of the Ld. DR before us was that, the Ld. CIT(A) had entertained and appreciated the additional evidences without confronting the same to the AO and seeking his remand report regarding the veracity of the same, which he contended ,was mandatory as per Rule 46A of the Income Tax Rules, 1962.
7. We find no merit in the argument of the Ld. DR as above. The Ld.CIT(A) has given his finding of all credits in the bank account of the assessee being duly explained primarily considering the notings in the bank statement against the credit entries revealing the parties from whom the amount was received, i.e AZDUSS, which he found was the primary party to whom milk was sold by the assessee and the quantum of sales reflected in the financials of the assessee justifying the credits in the bank account . Both the bank statement of the assessee and its audited financial statements do not constitute additional evidences, since they were part of record of assessment, the bank statement being the basis with the AO to reopen the case of the assessee, since he found the same to reveal huge credits in the bank account of the assessee and the audited financials constituting part of the Return of Income filed by the assessee.
8. The argument of the Ld. DR therefore that the evidences considered by the Ld. CIT(A) ought to have been confronted to the AO , is rejected , noting that they constituted part of the records of assessment. Even otherwise the Ld. DR has not demonstrated as to what purpose would be served by restoring the matter to the AO , considering the factual findings of the Ld.CIT(A) that the credits in the bank account of the assessee were narrated in the bank statement to be in relation to AZDUSS , which undeniably is the party to whom milk is sold by the assessee and the quantum of credits in the bank account is found by him to corelate with the figure of sales reflected in the audited financial statements of the assessee. These two facts itself are sufficient to demonstrate the source of bank credits as being from explained sources.
9. In the light of the above, since the Revenue has pointed out no infirmity in the factual findings of the Ld. CIT(A) and their only plea is that the AO should have been confronted with the additional evidence filed by the assessee, in which we find no merit, the appeal of the Revenue is found to be devoid of merits.
10. The appeal filed by the Revenue is therefore dismissed.
Order pronounced in the Open Court on 10.08.2026
