Palanisamy Kalyanasundaram Vs ITO (ITAT Chennai)
Opening Cash & Debtors Sufficient Explanation- Books Accepted, Cash Explained: 69A Addition of ₹1.03 Cr Deleted
In Palanisamy Kalyanasundaram Vs. ITO, ITA No.1938/Chny/2025, AY 2016-17, order dated 31.12.2025, Chennai ITAT allowed Assessee’s appeal & deleted addition of ₹1.03 crore u/s 69A towards alleged unexplained cash deposits. Assessee, engaged in cigarette distribution, had filed return declaring income of ₹5.85 lakh. AO completed limited scrutiny assessment by treating cash deposits in bank exceeding cash sales as unexplained money, ignoring explanation that deposits were sourced from opening cash balance & realisation from sundry debtors, even though books of account were produced & not rejected. CIT(A), NFAC confirmed addition mainly on ground that Assessee failed to file debtor confirmations.
Tribunal held that AO did not travel beyond scope of limited scrutiny, as verification of cash deposits formed integral part of demonetisation-linked scrutiny. However, on merits, Tribunal found that books of account were accepted, sales were assessed, & Assessee had demonstrated substantial collections from debtors during the year, which remained uncontroverted. Once books are not rejected, addition u/s 69A merely on suspicion or presumption is impermissible. Tribunal observed that Assessee had discharged onus of explaining source of cash deposits & no addition can be sustained merely for want of third-party confirmations, particularly when audited books support explanation. Accordingly, addition was directed to be deleted & appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee directed against the order of NFAC, [‘CIT(A)’ in short], Delhi dated 13.06.2025 for AY-2016-17.
