Manasi Mahesh Saigaonkar Kasba Peth Vs ITO (ITAT Pune)
Summary: The Pune Bench of the Income Tax Appellate Tribunal considered the assessee’s appeal for Assessment Year 2013-14 against the order dated 09.03.2026 of the Ld. Addl. / JCIT(A)-1, Gurugram, confirming an addition of ₹26,51,000 made by the Assessing Officer under section 69A of the Income Tax Act, 1961 in respect of cash deposited in the assessee’s SBI account. The assessee, an individual engaged in the business of ladies’ bangles at Shivardhan, Dist. Raigad, had not filed a return for AY 2013-14, following which the assessment was reopened under Section 147 and notice under Section 148 was issued on information regarding cash deposits of ₹26,51,000. Before the Addl. / JCIT(A), the assessee challenged the addition, validity of reassessment proceedings and sought application of peak-credit theory or estimation of income at 8% of turnover under Section 44AD, but the appellate authority rejected the contentions and dismissed the appeal. Before the Tribunal, the assessee relied upon the bank statement showing continuous cash deposits and withdrawals, the accepted nature of her ladies’ bangles business, an MSME certificate and the fact that profit of approximately 10.57% declared in the subsequent year had been accepted on processing under Section 143(1). The Tribunal found merit in the contention that the entire deposits could not be treated as unexplained cash deposits and were out of business receipts. Considering that the assessee had not filed her return or participated in the assessment proceedings and had declared profit at approximately 10.57% in the subsequent year, the Tribunal held that adoption of a 12% profit rate on the ₹26,51,000 cash deposits would meet the ends of justice. It therefore set aside the order of the Ld. Addl. / JCIT(A) and directed the Assessing Officer to restrict the addition by computing profit at 12% of the cash deposits, with the grounds accordingly partly allowed. The appeal was partly allowed and the order was pronounced in the open Court on 25th August, 2026.
Entire Cash Deposits Cannot Be Taxed Under Section 69A When They Represent Business Turnover: Pune ITAT Restricts Addition to 12% Profit
The Pune ITAT held that the entire cash deposits in a bank account cannot be treated as unexplained money under Section 69A where the surrounding evidence demonstrates that the deposits represent the assessee’s business receipts.
The assessee was engaged in the business of selling ladies’ bangles but had not filed a return for AY 2013-14. Based on information regarding cash deposits of ₹26.51 lakh in her SBI account, the assessment was reopened under Section 147.
Since the assessee neither filed a return in response to the Section 148 notice nor participated in the assessment proceedings, the AO treated the entire ₹26,51,000 as unexplained money under Section 69A. The Addl./JCIT(A) rejected the assessee’s alternative claims for application of the peak-credit theory or estimation of income under Section 44AD.
Before the Tribunal, the assessee produced the bank statement showing continuous cash deposits and withdrawals. The nature of the business was already accepted by the AO and was further supported by the assessee’s MSME registration certificate. The Tribunal therefore accepted that the deposits represented turnover from the bangles business rather than unexplained money from an unidentified source.
The Tribunal also noted that in the immediately succeeding year, the assessee had declared a net profit rate of approximately 10.57%, which had been accepted while processing the return under Section 143(1).
Considering the absence of a return and supporting records for the year under appeal, the Tribunal adopted a slightly higher estimated profit rate of 12% on the cash deposits of ₹26.51 lakh. It directed the AO to restrict the addition to approximately ₹3.18 lakh, instead of taxing the entire deposits.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 09.03.2026 of the Ld. Addl. / JCIT(A)-1, Gurugram relating to assessment year 2013-14.
2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. Addl. / JCIT(A) in confirming the addition of Rs.26,51,000/- made by the Assessing Officer u/s 69A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
3. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of ladies’ bangles at Shivardhan, Dist. Raigad. She has not filed her return of income for the impugned assessment year 2013-14. Information was received from the ITO (I&CI), Kalyan that the assessee has entered into financial transaction in the form of cash deposit of Rs.26,51,000/- in SBI, Shriwardhan Branch. It was also stated that during verification the assessee could not explain the source of cash deposits with documentary evidence. On the basis of information and considering the fact that the assessee has not filed her return of income, the case was reopened as per the provisions of section 147 of the Act. Accordingly, notice u/s 148 was issued and served on the assessee. Since the assessee did not file the return in response to the notice u/s 148 and failed to explain the source of such cash deposit, the Assessing Officer, invoking the provisions of section 69A of the Act made addition of Rs.26,51,000/-.
4. Before the Ld. Addl. / JCIT(A), the assessee apart from challenging the addition on merit, challenged the validity of the re-assessment proceedings and also filed certain additional evidences, based on which the Ld. Addl. / JCIT(A) called for a remand report from the Assessing Officer. After considering the remand report of the Assessing Officer and the rejoinder of the assessee to such remand report, the Ld. Addl. / JCIT(A) rejected the contention of the assessee that the peak theory credit should be applied in her case. He also rejected the argument of the assessee to estimate the income @ 8% of turnover u/s 44AD. The relevant observations of the Ld. Addl. / JCIT(A) read as under:
5. On the basis of above submissions, remand report and material available on records, the ground wise appeal is decided as under:-
5.1 Ground of appeal no. 1:- In this ground of appeal, the appellant has contended that the AO has erred in treating entire cash deposit of Rs. 26,51,000/- in bank as unexplained credit and added as income.
5.1.1 The appellant did not respond to multiple notices issued u/s. 148, 142(1), and show-cause notices issued various dates. Therefore, the assessment was completed u/s. 144 due to persistent non-compliance from the appellant. The appellant must prove source, nature and genuineness of the cash deposits. No such evidence was furnished during assessment. Further, in remand report the AO confirms that pattern of deposits/withdrawals does not support business claim. There were only cash withdrawals no cheque/RTGS payments typical of business purchases.
The appellant has also contended that peak credit theory should be applied in his case. Peak credit applies only when assessee establishes a circulation of the same cash. Here, no books of account, no stock records, no purchase bills, and no evidence of business turnover were produced during assessment. Therefore, Peak credit theory should not be applied here.
5.1.2 In the instant case, it is clear that the appellant failed to substantiate her explanation with credible evidence either during assessment or appellate proceedings. Therefore, the ground of appeal 1 is hereby dismissed.
5.2 Ground of appeal no. 2:- In this ground of appeal, the appellant has contended that the entire cash deposit should have been treated as her turn over for the period and profit should have been calculated @ 8 percent of turnover u s.44AD of the Income Tax Act, 1961.
5.2.1 The appellant has submitted certificate from Shrivardhan Nagar Parishad as business evidence. She has also enclosed a copy of Udyam Registration Certificate. However, it has been found that both the documents do not pertain to the period under consideration. Therefore, they have no evidentiary value in the present case. Further, it is pertinent to mention here that only bank entries do not prove turnover. There must be correlation between cash deposits, business activity and purchase/sales pattern and no such link was established by the appellant.
5.2.2 As the appellant failed to establish that deposits constitute turnover, 44AD computation cannot be applied in this case. Therefore, ground of appeal 2 is hereby dismissed.
5.3 Ground of appeal no. 3:- In this ground of appeal, the appellant has contended that the Show Cause notice was not served on the assessee as mentioned in the Order. As the assessee was not given proper hearing, the case may therefore be remanded back to the AO revision of assessment.
5.3.1 As per assessment order, the AO has issued several notices and all served as per assessment records. The appellant has remained non-compliant despite valid service. The appellant has not objected on remaining non-compliant during whole assessment proceedings despite sufficient opportunities were provided.
5.3.2 There is no reason to allow this ground when non-compliance is attributable solely to appellant. Therefore, the ground of appeal 3 is hereby rejected.
5.4 Ground of appeal no. 4:- In this ground of appeal, the appellant has contended that the AO has erred in invoking section 69A of the Income Tax Act.
5.4.1 Section 69A applies when assessee is found to be owner of money, and no explanation is offered about the nature/source; or explanation is unsatisfactory. In the present case the appellant admitted ownership of bank account but she failed to explain satisfactorily the source of deposits. Also, there was no evidence of business operations in the relevant year. As the appellant failed to substantiate her explanation with credible evidence either during assessment or appellate proceedings, it is held that AO correctly invoked section 69A and made addition. Therefore, the ground of appeal 4 is hereby dismissed.
6. As a result, the appeal of appellant is dismissed.
5. Aggrieved with such order of the Ld. Addl. / JCIT(A) the assessee is i n appeal before the Tribunal.
6. The Ld. Counsel for the assessee submitted that there is no dispute to the fact that the assessee is engaged in the business of ladies’ bangles which is discernable from page 1 of the assessment order. Referring to pages 6 to 10 of the paper book he drew the attention of the Bench to the copy of the bank statement and submitted that there are continuous deposits in and withdrawals from the bank account. Referring to the submissions made before the Assessing Officer during the remand proceedings he drew the attention of the Bench to the letter dated 20.09.2016 and submitted that it was categorically stated before the Assessing Officer that since her total turnover during the financial year is approximately Rs.25 lakhs and her income is below the taxable limit, hence the assessee has not filed her return of income. He submitted that in the subsequent year the income declared by the assessee disclosing the net profit @ 10.57% (approximately) has been accepted and the return has been processed u/s 143(1) of the Act. He submitted that the assessee being engaged in the business of ladies’ bangles, the profit margin is very low and a reasonable percentage be estimated and the entire addition cannot be made by invoking the provisions of section 69A of the Act.
7. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. Addl. / JCIT(A). He submitted that the assessee could not explain the nature and source of the deposits, therefore, the Ld. Addl. / JCIT(A) was fully justified in sustaining the addition made by the Assessing Officer by invoking the provisions of section 69 of the Act.
8. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. Addl. / JCIT(A) and the paper book filed on behalf of the assessee. It is an admitted fact that the assessee is an individual and engaged in the business of ladies’ bangles which has been accepted by the Assessing Officer himself at page 1 of the assessment order and which reads as under:
9. Further, a perusal of the bank statement shows that there are continuous deposits and withdrawals of money in the said bank account. It is also pertinent to mention here that the entire deposits and withdrawals are in cash and there is no deposit of cheque or payment by cheque. Further, the assessee’s business is also discernible from the certificate issued by Micro, Small and Medium Enterprises (MSME) which is as under:
10. Under these circumstances w e find merit in the argument of the Ld. Counsel for the assessee that the entire deposits cannot be treated as unexplained cash deposits and the same is out of business receipts of the assessee. Since in the instant case the assessee has not filed her ret urn of income nor participated in the assessment proceedings and in the subsequent year has declared the profit @ 10.57% on its total turnover, therefore, considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that adoption of profit rate @ 12% for the impugned assessment year on the deposit of Rs.26,51,000/- will meet the ends of justice. We, therefore, set aside the Ld. Addl. / JCIT(A) and direct the Assessing Officer to restrict the addition by computing the profit @ 12% of the cash deposit of Rs.26,51,000/-. The grounds raised by the assessee are accordingly partly allowed.
11. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on 25th August, 2026.
