Veerabhadreshwara Arecanut Company Vs ITO (ITAT Bangalore)
Bangalore ITAT in the case of Sri Veerabhadreshwara Arecanut Company held that receipts from debtors not recorded in the books do not constitute unexplained money u/s 69A, if the source is known & business-related.
A search in a related case revealed that the assessee received ₹4.97 lakh from a debtor but had accounted for only ₹1.85 lakh. AO treated the remaining ₹3.12 lakh as unexplained u/s 69A, & also disallowed ₹10,943 for inadmissible bad debts, totaling ₹3.23 lakh.
Assessee argued that it voluntarily disallowed bad debts of ₹2.85 lakh & offered them to tax in the revised return and that receipts were from known debtors & hence, could not be treated as unexplained.
Tribunal ruled that the conditions for invoking Section 69A (ownership of unrecorded money, lack of explanation) were not met, as:
-The amount was received from known debtors.
-The source & nature were not in dispute.
– The proper treatment should be under “Profits & Gains of Business” & not under unexplained income.
Since Assessee had already offered ₹2.85 lakh for tax, only the balance ₹37,369 (₹3.12 lakh – ₹2.85 lakh + ₹10,943 inadmissible expense) was directed to be added under business income, not Section 69A. ITAT held that known business receipts, even if unaccounted, cannot be taxed u/s 69A. Tribunal emphasized proper classification under the head of business income & granted partial relief to Assessee by deleting the bulk of the addition.
