Ashok Uttamrao Kulkarni Vs NFAC (ITAT Pune)
₹4.36 Crore Cash Deposits Were Not Necessarily Income — Stamp Vendor’s Bank Credits & Matching Stamp-Duty Payments Must Be Examined Before Addition u/s 69A
Summary: The Pune ITAT dealt with an interesting case where cash deposits of ₹4.36 crore in the bank account of a registered stamp vendor were treated by the AO as unexplained money u/s 69A. The assessee contended that the deposits represented amounts collected from customers for purchasing e-challans towards stamp duty, which were thereafter transferred to the Government account, while his real income was only a small commission of ₹50 per challan. The Tribunal found considerable force in this explanation & restored the matter to the AO for verification of the complete trail of cash credits vis-à-vis corresponding NEFT payments for stamp duty.
Facts — ₹4.36 Crore Deposited, No Return Filed
The Income Tax Department received information from DIT(System) under “Multi Year NMS Type” risk profiling that the assessee had deposited cash aggregating to ₹4,36,79,150 during FY 2015-16. Since no return of income had been filed for AY 2016-17, the AO formed a belief that income had escaped assessment & issued notice u/s 148.
The assessee did not comply with the notices, including notice u/s 142(1) & the show-cause notice requiring him to explain the source of the cash deposits. Consequently, the AO proceeded ex parte u/s 144 & treated the entire bank deposits of ₹4,36,79,150 as unexplained money u/s 69A. Assessment was accordingly completed u/s 147 r.w.s. 144 & 144B on 19.03.2022.
Thus, what entered the bank account as ₹4.36 crore effectively became ₹4.36 crore of taxable income in the assessment.
CIT(A) – Entire Deposits Not Income, But 5% Estimated as Profit
Before the CIT(A), the assessee explained the true nature of his activity. He was a registered stamp vendor engaged in selling e-challans for payment of stamp duty required for registration of documents.
The assessee’s case was therefore not one of an ordinary trader receiving ₹4.36 crore as his own turnover. He was essentially facilitating payment of Government stamp duty & earning commission from the transactions.
The CIT(A) accepted the explanation to an extent & instead of sustaining the entire addition u/s 69A, estimated the assessee’s income at 5% of the total cash deposits. Both sides were dissatisfied — the assessee challenged the 5% estimate as excessive, whereas the Revenue challenged the substantial relief granted by the CIT(A).
Assessee’s Argument — ₹50 Commission Cannot Become 5% of Stamp Duty
Before the ITAT, the assessee made a crucial factual submission. He was a duly registered stamp vendor holding a valid licence & received merely ₹50 per challan as commission from customers.
Therefore, applying an arbitrary profit rate of 5% on the entire amount deposited in the bank bore little relationship with the economic reality of the activity.
The assessee submitted that voluminous records relating to the challans had been produced. According to him, these records established that the cash received from customers represented money collected for purchasing stamp-duty e-challans & his actual earning was confined to the ₹50 commission.
The Crucial Missing Link – Credits Were Considered, Corresponding Debits Were Ignored
The most significant observation of the ITAT concerned the manner in which the bank account had been appreciated.
The assessee demonstrated that while the cash deposits appeared as credits, there were corresponding NEFT transfers to the SBI account used for issuing challans towards payment of stamp duty.
Thus, according to the assessee, looking merely at one side of the bank account presented a distorted picture. If ₹X was collected from a customer for payment of stamp duty & substantially the same ₹X thereafter moved through banking channels towards the Government stamp-duty payment, the initial cash deposit could not automatically be equated with the assessee’s income.
The assessee demonstrated the bank statements & details of challans contained at pages 53 to 200 of the paper book. The Tribunal specifically observed that the CIT(A) had considered the credits representing cash deposits but had ignored the corresponding debit entries comprising NEFT transfers to the SBI account used for issuing stamp-duty challans.
ITAT – Assessee’s Explanation Was “Realistic”
Importantly, the Pune ITAT expressly observed that the assessee’s submissions were “realistic”.
The Tribunal found that the CIT(A) had not properly considered the documents & information supporting the assessee’s claim. Considering the facts, circumstances & principles of natural justice, it considered it appropriate to provide the assessee another opportunity to substantiate his case through proper evidence.
Accordingly, the order of the CIT(A) on the disputed issue was set aside & the matter was restored to the AO for the limited purpose of examining & verifying the assessee’s claim & adjudicating the matter afresh on merits.
The assessee was directed to cooperate & furnish the necessary information.
Revenue’s Appeal Also Goes Back to AO
The Revenue separately challenged the CIT(A)’s action in restricting the income to 5% of cash deposits, contending that the CIT(A) had granted relief without adequately verifying the source of the deposits or supporting documentary evidence.
Since the Tribunal had already restored the central issue in the assessee’s appeal to the AO, it similarly restored the issues raised in the Revenue’s cross-appeal to the AO for fresh examination. Consequently, both appeals were allowed for statistical purposes.
Author’s Comment
The decision highlights an elementary but frequently overlooked principle in cash-deposit cases — a bank credit is a fact; whether it constitutes income is a separate question. Where a person acts as an intermediary collecting money specifically for payment to the Government, the entire collection cannot mechanically be treated as his income merely because the money temporarily passes through his bank account.
Equally significant is the Tribunal’s emphasis on examining both sides of the banking trail. Cash deposits cannot be viewed in isolation while ignoring corresponding payments through NEFT towards the very stamp-duty challans for which the money was collected.
However, the ITAT has not finally held that only ₹50 per challan is taxable, nor has it deleted the addition outright. The assessee must now establish before the AO, through challan-wise reconciliation, bank statements, licence details & corresponding Government payments, that the deposits were pass-through collections & that his actual income was confined to commission.
In short, ₹4.36 crore passing through the bank does not automatically make the stamp vendor ₹4.36 crore richer – the AO must first follow the money.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT PUNE
The Cross Appeal is filed by the revenue and the assessee against the order of NFAC/CIT(A) Delhi passed u/sec 250 of the Income Tax Act for the Assessment Year 2016-17.
2. Since the issues involved in this cross appeal is common and interlinked and for the sake of convenience, we shall take up Assessee appeal ITA.No. 833/PUN/2026 for the Assessment Year 2016-17 as a lead case.
3. The brief facts of the case are that, the Income Tax Department has received information from the DIT(system)under “Multi Year NMS Type” as per risk profiling that the assessee has made substantial cash deposits in the bank account aggregating to Rs. 4,36,79,150/- in the F.Y. 2015-16 and the assessee has not filed the return of income for the A.Y. 2016-17. The Assessing Officer (A.O) has reason to believe that the income has escaped assessment and followed the due process of law and issued notice u/sec 148 of the Act and there was no compliance by the assessee. Subsequently, the notice under Section 142(1) of the Act was issued and also a show cause notice to explain the sources of cash deposits along with the supporting evidences and the assessee has not filed any reply. . The A.O find that the assessee has not made submissions on the disputed issue in spite of providing adequate opportunities of hearing and finally the A.O considering the information available on record has invoked the provisions of section 144 of the Act and made addition of unexplained cash deposits u/sec69A of the Act of Rs.4,36,79,150/- and assessed the total income of Rs. 4,36,79,150/- and passed the order under Section 147 r.w.s 144 r.w.s144B of the Act dated 19.03.2022.
4. Aggrieved by the order, the assessee has filed an appeal with the CIT(A). Whereas the CIT(A) has considered the grounds of appeal, statements of facts, findings of the A.O and the submissions of the assessee that the assessee is registered stamp vendor and is engaged in selling e-challans of stamp duty for registration purposes and the assessee gets commission income and the CIT(A) has estimated the income @5%of the cash deposits and partly allowed the Assessee’s appeal. Aggrieved by the order of the CIT(A), the assessee and the revenue has filed the appeal before the Hon’ble Tribunal.
5. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in estimating income @ 5% on total cash deposits overlooking the submissions and facts that the assessee is registered stamp vendor and is engaged in selling e-challans of stamp duty for registration purposes and the assessee gets commission income of Rs.50/-per challan from the customers for e challan paid to government for registration of documents and the CIT(A) has erred in not considering the voluminous details of challans sold by the assessee to customers and the assessee is entitled to commission of Rs.50/- per challan. The Ld.AR mentioned that the assessee has substantiated with all the documents and there is no dispute that the assessee is a registered stamp vendor and holding valid license and the margin of income in very low and the estimated income percentage by the CIT(A) is very much higher .The Ld.AR substantiated the submissions with the factual paper book and prayed for allowing the appeal. Per contra, Ld.DR submitted that the revenue has filed cross appeal.
6. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld.AR that the CIT(A) has erred in estimating income @ 5% on total cash deposits overlooking the submissions and facts that the assessee is registered stamp vendor and is engaged in selling e-challans of stamp duty for registration purposes and the assessee gets commission income of Rs.50/- per challan from the customers for e challan paid to government for registration of documents and the CIT(A) has considered only the credits of cash deposited and ignored the debits of Neft transfer to SBI account used to issue challans for payment of stamp duty. The Ld.AR demonstrated the bank account statement and details of challans placed at page 53 to 200 of the paper book. We find the submissions of the Ld.AR are realistic and the CIT(A) has not considered the documents and information supporting the claim of the assesse. We considering the facts, circumstances, submissions and principles of natural justice, shall provide with one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, we set aside the order of the CIT(A) on this disputed issue and remit the issue to the file of the Assessing Officer for limited purpose to examine and verify the claim and adjudicate afresh on merits and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information. And the grounds of appeal of the assessee are allowed for statistical purposes.
7. In the result, the appeal filed by the assessee is allowed for statistical purposes.
ITA No. 834/PUN/2026 for the A.Y. 2016-17.
8. The Revenue has raised following grounds of appeal challenging the relief granted by the CIT(A) to the assessee. The Ld.DR submitted that the CIT(A) has erred in directing the Assessing officer to estimate the income @5% of the cash deposits without verifying the sources of cash deposits and are not supported with any documentary evidence and prayed for allowing the revenue appeal. Since, we have restored the disputed issue in the assessee appeal to the file of the assessing officer to examine the evidences and adjudicate a fresh on merits and accordingly the issues in the revenue appeal are also restored to the file of the Assessing officer. And the grounds of appeal of the revenue are allowed for statistical purposes.
9. In the result, the appeal filed by the assessee and the revenue are allowed for statistical purposes.
Order pronounced in the open court on 03rd September, 2026.
