Unexplained Money Addition Quashed as Transactions Were Conducted on Behalf of Bank

Baidyanath Dutta Vs ITO (ITAT Kolkata)

The appeal was filed by the assessee against the order of the National Faceless Appeal Centre, Delhi, for Assessment Year 2020-21. The dispute related to the addition of ₹2,31,00,415 as unexplained money under Section 69A of the Income-tax Act and an addition of ₹4,23,420 treated as unexplained income.

The assessee was a business correspondent of Bank of India. Based on information received through the Insight Portal under the e-verification scheme, 2021, the Assessing Officer reopened the assessment under Sections 147 and 148 of the Act. During the proceedings, the Assessing Officer noted total deposits of ₹2,41,08,740 in the assessee’s bank account. The return of income reflected income from life insurance and other activities, showing turnover of ₹10,08,325 and income under Section 44AD of ₹31,61,000. Observing a difference of ₹2,31,00,415, the Assessing Officer sought an explanation. Since there was no compliance from the assessee during the assessment proceedings, the Assessing Officer treated the amount as unexplained money under Section 69A and added it to the assessee’s income. The Commissioner (Appeals) confirmed the addition.

Before the Tribunal, certificates issued by Bank of India were produced. One certificate dated 21.03.2025 stated that the assessee was functioning as a business correspondent of the bank and was carrying out deposit and withdrawal transactions on behalf of the bank. The certificate explained that the assessee received money from customers on behalf of Bank of India, deposited the amounts into his account with the bank, and thereafter remitted the money to the bank’s account. Another certificate confirmed that the assessee had been appointed as a business correspondent since 15.12.2010 and was authorized to open savings bank accounts, recover loan accounts, and open term deposit accounts.

After examining these documents, the Tribunal found that the transactions reflected in the bank account were carried out on behalf of Bank of India. Accordingly, it held that the Assessing Officer was incorrect in treating those transactions as unexplained money under Section 69A. The Tribunal also held that the order of the Commissioner (Appeals) sustaining the addition could not be sustained. The addition of ₹2,31,00,415 was therefore deleted.

The second issue concerned an addition of ₹4,23,420. The Tribunal noted that the assessee had earned ₹4,23,420 as LIC income from various companies. The Assessing Officer had treated this amount as unexplained income because the assessee had not responded during the assessment proceedings, and the Commissioner (Appeals) had confirmed the addition.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 15.12.2025 for the AY 2020-21.

2. The issue raised by the assessee in the ground nos. 2 & 3 which are as under:-

“2) That on the facts and in the circumstances of the case the action of the CIT(A) confirm the addition made by the AO Rs.2,31,00,415/- as unexplained money u/s 69A on certain hypothesis contrary to the material evidences on record renders the addition has arbitrary, excessive and bad in law.

3) That on the facts and in the circumstances0 of the case the action of the CIT(A) to remand it back to AO the addition made of Rs.4,23,420/- as unexplained income even though such income was already considered as income in the original return is erroneous and bad in law.”

3. The facts in brief are that the assessee is a business correspondent of bank of India. The ld. AO received information from insight portal under e-verification scheme, 2021 that assessee has been identified under the said scheme with potential tax liability as the assessee was involved in certain financial transactions. Accordingly, the notice u/s 148 of the Act was issued on 28.03.2024 for reopening the assessment u/s 147 of the Act. The ld. AO noted that the total deposit in the assessee’s bank account were ₹2,41,08,740/-. In the return of income filed the assessee reflected the source of income as life insurance and other activity and has shown turnover of ₹10,08,325/-. Besides, the assessee showed income u/s 44AD of the Act to the tune of ₹31,61,000/-. Therefore, there is a difference of ₹2,31,00,415/- and accordingly, assessee was called upon to explain the same. The assessee did not make any compliance during the course of assessment proceedings and consequently the ld. AO added ₹2,31,00,415/- in respect of unexplained credits and cash withdrawals to the income of the assessee u/s 69A of the Act.

4. The ld. CIT (A) in the appellate proceedings, confirmed the addition as made by the ld. AO.

5. After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the assessee is a business correspondent of Bank of India. A certificate from Bank of India dated 21.03.2025, is available at page no.108 of the paper book which is extracted below:

6. A perusal of the above certificate reveals that the assessee is a business correspondent of Bank of India and is doing transactions of deposits and withdrawals on behalf of bank of India. The assessee received money from the customers on behalf of bank of India and deposited the same in his account with bank of India and thereafter the amounts are remitted to the bank of India account. A certificate is also attached at page no.107, which certified that the assessee has been appointed as business correspondent since 15.12.2010 and it is further stated that he is authorized to open SB account, recovery of loans accounts, opening of term deposits accounts. We note that the transactions done by the assessee were on behalf of the bank of India. Therefore, the ld. AO’s action in treating the same as unexplained money u/s 69A of the Act is incorrect and cannot be sustained. Similarly, the order of ld. CIT (A) upholding the order of ld. AO is wrong and cannot be sustained. Consequently, we set aside the order of ld. CIT (A) on this issue and direct the ld. AO to delete the addition. The ground no. 2 is allowed.

7. So far as the addition of ₹4,23,420/- is concerned, we note that the assessee has earned ₹4,23,420 as LIC from various companies. The ld. AO added the same when the assessee did not respond as unexplained income of the assessee, which was confirmed by the ld. CIT (A). In our opinion, the assessee suo moto declared the income in the return of income filed by the assessee. Therefore, the action of the ld. AO as sustained by the ld. CIT (A) is not correct. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground no. 3 is allowed.

8. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 20.05.2026.