In a significant relief for taxpayers operating high-cash-flow businesses, the Income Tax Appellate Tribunal (ITAT), Bangalore has deleted an addition of ₹14.10 lakh made by the Assessing Officer (AO) as “unexplained cash deposits” under Section 69A.
The assessee, a petrol pump proprietor, had declared ₹37.76 lakh income for AY 2017–18 on a turnover of ₹37.21 crore. During scrutiny, the tax department noticed cash deposits across two bank accounts and treated them as unexplained money.
What Triggered the Notice?
The AO alleged that cash deposits of:
- ₹7.40 lakh in one bank
- ₹6.70 lakh in another
were not satisfactorily explained and must be taxed as unexplained income under Section 69A.
The Commissioner of Income Tax (Appeals) upheld the addition.
Assessee’s Defence
The taxpayer argued that:
- All cash deposits were properly recorded in the cash book
- Books were audited
- Deposits were part of regular petrol pump business receipts
- AO did not even specify bank account numbers for the alleged unexplained deposits
The assessee also highlighted that with a turnover of ₹37 crore, such deposits were routine operational transactions.
ITAT’s Findings
The Tribunal ruled fully in favour of the taxpayer. Key observations:
1. Deposits were recorded in books
Since the cash deposits were already part of the audited accounts, Section 69A could not be invoked.
2. AO failed to provide specifics
The assessment order did not even mention the bank account numbers corresponding to the deposits.
3. Scale of business matters
With crores of rupees in annual turnover, these deposits were normal business activity, not unexplained income.
4. Addition deleted
The ITAT set aside the lower authorities’ orders and deleted the entire ₹14.10 lakh addition.
Why This Judgment Matters
This ruling is especially important for:
✔ Petrol pumps
✔ Retailers
✔ Cash-intensive businesses
It reinforces that proper books + audit = strong defence against wrongful additions under Section 69A.
Key Takeaways for Taxpayers
1. Maintain clean cash books
Daily cash entries and prompt recording of deposits help avoid disputes.
2. Reconcile bank accounts regularly
Monthly reconciliation closes gaps between books and bank statements.
3. Audit strengthens credibility
Audited financials carry significant weight before tax authorities.
4. AO must show clear evidence
Vague or incomplete observations cannot justify additions.
Professional Insight
This case highlights a recurring issue: treating legitimate business cash deposits as unexplained income. ITAT’s decision ensures fairness and protects genuine businesses from arbitrary additions.
For tax practitioners, it reiterates:
- Document everything
- Maintain audit trails
- Challenge Section 69A additions when books are clean
Stox N Tax 
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