ITAT Upholds Deletion of Rs. 8,89,36,000 Addition u/s 69C on Cash Withdrawals

In scrutiny initiated under CASS for “large cash withdrawals,” an addition of Rs. 8,89,36,000 was made as unexplained expenditure u/s. 69C. The assessee explained that amounts received from slaughterhouses were deposited into the bank and then withdrawn in cash to pay farmers for bulls. Commission on these transactions was duly offered to tax. Books and records, including cash book, bank book, purchase and sales registers, ledgers, and sample bills, were produced, yet the entire withdrawals were treated as unexplained.

CIT (A)’s Decision: On appeal, the CIT(A) admitted additional evidence for sufficient cause, called for a remand report, and noted that the Assessing Officer did not verify the documentation filed either at the assessment or appellate stage. Considering the nature of the business and material placed on record, the CIT(A) deleted the addition of Rs. 8,89,36,000 u/s 69C.

Issue Before ITAT
Whether cash withdrawals used to pay farmers for bulls, when sales to slaughter houses were accepted, and books/evidence were on record, could be treated as “unexplained expenditure” under Section 69C.

ITAT’s Decision: The Tribunal observed that the department had accepted sales of bulls but rejected the corresponding purchases without verification. Once sales were accepted, disbelieving the purchases was inconsistent. It noted that complete records, including purchase/sales registers, ledgers, cash and bank books, and sample bills, remained unrefuted.

Holding that there was no justification for treating the withdrawals as unexplained expenditure, the Tribunal upheld the deletion of Rs. 8,89,36,000 u/s 69C and dismissed the Revenue’s appeal. 

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