ITAT Deletes Section 69A Addition as Income Computation Supports Source of Cash Deposits:

The ITAT Agra Bench deleted the addition under Section 69A, holding that the assessee’s explanation for the cash deposits was reasonable and supported by his income tax computation.

The assessee was engaged in trading through M/s Khawaja Traders and in the bangle business through Rahish Bangle Suppliers. During reassessment proceedings, the Assessing Officer (AO) noted that during the year under consideration, the assessee had made cash deposits amounting to Rs 1.36 crore in his current account. The assessee explained that the actual deposits in the account of Khawaja Traders were approximately Rs 31.41 lakh, relating to business turnover and opening cash balance. The AO accepted this explanation and did not make any addition to this account.

However, the AO noticed cash deposits of Rs 2.29 lakh in the assessee’s Canara Bank savings account. The assessee explained that these deposits represented sale proceeds from his bangle business. The AO rejected the explanation, stating that the income from the bangle business had not been disclosed in the return, and added Rs 2.29 lakh under Section 69A read with Section 115BBE of the Act.

The Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), upheld the addition, observing that the assessee had failed to establish the source of the cash deposits with supporting evidence.

Before the Income Tax Appellate Tribunal (ITAT), the assessee submitted that "it was in the business of trading and also in bangles business and accordingly filed in his return of income wherein income from both the business are reflected. On perusal of the documents file the assessee we notice that the above claim of the assessee is supported by the computation of income filed by the assessee placed along with the written submission in which an amount of Rs. 1,51,200/- is shown as income u/s 44AD and an amount of Rs. 2,06,262/- from Khawaja Traders (grocery items)."

Considering the aforementioned findings, the tribunal held that the explanation was reasonable and deleted the addition of Rs 2.29 lakh. Therefore, the assessee's appeal was allowed.