ITAT Rejects Rs. 49.86 Cr Addition; Cash Deposits by Dairy Cooperative Not Unexplained Under Section 69A

The assessee, engaged in milk procurement and sale under the ‘VITA’ brand, faced reassessment under Section 148 on the grounds of large cash deposits totalling Rs. 49.86 crore during AY 2015–16. The Assessing Officer added the entire amount as unexplained under Section 69A after the assessee failed to submit complete replies during the assessment proceedings. Before the CIT(A), however, the assessee explained that cash sales are the very nature of its dairy business, with customers, mostly small vendors and booth operators, paying in cash, often directly into bank accounts. The Cooperative’s turnover of Rs. 175 crore, comparable to earlier and later years, and audited financials, including VAT returns, were submitted.

The CIT(A), admitting additional evidence, accepted the explanation and deleted the addition. The Revenue filed an appeal, contending that the CIT(A) wrongly accepted bank book details without independent verification of cash sources, business model, or identities of cash depositors.

Main Issue: Whether the large cash deposits made by a milk cooperative into its bank accounts could be treated as unexplained income under Section 69A when supported by audited books, regular business patterns, and consistent turnover.

ITAT’s Decision: The ITAT, however, upheld the CIT(A)’s findings, noting that the cooperative’s nature of business involves consistent, high-volume cash transactions which are fully reflected in the books of account. The Tribunal held that when the pattern of cash deposits matches business turnover and no unaccounted income is demonstrated, Section 69A cannot apply.

Therefore, both of the appeals filed by the Revenue for AYs 2015-16 and 2017-18 were dismissed.

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