ITAT Upholds Deletion of Rs. 12.12 Crore Cash Purchase Addition; Sustains Rs. 1.16 Lakh Cash Deposit Addition

The Department of Income Tax filed an appeal before the Income Tax Appellate Tribunal (ITAT), New Delhi, and a taxpayer named Ankur Mittal has filed a cross-objection challenging an order passed by the CIT(A)/NFAC Delhi on December 23, 2024, and an assessment order passed by the Assessing Officer (AO) for the AY 2017-18 under the section 143(3)/263 of the Income Tax Act, 1961.

As per the revenue, the CIT(A) had mistakenly deleted the aggregated additions amounting to Rs. 7,46,102 made by the Assessing Officer (AO) as unexplained money deposited in bank accounts of the taxpayer with Canara Bank and Syndicate Bank under section 69A of the Act and Rs. 12.12 crore as unexplained expenditure under section 69C of the Act for purchases made by the taxpayer in cash. Additionally, it was argued that CIT(A) did not take note of the facts that the tax officer mentioned in the assessment order before announcing its final decision.

The taxpayer is engaged in the business of food grains through a proprietary concern and also earns income from partnership firms. He filed his return of income for the relevant assessment year, declaring the total income of about Rs. 21.50 lakh. The AO initially accepted the filed return and completed the assessment. Later, the case was reopened for reassessment and also revision proceedings under section 263 of the Income Tax Act, where the Principal Commissioner directed the Assessing Officer to verify cash purchases and bank deposits made by the taxpayer. Thereafter, a revised order was passed, wherein two major additions were made: Rs. 7.46 lakh as unexplained cash deposits under section 69A and Rs. 12.12 crore as unexplained cash purchases under section 69C.

When the taxpayer approached the CIT(A), challenging the aforesaid additions made by the income tax department. CIT(A) deleted all the additions, and now the present appeal has been filed by the Revenue challenging the same decision of CIT(A) before ITAT.

In the cross objection, the assessee challenged the sustained addition of Rs. 1.16 lakh out of cash deposits. The validity of the revision order passed under section 263.

The tribunal analysed the arguments of both sides and noted that the CIT(A) had carefully examined each source of cash deposit and accepted most of them as explained, sustaining only Rs. 1.16 lakh as unexplained. The assessee had also earlier agreed to sustain a part of the addition. Therefore, the Tribunal upheld the addition of Rs. 1.16 lakh. The second ground relating to the challenge of the revision order under section 263 was not pressed by the assessee and was dismissed.

Meaning overall, the appeal of the Income Tax Department has been dismissed, and also the cross objection raised by the taxpayer. The tribunal confirmed the deletion of Rs. 12.12 crore and the addition of Rs. 1.16 lakh under section 69A.