Unexplained cash deposits by banking correspondent; appellate tribunal upheld deletion of income addition due to inadequate inquiry

Dispute concerns treatment of cash deposits in a taxpayer's bank account alleged as unexplained income under assessment provisions. The discussion emphasises the onus of proof on revenue to displace the taxpayer's explanation that deposits arose from authorised activities as a banking correspondent; the bank's statement confirming the taxpayer's role and lack of complaints was treated as relevant. The Assessing Officer drew an adverse inference without obtaining the taxpayer's bank records or further inquiry, and the appellate authorities set aside the addition for want of adequate evidential inquiry.

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Issues: Whether the addition of Rs. 10,04,97,350/- made by the Assessing Officer under Section 69A of the Income-tax Act, 1961, treating bank cash deposits as unexplained investment, was rightly deleted by the Commissioner (Appeals) where the assessee claimed the deposits were receipts/collections made in his capacity as a Bank Mitra/Correspondent of SBI and produced the bank's communication.

Analysis: The Tribunal examined the material on record including the assessee's statement, the terms of the agreement with the State Bank of India authorising the assessee to collect and remit cash as a Bank Mitra/Correspondent, and the bank manager's communication which confirmed the existence of the agreement and that no complaints were received regarding non-deposit for the period in question while stating inability to verify each transaction due to large volume. The Tribunal found that the Revenue did not dispute the existence of the agreement and the Assessing Officer did not make further inquiries such as examining the assessee's account statements or seeking additional bank records before drawing an adverse inference. Applying Section 69A, the Tribunal held that in the factual matrix the assessee had furnished sufficient material to demonstrate that the cash pertained to his role as bank correspondent and that the Assessing Officer's invocation of Section 69A without further inquiry was not justified.

Conclusion: The deletion of the addition of Rs. 10,04,97,350/- under Section 69A is upheld in favour of the assessee; the Revenue's grounds are dismissed.

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