2025 (8) TMI 1309 - AT - Income Tax

Appeal allowed deleting additions under s.69A read with s.115BBE after bank reconciliations supported source of deposits

Manju Dudala, Hyderabad Versus Income Tax Officer, Ward-11 (3), Hyderabad.

ITAT (Hyderabad) allowed the appeal, deleting additions under s.69A r.w.s.115BBE. The tribunal found transaction reports and reconciliations showed the ... Unexplained income u/s 69A r.w.s 115BBE - unexplained bank deposits - as argued deposits belong to the appellant's husband, who is carrying on 'Mee Seva Services' - HELD THAT:- As gone through the transaction report issued by TSTSL and the reconciliation of the total transfer made from the bank account of the assessee. On going through all these documents, we found that, the bank account in the name of the assessee have been used for the transactions executed by her husband also. All the cash deposited in the bank account of the assessee are cash received from customers out of business of assessee as well as her husband and deposited in bank accounts were utilized for making payment to APT (for assessee's own business) and to Payu (for business of assessee's husband). Therefore, the amount of cash deposited in the bank account of the assessee either related to her own business or the business of her husband. Accordingly, we found the sources of cash deposited in the bank accounts of the assessee as explained. Therefore, we are inclined to accept the submissions of the assessee and accordingly delete the addition sustained by the Ld. CIT(A). Appeal of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether cash deposits in the assessee's bank accounts constituted 'unexplained money' liable to be treated as income under section 69A of the Income Tax Act where deposits arose from franchisee/Mee Seva/utility collection activities carried on by the assessee and her husband and substantial transfers were made to principal agents. 2. Whether the assessee discharged the onus of explaining the nature and source of cash deposits by producing licenses, transaction reports, Form 26AS entries and a bank-to-principal reconciliation, when the same bank account was used to handle receipts of both the assessee and her husband. 3. Whether the Assessing Officer's and the first appellate authority's treatment of a portion of credits as unexplained was justified in light of evidence showing transfers from the account to APT/Payu and certified transaction summaries from principal agents. 4. Whether the delay of 72 days in filing the appeal before the Tribunal ought to be condoned in view of the facts and explanations presented. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of section 69A to cash deposits Legal framework: Section 69A treats cash found to be in excess of known sources as 'unexplained money' and, absent satisfactory explanation, such money may be assessed as income. The assessee bears the onus of satisfactorily explaining the source of unexplained cash/credits. Precedent treatment: No prior judicial precedents were relied upon or considered in the record of this judgment; the decision proceeds on statutory principles and evidentiary assessment. Interpretation and reasoning: The Tribunal examined bank statements, licenses, transaction reports from the principal agents (APT and TSTSL/TSTS), Form 26AS of both spouses and a reconciliation showing amounts transferred to APT and Payu. The Tribunal found that cash deposits in the assessee's bank accounts comprised receipts arising from the assessee's franchisee activities and receipts from the husband's similar agency business. Further, the cash so deposited was subsequently utilized to make payments to the respective principals (APT and Payu), establishing a business flow rather than unexplained personal income. Ratio vs. Obiter: Ratio - where detailed contemporaneous transaction records and certified transaction summaries demonstrate that cash deposits are business receipts collected on behalf of principals and are followed by transfers to those principals, the onus under section 69A is satisfied and additions as unexplained income cannot be sustained. Conclusions: The Tribunal deleted the addition of Rs. 53,09,114/- made under section 69A, holding that the assessee satisfactorily explained the source and application of the cash deposits as business receipts relating to the assessee and her husband. Issue 2 - Sufficiency of evidence where a single bank account was used for receipts of both spouses Legal framework: The identity of source is determinative; where an account in one person's name is used to receive and remit amounts that relate to distinct business activities (including those of a spouse), documentary proof and reconciliation can establish the nexus between receipts and business transactions despite single-account usage. Precedent treatment: No specific authorities were applied or distinguished in the judgment; the Tribunal relied on documentary analysis as the decisive factor. Interpretation and reasoning: The assessee produced (i) licences in respect of franchisee operations, (ii) transaction summaries certified by the principals showing amounts handled, (iii) Form 26AS entries, and (iv) a detailed reconciliation of credits and transfers from the bank account segregating amounts attributable to the assessee and to the husband and showing amounts paid to principals. The Tribunal accepted that business receipts of both spouses passed through the assessee's account and that transfers to APT and Payu corresponded to those receipts. The Tribunal specifically noted that the Assessing Officer and first appellate authority had not disproved the documentary evidence and that the reconciliation established the flow from customer cash to principal-agent payments. Ratio vs. Obiter: Ratio - where independent, contemporaneous records from principals and tax-related documents (Form 26AS) corroborate the assessee's reconciliation of receipts and transfers, the use of a single bank account for multiple related business activities does not taint the explanation and does not justify classification as unexplained money under section 69A. Conclusions: The Tribunal accepted the evidence and reconciliation and held that the deposits were attributable to legitimate franchisee/utility collection activity of the assessee and her husband; accordingly, the addition was deleted. Issue 3 - Validity of sustaining part addition by the first appellate authority despite acceptance of certain transfers Legal framework: Appellate authorities must evaluate whether the taxpayer has satisfactorily explained disputed receipts; partial acceptance of explanations must be reconciled with remaining unexplained amounts and documentary evidence. Precedent treatment: No precedent analysis recorded; the Tribunal evaluated factual evidence de novo. Interpretation and reasoning: The first appellate authority accepted certain transactions (transfers to APT/Payu and non-cash deposits) but sustained an addition of Rs. 53,09,114/- on the ground that the assessee could not show transfers from the bank account separately to principals. The Tribunal, after examining the transaction summaries and the post-hearing reconciliation that separately identified transfers to APT and Payu (including amounts attributable to the husband), concluded that the asserted inability to show transfers was incorrect. The Tribunal found the reconciliation credible and the documentary evidence adequate to establish that the contested credits were business receipts passed on to principals. Ratio vs. Obiter: Ratio - appellate confirmation of additions cannot stand where subsequent reconciliation and corroborative documents demonstrate the movement of funds to principal agents and explain the nature of deposits; silence or failure by revenue to rebut such evidence requires deletion of additions. Conclusions: The Tribunal reversed the first appellate authority's sustaining of the addition and allowed the appeal, deleting the impugned addition. Issue 4 - Condonation of delay in filing appeal Legal framework: Delay in filing an appeal may be condoned where reasonable explanation and circumstances beyond the appellant's control are shown; condonation is discretionary and requires consideration of explanation and prejudice, if any. Precedent treatment: No precedents cited; Tribunal exercised discretion based on facts. Interpretation and reasoning: The assessee's authorised representative explained that the husband's health emergency (heart surgery) and service of notices on an incorrect email ID resulted in unintentional delay; the assessee acted promptly upon becoming aware of dismissal. The Tribunal heard submissions from both sides and condoned the 72-day delay as unintentional and beyond the assessee's control. Ratio vs. Obiter: Ratio - where reasonable and credible causes for delay are demonstrated and prejudice to the revenue is not established, the Tribunal may condone procedural delay and admit the appeal for adjudication. Conclusions: The delay was condoned and the appeal admitted for adjudication; this procedural order enabled the Tribunal's substantive decision allowing the appeal and deleting the addition under section 69A. Cross-references See Issue 1 and Issue 2: the substantive deletion of the addition under section 69A is founded on the evidentiary conclusions reached under Issue 2 (sufficiency of licenses, transaction reports, Form 26AS and bank reconciliation) and the Tribunal's analysis in Issue 1 regarding the statutory onus to explain unexplained money.