Addition under s. 69A deleted where audited receivables explain bank deposits from assessed liquor business

ITAT Hyderabad allowed the assessee's appeal and deleted the addition made under s. 69A. It held that the assessee had a confirmed receivable of Rs. 15 lakhs as on 31.03.2018, duly reflected in audited financial statements, and neither AO nor CIT(A) produced adverse material to dispute these audited figures or the genuineness of such receivables. As the existence of receivables was accepted and related to an assessed liquor business, realization of these receivables in later years constituted an explained source of the bank deposits. Consequently, treating total bank credits as unexplained money was unjustified.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the total bank credits of Rs. 12,21,810/- during the relevant assessment year could be assessed as unexplained money under section 69A of the Income Tax Act, 1961.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Taxability of bank deposits as unexplained money under section 69A

Legal framework (as discussed)

2.1 The assessment and first appellate orders invoked section 69A of the Income Tax Act, 1961 to treat the total credits in the assessee's bank account, including cash deposits, as unexplained money, on the ground that the assessee had not satisfactorily explained the source of such deposits.

Interpretation and reasoning

2.2 The Tribunal examined the earlier assessment order for Assessment Year 2017-18, wherein the Assessing Officer had clearly recorded that the assessee was engaged in the business of retail liquor trading. This prior finding by the Department itself was treated as acknowledgment of the assessee's business activity.

2.3 The Tribunal considered the copies of license fee payments placed on record, which corroborated the existence of the liquor retail business carried on by the assessee in earlier years.

2.4 The Tribunal further examined the audited balance sheet as at 31.03.2018, which disclosed receivables of Rs. 15 lakhs arising from the assessee's past liquor business. This audited financial statement had been produced before the lower authorities.

2.5 The Tribunal noted that neither the Assessing Officer nor the first appellate authority had brought any adverse material on record to dislodge the audited financials or to challenge the genuineness or existence of the receivables shown therein.

2.6 It was reasoned that once the existence of receivables is duly established through audited accounts, and there is no contrary finding on their genuineness, the subsequent realization of such receivables in later year(s) constitutes a valid and explained source for the deposits in the assessee's bank account.

2.7 The Tribunal observed that the lower authorities had also not disputed the authenticity of the earlier assessment order or the license fee documents evidencing the liquor business, yet had concluded that there was no reliable evidence of such business or of the source of deposits.

2.8 In the absence of any adverse finding or material against the documentary evidence produced, the Tribunal held that the deposits could not be characterized as unexplained money under section 69A.

Conclusions

2.9 The assessee had furnished sufficient and credible evidence - including the prior assessment order acknowledging the liquor business, license fee records, and an audited balance sheet reflecting receivables of Rs. 15 lakhs - which established explained sources for the bank deposits.

2.10 The addition of Rs. 12,21,810/- under section 69A, sustained by the first appellate authority, was held to be unsustainable and was directed to be deleted.

2.11 The appeal was allowed, resulting in deletion of the entire addition made under section 69A for the bank deposits in question.

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