Agency funds and beneficial ownership determine Section 69A treatment; intermediary cash withdrawals cannot automatically become unexplained money

Cash withdrawals from a bank account should not be treated as unexplained money under Section 69A where the account holder acts only as an authorised sub-agent and intermediary. Bank statements, day books, ledger accounts and Form 26AS may establish that receipts were remitted by foreign exchange entities for onward disbursal to beneficiaries after KYC verification. Where the intermediary's own income is limited to commission, subject to tax deduction under Section 194H, and no evidence shows beneficial ownership of the funds, the receipts are not attributable to the intermediary as unexplained money. Section 69A concerns unexplained money owned by the assessee and does not ordinarily support an addition based solely on cash withdrawals from the assessee's account.

---

---

Issues: Whether cash withdrawals from the assessee's bank account, representing funds received and routed as an authorised sub-agent of foreign exchange entities, could be treated as unexplained money under Section 69A of the Income-tax Act, 1961.

Analysis: The material on record, including bank statements, day book, ledger accounts and Form 26AS, established that the assessee acted as an intermediary for Transcorp International Ltd. and Muthoot Forex Ltd. on commission basis. The receipts in the bank account were found to be remittances from those entities for onward disbursal to beneficiaries after KYC verification, while the assessee's own income was only the commission reflected in Form 26AS with tax deduction under Section 194H of the Income-tax Act, 1961. No material was produced to show that the assessee was the beneficial owner of the funds. On the legal framework, Section 69A of the Income-tax Act, 1961 applies to unexplained money owned by the assessee, and in the context of bank transactions it could at best relate to unexplained deposits or credits, not cash withdrawals from the assessee's own account. The invocation of Section 69A on cash withdrawals was therefore unsustainable on facts as well as in law.

Conclusion: The addition made under Section 69A of the Income-tax Act, 1961 on account of cash withdrawals was rightly deleted; the issue was decided in favour of the assessee and against the Revenue.

---