AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 367
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....ncome-tax Act, 1961, without appreciating that the assessee failed to discharge the onus of establishing the actual utilization of the cash withdrawals for business purposes during the course of assessment proceedings." 2. On the facts and circumstances of the case and in law, The Ld. CIT(A) has erred in deleting the addition solely on the basis that the withdrawals were from disclosed bank accounts, without independently verifying whether the cash was actually utilized for business expenditure or remained unexplained, which is a prerequisite under Section 69A of the Act." 3. On the facts and circumstances of the case and in law, The Ld. CIT(A) has erred in deleting the disallowance of Rs. 12,09,21,303/- being 5% of the total expenditure made on account of unverifiable expenses, without appreciating that the assessee failed to furnish complete, verifiable, and third-party supported documentation during the assessment proceedings, to substantiate the genuineness and business purpose of the entire expenditure claimed." 4. On the facts and circumstances of the case and in law, The Ld. CIT(A) has erred in relying solely on the absence of adverse remarks in th....
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....he banks, either by demonstrating that the same had been expended for business purposes or otherwise. Holding that the source and utilisation of the cash withdrawals remained unexplained, the Assessing Officer treated the sum of Rs. 35,87,16,800/- as unexplained money and brought the same to tax under section 69 of the Act. 3.4 The Assessing Officer further noted that the assessee did not produce any supporting evidence in respect of purchases and other expenditure aggregating to Rs. 2,41,84,26,074/-, as reflected in the profit and loss account. The details of such expenditure were tabulated by the Assessing Officer as under: Sr. No. Particulars Amount in Rs. 1 Purchases 2,67,05,926 2 Direct Expenses 2,48,40,14,510 3 Indirect Expenses 26,64,22,438 Total 2,77,71,42,874 4 Less: Expenses Already Discussed as disallowed 35,87,16,800 5 Balance Expenditure as per P & L Account 2,41,84,26,074 3.5 In view of the continued non-compliance and failure of the assessee to furnish supporting details despite adequate opportunities, the Assessing Officer considered it reasonable to disallow 5% of the balance expenditure of....
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....e petty cash books, and summaries of cash utilisation. The list of documents filed by the assessee, as available at page 41 of the Paper Book, included inter alia: bank-wise withdrawal charts, highlighted bank statements, main and petty cash books of various project sites, site-wise and head-wise cash utilisation summaries, sample vouchers and bills, details of creditors, and sample RA bills pertaining to government projects. 7.4 It was further explained that the assessee is engaged in civil construction activities executed at multiple and often remote locations. The nature of the business necessitates engagement of labour from surrounding areas and distant places, including other States, where labourers frequently change and insist upon cash payments. Construction activity being predominantly labour oriented, payment of wages in cash becomes inevitable. It was also submitted that urgent purchases of material and repairs to machinery and equipment at project sites often require immediate cash payments. These business compulsions necessitated regular and substantial cash withdrawals to ensure uninterrupted execution of projects within stipulated timelines, failing which the asses....
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....n the ground that the appellant did not furnish supporting evidence during assessment proceedings. 7.5 It is found that the appellant provided substantial evidence regarding cash utilization and confirmed that significant amounts were paid to creditors, suppliers, and labourers. However, the AO, in the remand report, expressed an inability to conduct exhaustive verification due to constraints but did not bring any adverse material to disprove the appellant's claims. 7.6 The addition under Section 69A of the Act is unjustified as the AO has treated the cash withdrawals from the appellant's disclosed bank accounts as unexplained money. However, the Hon'ble ITAT Raipur vide its order dated 10.01.2025 in the case of Harish Pandey vs. ACIT (ITA No. 503/RPR/2024) has categorically held that, "Without making necessary inquiries, putting the entire amount of bank deposits under the tax net on the basis of presumption to treat the same as taxable income of the assessee is found to be excessive. Such exercise could have been done either by the Ld. CIT(A), may be by himself or by directing the Ld. AO, however, the First Appellate Authority, who has the p....
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....ar along with sample copies signed by government engineers. " 7.10 Despite having reviewed these records, the AO in the remand report does not bring any adverse finding against the appellant's claim that the withdrawals were used for business purposes. The Hon'ble ITAT Ahmedabad vide its order dated 10.10.2024 in the case of Rajendra Gadhia vs. ITO (ITA No. 31/Ahd/2024) held that "cash withdrawal satisfactorily explained through documents cannot be added u/s. 69A of the Act." 7.10.1 The Hon'ble ITAT has also ruled that: "Once cash withdrawals are demonstrated, the burden shifts to the Department to disprove their availability for subsequent deposits. Further, it was held that "When the assessee has satisfactorily explained cash withdrawals through documented evidence, and the AO has not brought any adverse material on record to disprove their availability, an addition under Section 69A cannot be sustained." 7.11 The Hon'ble ITAT Mumbai vide its order dated 12.05.2023, in the case of Ramchandra Kanu Mendadkar vs. CIT(A) (ITA No. 163/MUM/2023), clarifies that: "addition under Section 69A of the Income Tax ....
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....ted anywhere else. The Ld.AR of the assessee submits that once the closing balance cash of Rs. 6,77,106/- was accepted and the assessee has clearly proved withdrawal from his bank account, then the lower authorities were not justified in treating the cash available with the assessee as unexplained." Similarly, in the case of Rajendra Gadhia vs. ITO (supra), the ITAT noted that: "the Department has not provided contrary evidence. Therefore, the Tribunal concludes that the withdrawals from these accounts should be treated as the source for Rs. 8,30,000/- of the deposits during demonetization. Judicial precedents, such as, judgement of Jurisdictional High Court in the case of Shailesh Rasiklal Mehta reported at (2009) 176 taxmann.com 270 (Gujarat), support this conclusion by establishing that once cash withdrawals are demonstrated, the burden shifts to the Department to disprove their availability for subsequent deposits." 7.14 In view of above, I am the opinion that the cash withdrawals were made due to genuine business requirements, the AOs action in treating them as unexplained cannot be sustained. The documents submitted include a chart of bank-wise cash....
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....oney not recorded in the books of account and fails to offer a satisfactory explanation regarding the nature and source thereof. On a plain reading of the statutory provision, it is evident that the primary requirement for invoking section 69A is that the source of the money should be unexplained or not recorded in the books of account. In the present case, the Assessing Officer himself has acknowledged that the amounts in question were withdrawn from the assessee's disclosed bank accounts. Thus, the source of the cash stands duly explained and is not in dispute. 8.2 Once the source of cash is established, no addition under section 69A can be sustained merely on the basis of doubt regarding its utilisation. If the Assessing Officer was of the view that any expenditure was not incurred wholly and exclusively for the purposes of business, or that vouchers were defective or unverifiable, the appropriate course would have been to examine such expenditure under the relevant provisions of the Act. However, the deeming provisions of section 69A cannot be invoked solely on the ground that the Assessing Officer was not satisfied about the utilisation of the cash, despite the source being....
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....ails are forwarded to the AO and a remand report was called from him. The rejoinder from appellant was also called for against the remand report. 8.3 The AO in his remand report submitted his comments wherein he stated that on perusal of audited books of accounts submitted by the appellant, it has been observed that total direct expenses are of Rs. 190,08,93,929/- and indirect expenses of Rs 25,67,69,541/- (totalling to Rs. 215,76,63,470/-) during the year under consideration. Out of these total expenses, payments made in cash is Rs. 11,89,77,013/- for direct expenses and Rs. 87,38,742/- for indirect expenses (totalling to Rs. 12,77,15,755/-). 8.4 The AO further mentioned that the appellant is engaged in the business of civil construction work undertaken for Government, Semi-Government, and private contracts. These construction projects are spread across multiple locations and typically extend beyond a year for completion. Given the diverse and numerous project sites, labourers are assembled from nearby areas as well as from distant states. These labourers, primarily unskilled, need to be retained for extended periods, necessitating the provision of on-site accomm....