HANUMANTHAPPA RAJAPPA MOHAN,CHITRADURGA V. INCOME TAX OFFICER, WARD-2, CHITRADURGA

ITA 1305/BANG/2025

AI Insights

The case involves Hanumanthappa Rajappa Mohan Kumar, a grocery merchant and commission agent, who appealed against the addition of Rs.11,52,165 to his income for the assessment year 2016-17, which was deemed unexplained cash under section 69A of the Income-tax Act, 1961. The addition was based on the AO's finding that the cash balance reported by the assessee was inconsistent with his income and other financial activities. The assessee contested this addition, providing a cash flow statement that the AO rejected. The CIT(A) upheld the AO's decision, leading to the appeal in the Tribunal, which found in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781145 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 02-06-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH R. GHALE; STANDING COUNSEL
• Assessee Lawyers: SANDEEP CHALAPATHY
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT ITA No.1305/Bang/2025 Assessment year : 2016-17 Hanumanthappa Rajappa Mohan Kumar, Ramagiri, Holalkere – 577 522. Chitradurga. PAN: CBVPM 8667D Vs. The Income Tax Officer, Ward 2, Chitradurga. APPELLANT RESPONDENT Appellant by : Shri Sandeep Chalapathy, CA Respondent by : Shri Ganesh R. Ghale, Advocate, Standing Counsel. Date of hearing : 25.09.2025 Date of Pronouncement : 22.10.2025 O R D E R 1. This appeal is filed by Hanumanthappa Rajappa Mohan Kumar (the assessee/appellant) for the assessment year 2016-17 against the appellate order passed by the Addl/JCIT(Appeals)-11, Delhi [ld. CIT(A)] dated 24.03.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [the Act] dated 20.12.2018 by the ITO, Ward 1, Chitradurga [ld. AO] was dismissed. Printed from counselvise.com ITA No.1305/Bang/2025 Page 2 of 5 2. The assessee is aggrieved and is in appeal. 3. The brief facts of the case show that assessee has filed its return of income on 16.8.2016 at a total income of Rs.2,72,78. The assessee is a grocery merchant and also a commission agent for agricultural produces. Return was picked up for limited scrutiny to verify the cash deposit and therefore notice u/s. 143(2) of the Act was issued on 21.6.2017. The assessee was found to have deposited a sum of Rs.88,58,865 in his bank account in cash. In response to the above, the assessee submitted that assessee has a cash balance as on 31.3.2016 of Rs.27,34,800. Assessee submitted the cash flow statement. The ld. AO found that assessee should have the availability of only Rs.15,82,635 as on 31.3.2016 which was stated by the assessee of Rs.27,34,800 and therefore there is a difference of Rs.11,52,165. The assessee has stated that assessee has the opening balance as on 31.3.2016 and there is no unaccounted cash. As the assessee did not furnish any further detail, the ld. AO made an addition to the extent of Rs.11,52,165 u/s. 69A of the Act and determined the total income of assessee at Rs.14,24,945 by assessment order dated 20.12.2018. 4. Aggrieved, the assessee preferred appeal before the ld. CIT(A). The assessee submitted that the working made by the AO is erroneous and further the assessee has availed a loan of Rs.5 lakhs from one Chetan H on 11.8.2015 which is not considered. The ld. AO has not considered this amount and therefore the entire methodology adopted by the ld. AO rejecting the cash flow statement prepared by the assessee has Printed from counselvise.com ITA No.1305/Bang/2025 Page 3 of 5 resulted into the addition. The ld. CIT(A) after considering the explanation of the assessee found that the AO has made the correct addition of Rs.11,52,165 u/s.69A of the Act and confirmed the action of the AO. 5. The assessee aggrieved with the same is in appeal. I have heard the contentions of Mr. Sandeep Chalapathy, CA for the assessee and Mr. Ganesh Ghale, Standing Counsel for the Revenue. I have also carefully perused the orders of the ld. lower authorities. The brief facts show that assessee is deriving income from business of selling groceries and also has commission income for sale of agricultural produces. The assessee has also agricultural income. As the assessee has deposited cash into the bank account, the ld. AO found that a sum of Rs.11,52,165 is unexplained money u/s. 69A of the Act. The assessee stated that it has a closing cash balance as on 31.3.2016 of Rs.32,14,313, out of which after reducing the drawing and LIC payment, net closing cash balance available with the assessee is Rs.27,34,800. The ld. AO disbelieved the same and held that assessee should have only the cash balance of Rs.15,82,635 as on 31.3.2016. He reached the above sum by considering agricultural income of Rs.3,50,000, cash profit for AY 2016-17 of Rs.4,07,035 and receipt from debtors of Rs.8,25,600. Therefore he made an addition of the difference between Rs.27,34,800 and Rs.15,82,630 amounting to Rs.11,52,165 as unexplained money u/s.69A of the Act. On careful consideration of the explanation, I find that the original query of the AO was with respect to the deposit of cash of Rs.88,58,865 into his Printed from counselvise.com ITA No.1305/Bang/2025 Page 4 of 5 bank account by way of cash. To substantiate the claim, assessee prepared a cash flow statement wherein the source of deposit of Rs.88.58 lakhs was shown to have been explained. According to the cash flow statement prepared by the assessee as on 30.3.2016, assessee has stated that cash of Rs.32,14,313 is available with the assessee as per the cash flow statement. It is the claim of assessee that assessee is having cash on hand as on 30.3.2016 amounting to Rs.32,14,313. The assessee submitted that in the cash flow statement assessee has not shown the LIC payment and drawings and based on this, it was stated that cash of Rs.27,34,800 is available with the assessee. The AO says that no, you should not have that much of cash and you should have only Rs.11,52,165. Thus, how the cash flow statement prepared by the assessee was erroneous was not stated by the ld. AO. Without considering the cash flow statement shown by the assessee, the ld. AO has held that assessee has an agricultural income of Rs.3,50,000, cash profit of Rs.4,07,035, payment from sundry debtors is Rs.8,25,600 and therefore assessee should have only Rs.15,82,635 and made an addition of Rs.11,52,165 u/s. 69A of the Act. I find that the provisions of section 69A of the Act is whether assessee is found to be the owner of assets which are not recorded in the books of account. In fact, assessee has recorded the above sum of Rs.32,14,313 in the books of account. Therefore the provisions of section 69A of the Act could not have been applied by the AO. Accordingly, I direct the ld. AO to delete the addition of Rs.11,52,165 made u/s. 69A of the Act without considering the cash flow statement prepared by the assessee, but prepared his own Printed from counselvise.com ITA No.1305/Bang/2025 Page 5 of 5 fund flow, which is not in accordance with the books of account of the assessee. Accordingly the appeal of the assessee is allowed. Pronounced in the open court on this 22nd day of October, 2025. Sd/- ( PRASHANT MAHARISHI ) VICE PRESIDENT Bangalore, Dated, the 22nd October, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "