MALA,BANGALORE V. INCOME-TAX OFFICER, BANGALORE

ITA 1956/BANG/2025

AI Insights

The case involves an appeal by Shri Mala against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2017-18, which confirmed the addition of 27,97,670 as unexplained money under section 69A of the Income Tax Act, 1961. The appellant's bank account showed cash deposits during the demonetisation period, which were treated as unexplained by the Assessing Officer. The appellant argued that these deposits were proceeds from a liquor business operated by her mother, Smt. Shashikala, and that the income from this business had already been taxed in the hands of the previous owner and subsequently in her mother's hands after the formal transfer of the license. The Tribunal found merit in the appellant's arguments and directed a fresh examination of the evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791589 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 03-09-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH R GHALE; STANDING COUNSEL
• Assessee Lawyers: BHUVAN M
• Keywords: Set aside; Business income

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No.1956/Bang/2025 Assessment Year: 2017-18 Shri Mala, No.298, 2nd Cross, 6th Main Road, Basaveshwaranagar, Bengaluru – 560 079. PAN – ARTPM 0390 B Vs. The Income Tax Officer, Ward – 6(2)(1), Bengaluru. . APPELLANT RESPONDENT Assessee by : Shri Bhuvan M, CA Revenue by : Shri Ganesh R Ghale, Standing Counsel for Department Date of hearing : 13.11.2025 Date of Pronouncement : 08.12.2025 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed dated 31-07-2025 for the assessment year 2017-18. 2. This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2017-18, wherein the addition of ₹27,97,670/- was made under section 69A of the Income Tax Act, 1961 as unexplained money vide order dated 31-07-2025. Printed from counselvise.com ITA No.1956/Bang/2025 Page 2 of 5 . 3. The assessee is an individual deriving income from house property and other sources. For A.Y. 2017-18, she filed her return declaring total income of ₹5,71,900/- only. The case was selected for limited scrutiny for verification of cash deposits made during the demonetisation period. The Assessing Officer noticed cash deposits of ₹27,97,670/- in the assessee’s Axis Bank account and treated the same as unexplained under section 69A of the Act. The learned CIT(A) also confirmed the impugned addition in his ex-parte order in the absence of the assessee. 4. Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us. 5. It was explained by the ld. AR that the appellant’s mother, Smt. Shashikala, had purchased a liquor shop licence from one Mr. C. Srinivas during A.Y. 2017-18 and had taken over the business. However, the official transfer of licence was delayed due to procedural formalities, but the business operations were effectively managed by the appellant’s mother. 6. The appellant merely assisted her mother in operating the business and in facilitating online banking transactions. The sale proceeds of the liquor business were deposited in the appellant’s bank account and subsequently transferred to the Karnataka State Beverages Corporation Limited (KSBCL) for purchase of stock. 7. The appellant did not derive any income or remuneration from this business, and the business income had already been offered to tax in the hands of the rightful owner — first by Mr. C. Srinivas for A.Y. Printed from counselvise.com ITA No.1956/Bang/2025 Page 3 of 5 . 2017-18, and thereafter by the appellant’s mother for A.Y. 2018-19 when the licence was formally transferred. 8. The Learned Authorised Representative (AR) before us further submitted that: • The utilisation of the cash deposits is not in dispute, as the deposits were used for payments to the KSBCL for the purchase of liquor stock. Bank statement was enclosed in support of the contentions. • The bank statement clearly evidences that the deposits and withdrawals correspond to the business operations of the liquor shop. • Hence, it is established that the cash deposited represented sale proceeds of the liquor business. • It was further contended that since the income from such business was already offered to tax by Mr. C. Srinivas, no separate addition can be made in the assessee’s hands, as it would amount to double taxation. 9. The Learned Departmental Representative (DR), on the other hand, submitted that the assessee neither appeared during the assessment nor before the ld. CIT(A). He therefore prayed that the matter may be restored to the Assessing Officer for fresh adjudication after considering the documents and evidence furnished by the assessee. 10. We have heard the rival contentions and perused the materials available on record. On perusal of the bank statement placed on record, it is evident that the cash deposits were immediately utilised for making Printed from counselvise.com ITA No.1956/Bang/2025 Page 4 of 5 . payments to KSBCL towards purchase of liquor. Thus, the utilisation pattern substantiates the contention that the deposits represented sale proceeds of the liquor business and not unexplained money. 10.1 The argument of the learned AR is also supported by the subsequent conduct of the parties, as in the next assessment year, the liquor licence stood transferred to the appellant’s mother, and the corresponding business income was duly offered to tax by her. 10.2 We therefore find merit in the plea of the assessee that the cash deposited cannot be treated as unexplained under section 69A of the Act, since the trail of deposits and payments establishes a clear nexus with the regular business operations carried out under the liquor licence originally standing in the name of Mr. C. Srinivas. 10.3 The finding of the lower authorities ignoring these factual aspects cannot be sustained. However, since the lower authorities did not have the benefit of examining the detailed documentary evidence now produced, we consider it appropriate to set aside the matter to the file of the Assessing Officer for fresh adjudication as per law and in the light of above stated discussion. 10.4 The Assessing Officer shall verify the bank statements, KSBCL payment details, and other supporting documents, and decide the issue afresh in the light of the above observations. If the nexus between deposits and business receipts is found established, the addition made under section 69A shall stand deleted. Printed from counselvise.com ITA No.1956/Bang/2025 Page 5 of 5 . 10.5 In view of the foregoing discussion, we set aside the impugned order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer for fresh consideration as per law and in the light of the above observations. Hence, the ground of appeal of the assessee is treated as allowed for statistical purposes. 11. In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in court on 8th day of December, 2025 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 8th December, 2025 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore Printed from counselvise.com "