₹52.3 Lakh Addition Under Section 69A: ITAT Says Recheck
The keyphrase Section 69A addition has again come into spotlight after a recent ITAT ruling. The case involved an unexplained cash deposit of ₹52.3 lakh, but the ITAT noted that the assessee was not grossly non-compliant and directed the Assessing Officer (AO) to conduct a fresh enquiry.
Let’s break down what Section 69A means, how it’s applied, and what this case teaches taxpayers.
What is Section 69A of Income Tax Act?
Section 69A empowers the Income Tax Department to treat unexplained money or valuables as deemed income if the taxpayer fails to satisfactorily explain the source.
Applies to:
- Cash deposits
- Bullion, jewellery, or valuables
- Bank account balances
- Digital assets (under current interpretation)
Key Conditions for Addition:
- The amount is not recorded in the books
- Assessee cannot explain the source
- Explanation is not satisfactory in AO’s opinion
Tax Treatment:
- 60% flat tax under Section 115BBE
- No deduction allowed
- Penalty provisions may apply
Case Summary: Why ITAT Sent the Case Back
Case: ITAT Rajkot Bench – [Assessee v. ITO]
Addition: ₹52,31,000 under Section 69A
Issue: AO made the addition based on cash deposit in bank without accepting the assessee’s explanation.
What ITAT Observed
- The assessee had submitted an explanation (though it was brief).
- The AO did not examine the source properly.
- There was no attempt to establish willful concealment.
- The AO failed to provide the assessee adequate opportunity for rebuttal.
ITAT Direction
“The matter is restored to the AO for fresh verification. The assessee must be granted proper opportunity to explain the source of cash.”
Key takeaway: Not every unexplained deposit calls for harsh addition. Natural justice must be followed.
Why This Case Matters for Taxpayers
If you’ve deposited large amounts in cash — whether from agricultural income, business proceeds, or asset sales — you must document the trail. But if the AO fails to conduct due enquiry, you may have a valid legal defence.
Tips to Avoid Section 69A Addition:
- Always keep source proof — like sale deeds, loan agreements, or withdrawal slips
- Ensure all cash inflows are recorded in books
- If questioned, submit reply along with evidence
- If AO refuses to accept without reason — go for appeal
Expert View
“Section 69A is a blunt tool. But courts have repeatedly held that it cannot override the principle of natural justice. The burden of proof is not absolute — the AO must also show due process.”
— A Senior CA from APTPCA
CBDT Guidance and Legal Basis
- CBDT Instruction No. 3/2018: AOs must avoid high-pitched assessments without due basis.
- SC Ruling in CIT v. P.K. Noorjahan: Just because an explanation is not accepted doesn’t mean addition is automatic.
- Relevant Section: 69A + 115BBE + Rule of Natural Justice (Article 14, Constitution of India)
Related Efiletax Reads
Summary
ITAT remanded a ₹52.3 lakh Section 69A addition, citing lack of due enquiry and opportunity. Cash deposits must be probed fairly—natural justice matters.
FAQs
Q1. Can cash from a relative be added under 69A?
Only if you fail to prove the source and identity. Gift deeds, PAN, and bank trail are a must.
Q2. Is Section 69A addition appealable?
Yes. You can approach CIT(A), then ITAT. Courts examine whether enquiry was proper.
Q3. Does 69A apply to digital wallets or UPI?
Currently not directly, but unexplained deposits in linked accounts can trigger scrutiny.
Final Word
Facing a cash deposit notice? Don’t panic. Respond with documents, stay calm, and if needed — appeal. And if you need expert help for IT notices or appeals, reach out to Efiletax. We simplify tax. We fight smart.