AO Can’t Treat Unexplained Cash as Income u/s 69A if Assessee Accounted for It Under Presumptive Taxation | ITAT

Case Details: Imran Ibrahim Badshah vs. ITO - [2025] 170 taxmann.com 166 (Mumbai-Trib.)

Judiciary and Counsel Details

• Narender Kumar Choudhry, Judicial Member
• Bharat Kumar, Ld. A.R. for the Appellant.
• V.K. Chaturvedi, Ld. Sr. D.R. for the Respondent.

Facts of the Case

The assessee was engaged in the business of imitation jewellery and declared the gross profit at 8% of gross receipt as his income under section 44AD. On enquiry, the Assessing Officer (AO) revealed that the assessee had furnished the computation of income for receipt under section 44AD; however, they could not furnish a certain amount, which remained unexplained. The AO treated such an amount as unexplained and added it under section 69A.

On appeal, the CIT(A) affirmed the addition made by the AO. Aggrieved by the order, an appeal was filed to the Mumbai Tribunal.

AAR Held

The Tribunal held that though it was a fact that the total deposits of 1.25 crores (approximately) were made in the bank account maintained with the Co-operative Bank Ltd. The assessee has shown the amount of 1.08 crores (approximately) as a gross receipt and claimed that the differential amount was from the savings out of the profits earned from the earlier years and the household savings of the family, which was deposited in the bank during the demonetisation period.

The AO and the CIT(A), considering that the assessee furnished no details, respectively, made and affirmed the addition under section 69A. Instant Court has thoughtfully considered the rival claims of the parties and the determination made by the authorities below. Admittedly, the assessee has not done any other business except the imitation jewellery. Even otherwise, no material was available on record by which it can be construed that the assessee has earned any other income other than from the admitted business.

Thus, considering the peculiar facts and circumstances in totality, it would be appropriate, as both the parties have also agreed in the open court, to treat such an amount as business receipts. Therefore, the same can be subjected to profit at 8 percent of the said amount, which can be added to the assessee’s income. Hence, the AO was directed to apply the profit at the rate of 8% and add the same to the assessee’s income. Accordingly, the additions under section 69A were deleted.