Section 69A Remand: When New Evidence Changes Everything

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Unexplained Cash Deposits: The ITAT's Demand for Due Process 

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In a crucial ruling, the Hyderabad ITAT recently set aside an addition under **Section 69A** of the Income-tax Act. The decision serves as a powerful reminder that additions, particularly for unexplained cash deposits, must adhere to the principle of **Natural Justice**. When taxpayers produce substantive, new evidence—even late in the process—the Assessing Officer (AO) must verify the facts before confirming the addition.

The Assessment Challenge

The Core Disallowance

The case began with an individual assessee who failed to file an ITR. The AO, noticing substantial **cash deposits (₹1.44 Cr)**, invoked Section 69A, treating the entire amount as unexplained money simply because supporting **bills and vouchers were not initially furnished**.

The Assessee's Lifeline

Before the ITAT, the taxpayer presented evidence supporting the claim that the funds came from genuine soft drink business sales. This evidence included auditable documents previously unexamined by the AO or CIT(A):

  • ✔️ **GST Returns** and Sales Invoices
  • ✔️ **Commercial Tax Department** Assessment Order

ITAT's Mandate: Verify the Facts

The Tribunal recognized that the new documents **prima facie supported** the business claim. Therefore, the addition could not stand based on a procedural default alone. The matter was **remanded** back to the AO, with clear instructions to:

  1. **Verify Genuineness:** Examine the GST data, sales invoices, and the Commercial Tax order.
  2. **Cross-Check:** Tally sales and purchases with the bank deposits.
  3. **Re-adjudicate:** Pass a fresh order under Section 69A after granting a reasonable opportunity of being heard.

Key Takeaway 💡

The ITAT confirms that the **verification of substantive facts takes precedence** over initial failure to comply. Taxpayers with genuine, documented business activity should be granted the chance to prove their case, even if the evidence is delayed. **Always use statutory filings (like GST returns) as prime evidence** to substantiate business transactions and counter additions under deeming sections like 69A.

Case Reference: Chinthalapudi Ramakrishna vs. ITO [2025] 179 taxmann.com 219 (Hyderabad - Trib.)

Relevant Section: Section 69A, Income-tax Act, 1961.

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