Income Tax: Karnataka petrol pump owner Srinivasappa has been granted a major relief by the ITAT Bangalore. The Income Tax Department had added ₹14.10 lakh deposited in his bank accounts to his taxable income under Section 69A, terming it "unexplained money." However, Srinivasappa proved that this cash was already recorded in his audited books and was business income. The ITAT held that Section 69A cannot apply when the money is recorded and the source is clear. The AO had acted without proper investigation. Therefore, the ITAT quashed the entire addition and ruled in the taxpayer's favor.

Income Tax: Srinivasappa, a petrol pump owner from Chikkaballapur taluk in Karnataka, was accused by the Income Tax Department of claiming that ₹14.10 lakh cash deposited in his bank accounts was "unexplained money." The AO (Investigating Officer) and CIT(A) assumed that SBI and HDFC Bank were unaware of the source of these cash deposits, and therefore, they were considered taxable income under Section 69A.

What does Section 69A say?

This section of the Income Tax Act applies when a person receives cash that is not recorded in their accounts and whose exact source cannot be ascertained. This means that this section applies only when there is unexplained and unrecorded cash.

How did Srinivasappa explain?

Srinivasappa proved to the ITAT that his petrol pump business has a turnover of over ₹37 crore and that his entire books were audited. He presented the cash book, date-wise details, and reconciliation statements, demonstrating that the entire cash of ₹14.10 lakh was business income and was already recorded in the accounts. He also stated that the AO did not provide even the exact bank account number. When transactions worth crores of rupees continue to occur in their accounts, it is wrong to doubt only Rs 14 lakh.

What did the ITAT say?

The tribunal clearly stated that when the money is already recorded in the books and its source is proven, Section 69A cannot be applied. The AO made allegations without a thorough investigation, therefore the entire addition was incorrect. The ITAT ordered that this added income of Rs 14.10 lakh be immediately removed. The court also stated that when the taxpayer provided all the evidence, there was no need to send the case back to the AO. This decision shows that tax officials cannot increase tax based on mere suspicion, especially when everything is clearly written in the records.

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