Tax Tribunal Deletes Addition Over Rs 3.69 Crore Bangle Business Cash Deposits

The Income Tax Appellate Tribunal (ITAT) deleted an addition of Rs 3.69 crore made by the tax department regarding substantial bank deposits found in the account of a woman handling cash for bangle traders. The tax authorities had treated these deposits as unexplained income under Section 69A of the Income Tax Act. However, the tribunal established that the funds belonged to the traders rather than the taxpayer, noting that the deposits were directly connected to a commission-based business operation. Under Section 69A of the Income Tax Act, the burden typically lies on the revenue to prove ownership when unexplained money is found in a taxpayer's possession.

The old position often saw tax officers automatically treating high bank balances as personal income of the account holder. The new position reinforced by this ruling clarifies that when a taxpayer acts strictly as a cash handler or commission agent for third-party traders, the department must produce concrete evidence showing the money belongs personally to the taxpayer before making an addition. Tax professionals and chartered accountants should advise clients who manage cash for others to maintain meticulous records, ledger accounts, and identity proofs of the primary traders.

Practitioners must ensure that commission agreements and transaction trails are properly documented during assessments to challenge similar additions under Section 69A successfully. Bottom line: maintaining robust documentation protects intermediaries from bearing the tax liability of business funds belonging to others.