Inapplicability of Section 69A When Transactions Are Recorded in Books of Account

Facts

The Dispute: The Department made an addition of ₹1.53 crores to the assessee’s income, treating cash deposits in the bank account as “unexplained money.”
Assessee’s Defense: The assessee argued that the deposits represented sales and receipts already recorded in its books of account and further supported by corresponding VAT returns.
The Assessment: The Assessing Officer (AO) issued a notice under Sections 68/69 and finalized the addition under Section 68. Notably, the AO explicitly recorded in the order that these transactions were entered in the assessee’s books of account.
First Appeal: The Commissioner (Appeals) ruled that Section 68 was technically inapplicable (likely because it was a bank deposit rather than a credit in books) but instead sustained the addition under Section 69A.

Decision

Final Verdict: In favour of the Assessee (Matter Remanded for limited verification).
Ratio Decidendi:
- Pre-requisite of Section 69A: The Tribunal held that Section 69A is strictly attracted only where the taxpayer is found to be the owner of money, bullion, or jewelry which is not recorded in the books of account.
- Admission by Revenue: Since the AO had already given a factual finding in the assessment order that the transactions were recorded in the books, the very foundation for invoking Section 69A was non-existent.
- Remand for Truth: To meet the ends of justice, the Tribunal set aside the previous orders and directed the AO to conduct a limited verification of the specific details and paper book filed by the assessee to ensure the cash deposits truly matched the recorded sales.

Key Takeaways

Section 68 vs. 69A Strategy: This ruling clarifies the “technical boundaries” of the law. Section 68 applies to credits in the books, whereas Section 69A applies to assets/money found but not recorded in books. If an item is recorded, the Department cannot shift to Section 69A simply because Section 68 failed.
Books as a Shield: Once an entry is admitted as being part of the books of account, the Department’s burden shifts. They must prove the entry is “bogus” or “sham” under Section 68/69, rather than claiming it is “unrecorded” under Section 69A.
Limited Verification: Professionals should push for “limited verification” remands when the AO has made a technical error in selecting the section of the Act, but the underlying documentation (like VAT returns and sales ledgers) is robust.
IT Act 2025 Alignment: Under the renumbered Act (Sections 102 and 104), the distinction between “recorded” and “unrecorded” items remains a fundamental pillar of litigation.

IN THE ITAT DELHI BENCH ‘A’

Bath Affair

Income-tax Officer^*

Vikas Awasthy, Judicial Member
and AMITABH SHUKLA, Accountant Member

IT Appeal No. 916 (Delhi) of 2024
[Assessment year 2017-18]

MARCH 21, 2025

Arun Kishore and Anil kishore, CAs for the Appellant. Ashish Tripathi, Sr. DR for the Respondent.

ORDER

Amitabh Shukla, Accountant Member.- The Assessee is contesting order u/s 250 dated 29.12.2023, passed by NFAC confirming addition of Rs. 1,53,03,000/- made by the Ld. Assessing Officer.

2. The only issue raised by the assessee through its Ground of Appeal, that arises in this case is regarding an addition of Rs. 1,53,03,000/- made by the Ld. Assessing Officer u/s 68 on account of unexplained cash deposits in the bank account of the assessee. The Ld. Council of the assessee argued that the show cause notice issued by the Ld. Assessing Officer was vague and cryptic in as much as it was issued for taxing the income u/s 68/69 of the Act. Thus, the Ld. Assessing Officer was not confident as to whether the impugned addition was liable to be made u/s 68 or u/s 69 of the Act. Before the Ld. First Appellate Authority, assessee had taken to argument that no addition u/s 68 was permissible since the credit in the form of cash was available in assessee’s bank account or to say in the books of account of the banks and not of the assessee’s. The Ld. Council for the assessee submitted that whereas Ld. First Appellate Authority concurred that section 68 was not applicable it proceeded to confirm the addition u/s 69A of the Act. It is the case of assessee that section 69A of the Act gets attracted in a case where books of account are not maintained by the assessee and that in the present case the Ld. Assessing Officer has himself given a finding that all the transactions were recorded in the books of account. The Ld. Council for the assessee further filed a comprehensive paper book indicating that all the sales made by it was recorded in its books of account. The Ld. DR placed reliance upon the order of lower authorities.

3. We have heard rival submissions in the light of material available on records. As regards, the controversy regarding confirmation of addition made by the Ld. Assessing Officer, by the Ld. CIT(A) u/s 69A is concerned, we find force in the argument of the assessee that as the Ld. Assessing Officer himself the given a finding in the order that transactions were recorded in assessee’s books of account, there cannot be any justifications for making addition u/s 69A. Coming to the next limb of controversy that if the transactions were recorded in assessee’s books of account there cannot be any justifications for making addition u/s 69A, we find that again there exists sufficient force in the arguments of the assessee that section 69A is only attracted in cases where transaction are not recorded in the assessee’s books of account and that since in the present case, the same were, admitted by the Assessing Officer himself, recorded in the assessee’s books of account there cannot be any case of addition in impugned section. The assessee on its part have also through its paper book submitted details to indicate that all the sales was recorded in the books of account, VAT returns etc. We also find force in the arguments of Ld. Council qua acceptance of assesee’s audited books of account by the Assessing Officer without pointing any defect u/s 145.We have also noted the extensive paper book filed by the assessee dated 12.03.2025 , from pages 14 to 28 contains instances alluding that sales were indeed recorded in the assessee’s books of account. Be that as it may be, we are of the view that ends of justice would be made if the Ld. Assessing Officer is given an opportunity to examine the details filed by the assessee before us through its paper book dated 12.03.2025. Accordingly, the order of lower authorities is set aside and the Ld. Assessing Officer is directed to conduct a limited verification of details filed before us including paper book dated 12.03.2025. In the event of impugned sales are found duly recorded in the assessee’s books of account, the Ld. Assessing Officer is directed to delete the addition of Rs. 1,53,03,000/-. The Ld. Assessing Officer shall give due opportunity of being heard to the assessee. Accordingly, all the grounds of appeal raised by the assessee on this issue are allowed for statistical purposes.

4. Before us the assessee has raised the additional grounds of appeal challenging the Assessment Order and Appellate Order on legal parameters. As, we have accepted the challenge of the assessee qua non-application of section 153A in this case and directed the Ld. Assessing Officer to conduct a limited verification and to consequently delete the addition, the impugned additional ground is left open.

5. In the result, the appeal of the assessee is allowed for statistical purposes.