Income Tax: Receiving an income tax notice is a stressful experience for anyone, especially when the income is completely legitimate and yet suspect. Srinivasappa, a petrol pump owner from Chikkaballapur, Karnataka, has a similar story. Despite a business turnover of over ₹37 crore, the Income Tax Department declared ₹14.10 lakh deposited in his bank account as “unexplained money.
How did the dispute begin?
| Particulars | Details |
|---|---|
| Case Type | Income Tax dispute on cash deposit |
| Taxpayer | Srinivasappa, Petrol pump owner from Karnataka |
| Disputed Amount | ₹14.10 lakh cash deposit |
| Allegation by IT Department | Treated as Unexplained Money under Section 69A |
| Assessed Turnover of Business | More than ₹37 crore |
| Evidence Provided by Taxpayer | Cash book, audit records, date-wise cash details, reconciliation statements |
| ITAT Observation | Cash was recorded in audited books and source was clear |
| Verdict | Entire addition of ₹14.10 lakh deleted |
| Reason for Decision | Section 69A not applicable when cash is recorded and source is proven |
| Final Outcome | Complete relief and clean chit to the taxpayer |
The AO and CIT(A) assumed that the source of the ₹14.10 lakh deposited in Srinivasappa’s SBI and HDFC bank accounts was unclear. Both officials claimed that the cash was unrelated to his business and unrecorded.
Therefore, it was considered taxable income under Section 69A and added to his total income. This action could have resulted in a significant burden of additional tax and interest on Srinivasappa.
What is Section 69A?
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— Laughing Colours (@LaughingColours) November 15, 2025
This section of the Income Tax Act applies when a person is found in possession of cash that is not recorded in their books and whose source cannot be clearly explained. This provision applies only when the money is unrecorded and unsourced. The department alleged that this cash was not recorded, but the truth turned out to be something else.
How did Srinivasappa prove his honesty?
During the ITAT hearing, Srinivasappa responded with patience and precise documentation. He demonstrated that his petrol pump business has a turnover of ₹37 crore and that every transaction is recorded in audited books. He presented the cash book, date-wise details, and reconciliation statements.
These documents clearly established that the ₹14.10 lakh cash was entirely business income and was already recorded in the accounts. He also stated that when transactions worth crores of rupees are recorded in his accounts, it is wrong to suspect only ₹14 lakh. According to them, the AO did not even properly investigate the bank accounts and reached conclusions without facts.
How did the ITAT give its final decision?
The tribunal strongly stated that Section 69A cannot apply when cash is already recorded and its source is fully confirmed. It is not appropriate to label legitimate business income as “unexplained money” based on suspicion. The ITAT ordered the removal of all income added by the AO and stated that there was no need to send the case back to the AO, as the taxpayer had already provided all the evidence.
This decision demonstrated that income tax officials cannot increase tax calculations based solely on guesswork and suspicion. If the taxpayer possesses evidence, the department must accept it.
What message did this case send?
This case became an important example for businesses and taxpayers across the country. It demonstrates that even if a tax notice is false and you have the correct documents, you can seek legal justice. This decision also demonstrates that the system is fair and that judicial institutions protect taxpayers who act honestly.
Srinivasappa, with patience and evidence, proved his integrity and received a complete clean chit from the ITAT. Now, he will not be required to pay any additional tax, nor will the ₹1.4 million be considered unexplained income. This decision is not only a legal victory for him but also a mental relief.
FAQs
Q1. Why did the Income Tax Department add ₹14.10 lakh to the taxable income?
The department treated the cash deposit as unexplained money under Section 69A.
Q2. How did the taxpayer prove the source of the money?
He provided audited books, cash book details and reconciliation statements confirming the cash was business income.
Q3. Why did ITAT reject the application of Section 69A?
Because the cash was already recorded in the audited accounts with a clear source.
Q4. What was the final decision of ITAT in this case?
ITAT removed the entire addition and granted full relief to the taxpayer.
Q5. What does this judgment mean for other taxpayers?
If income is properly recorded and supported with documents, tax cannot be imposed based on suspicion.
Disclaimer: This article is for informational purposes only. Tax situations vary from person to person. If necessary, consult a certified tax advisor or expert.
