ITAT Delhi Upholds Section 69A Addition on Rs. 7.50 Crore Cash: Detailed Case Note

Background of the Dispute

The case of ACIT Vs Shiv Shakti Traders (ITAT Delhi) revolves around a substantial cash seizure of Rs. 7.50 crore and its tax treatment under Section 69A of the Income Tax Act 1961. The assessee, an Association of Persons (AOP) operating multiple retail liquor vends, claimed that the intercepted cash represented business receipts duly recorded in its books.

The Revenue authorities, however, treated the amount as unexplained money under Section 69A, and the matter ultimately reached the Income Tax Appellate Tribunal (ITAT), Delhi Bench, after the CIT(A) deleted the addition. The Tribunal has now reversed the CIT(A)’s decision and restored the entire addition of Rs. 7.50 crore.

This order provides important guidance on:

  • The evidentiary burden on the assessee when large amounts of cash are found in its possession
  • The degree of corroboration needed to accept explanations regarding source and movement of cash
  • The application of Section 69A in the context of regulated businesses like liquor trade

Search, Seizure and Initial Facts

Cash Seizure by Police

On 06.05.2017, the local police at Daliganj crossing, Lucknow, stopped a Toyota Innova (UP 32 GV 4413) and recovered Rs. 7.50 crore in new currency notes, placed in four boxes. The vehicle was being used by:

  • Shiv Kumar Tiwari, a cash courier boy
  • He admitted in his Section 132(4) statement that the cash was handed over to him by Shri Atul Bhatia, another cash courier associated with M/s Shiv Shakti Traders

The information was forwarded to the Income Tax Department, which triggered further proceedings.

Assessee’s Business Profile and Return

  • The assessee is M/s Shiv Shakti Traders, an AOP engaged in retail liquor trade through multiple licensed vends.
  • It is assessed with Central Circle-29, New Delhi.
  • For AY 2018-19, the assessee filed its return on 31.10.2018, declaring total income of Rs. 12,16,54,740/- under the heads “income from business or profession” and “income from other sources”.
  • Notice under Section 143(2) was issued on 27.09.2019, followed by multiple notices under Section 142(1) along with detailed questionnaires.

Assessee’s Explanation Before the AO

The assessee offered two broad lines of explanation at different stages:

  1. First explanation:

    • The cash represented sale proceeds from its liquor business in Lucknow.
    • It was allegedly being transported from Lucknow to Haldwani to be deposited into the assessee’s HDFC Bank account there.

  2. Subsequent variation of stand:

    • The assessee later claimed that during the demonetization period, the Haldwani branch had sent cash (in old currency) to the Lucknow branch for depositing into bank accounts.
    • The present movement of Rs. 7.50 crore from Lucknow to Haldwani was explained as a return of that earlier cash to the Haldwani branch.

The assessee maintained that supporting documents, including books and cash books, were produced and should have been accepted.

Findings of the Assessing Officer

The Assessing Officer (AO) conducted a detailed factual and comparative analysis of sales, cash deposits, and the pattern of business operations. The AO’s key conclusions are summarised below.

No Functional Office and Lack of Books at Claimed Collection Point

The assessee claimed that cash was collected at Plot No. 08, 4-Shahnazaf Road, Lucknow, from various salesmen and consolidated there. However:

  • Enquiries on 06.05.2017 revealed no functional office at this address.
  • No books of account relating to sales in Lucknow were found there.
  • This contradicted the courier boys’ claim that cash from multiple vends was pooled at that location before being handed over.

The AO therefore rejected the assertion that the seized cash came out of recorded sales collected at that address.

Analysis of Cash Sales Pattern

The AO examined sales data furnished by the assessee, comparing average daily cash sales for different periods in FY 2016-17 and FY 2017-18. On the basis of tables reproduced in the assessment order, the AO concluded:

  • The average daily cash sales for 01.04.2017 to 05.05.2017 were Rs. 34,96,269/-.
  • Even assuming accumulation of 2–3 days’ sales, such figures could not logically support possession of Rs. 7.50 crore in cash at a single point of time.
  • Comparative figures for:
    • 01.04.2016 to 05.05.2016: average daily cash sales around Rs. 36,89,859/-
    • 06.05.2016 to 30.06.2016: average daily around Rs. 31,10,723/-
  • However, for FY 2017-18:
    • 01.04.2017 to 05.05.2017: average Rs. 34,96,269/-
    • 06.05.2017 to 30.06.2017: average Rs. 17,81,898/-, which was abnormally lower compared with the same period in the previous year.