Pune ITAT Rules Cash Deposits in Scrap Business Cannot Be Treated as Unexplained Money Under Section 69A When Business Turnover Accepted in Other Years

Case Reference

Pathan Wajeed Khan Manzoor Vs ITO (ITAT Pune)
Assessment Year: 2016-17
Order Pronounced: 01st June, 2026

Background and Facts of the Case

The Pune Income Tax Appellate Tribunal delivered a significant ruling in favor of an assessee engaged in the scrap trading business, holding that cash deposits in a bank account cannot be arbitrarily treated as unexplained money under Section 69A read with Section 115BBE of the Income Tax Act, 1961, when the very same business and its turnover have been acknowledged and accepted by the Revenue in both preceding and succeeding assessment years.

The assessee, an individual carrying on scrap purchase and sale operations for over a decade, had originally filed his return of income on 11.05.2016, declaring total income of Rs. 3,00,340/-. Acting on information received through the high-risk transaction category on the Insight Portal of the Income Tax Department, the Assessing Officer identified that the assessee had deposited an amount of Rs. 1,28,26,078/- in a bank account maintained with Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd.

On the basis of this information, the case was reopened under Section 147 of the Income Tax Act, 1961, and a notice under Section 148 was duly issued to the assessee on 31.03.2021.

Sequence of Events Leading to the Dispute

Non-Filing of Return and Subsequent Notices

The assessee did not furnish any return in response to the notice issued under Section 148. Thereafter, the Assessing Officer issued notices under Section 142(1) along with a show cause notice to the assessee, requiring an explanation regarding the substantial cash deposits.

Assessee's Explanation

In response to the statutory notices, the assessee submitted that due to a technical failure — specifically, a computer system crash caused by a virus infection resulting in hard-disk corruption — the relevant data pertaining to the transactions reflected in the bank account maintained with Shri Renuka Mata Multi State Urban Cooperative Credit Society Ltd. could not be retrieved or incorporated at the time of filing the original income tax return.

The assessee further requested that income from the said transactions be computed by applying a net profit rate of 8% on the gross turnover reflected in the disputed bank account, which was consistent with the approach adopted in other assessment years.

Assessing Officer's Action

The Assessing Officer was not satisfied with the explanation offered by the assessee. Accordingly, the assessment proceedings were completed vide order dated 28.03.2023 under Section 147 read with Section 144 read with Section 144B of the Income Tax Act, 1961. The total assessed income was determined at Rs. 1,31,26,418/- as against the declared income of Rs. 3,00,340/-. This assessed income included an addition of Rs. 1,28,26,078/- treated as unexplained money under Section 69A read with Section 115BBE of the Income Tax Act, 1961.