To levy Sec 69A on excess cash, the burden of proof is on the AO, to bring out the alleged source.

[Vivek Jalan]

In cases falling under Sec 69A, the words used show that before any of these sections are invoked, the condition precedent as to existence of alternate source of money must be conclusively established by material on record/ evidence. Section 101 of The Indian Evidence Act, 1872 specifies that Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. In Mad HC in COMMISSIONER OF INCOME TAX VERSUS N. SWAMY - 1998 (9) TMI 27 - MADRAS HIGH COURT relied by Chennai ITAT in OMEGA ESTATES. VERSUS INCOME-TAX OFFICER, WARD VII(2). - 2006 (4) TMI 232 - ITAT MADRAS-B and Chd ITAT in INCOME-TAX OFFICER, VII (2) , LUDHIANA VERSUS DR. R.L. NARANG - 2008 (3) TMI 685 - ITAT CHANDIGARH, it was held that the burden of showing that the assessee had undisclosed income is on the revenue.

To levy Sec 69A of Income Tax Act relating to unexplained money, for cash deposits, the AOs generally divide the deposits as some part being in course of business and allege some as unexplained. The explanations of assessees are also ignored while passing the order. The assessees on the other hand argue that the entire deposits is from business and the difference in cash in hand and cash sales is actually the cash purchases. For example, in case the cash balance is Rs.20 Lakhs and Cash deposit in bank account is say Rs. 1 Crore, the question is whether the difference Rs. 80 Lakhs is cash purchase or a part of it is unexplained liable to be assessed u/s 69A. However, to sustain the order u/s 69A, the AO has to bring cogent reasons to justify different view taken on cash deposits found in the assesses bank account during the same FY. They have to also bring out the alleged source. In case no material against the assessee is brought on record for the cash deposits then the demand would not sustain. Further there must also be cogent reasons to reject the stock-in-hand. When the closing stock is not disputed, it would be imperative to admit that the difference is the the sales made by the assessee. A similar case was sustained in the matter of SRI KANAKA MAHALAKSHMI CRACKERS VERSUS INCOME TAX OFFICER, WARD-1 (1) , VISAKHAPATNAM - 2023 (7) TMI 1009 - ITAT VISAKHAPATNAM

Similarly, In INCOME TAX OFFICER WARD 1 (2) , MEERUT VERSUS MRS. DEEPALI SEHGAL - 2014 (9) TMI 1073 - ITAT DELHI, the AO noted that assessee had withdrawn huge cash from bank account and the same amount had been deposited to the same account after lapse of substantial time. The AO rejected the explanation and held that the assessee had cash deposit of Rs.24,38,000/- as unexplained money and the assessee found to be the owner of the money as he had not offered any acceptable and cogent explanation. AO, in his remand report could not bring out any fact that the cash withdrawn from Saving Bank Account and partnership overdraft account was used for other purpose anywhere else then, merely because there was a time gap between withdrawal of cash and its further deposit to the bank account, the amount cannot be treated as income from undisclosed sources u/s 69 of the Act in the hands of the assessee. Hence, the addition made by AO without any legal and justified reason was rightly deleted by the CIT (A).

The provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 69A i.e., from residuary category w.e.f. 01/04/2017. Even where the assessee has successfully explained that the excess stock & excess cash was nothing but business income of assessee and the CIT(DR) could not dislodge the contention and observations that the surrendered amount was pertaining to excess stock & excess cash which was business income of the assessee, the impugned income will not be entangled in the clutches of Section 69/ 69A/69B of the Act and therefore do not warrant application of Section 115BBE of the Act at all. The same was held in the case of DCIT (CENTRAL) -2 INDORE VERSUS SHRI KRISHNA KUMAR VERMA [2023 (2) TMI 639 - ITAT INDORE]