ITAT Delhi Deletes Addition Under Section 69A: No Presumption of Cash Ownership Without Actual Possession

Introduction

In a significant ruling strengthening taxpayer safeguards against arbitrary additions, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Mr. Bipin Agarwal vs. ACIT - ITA No.2844/Del/2025 has held that Section 69A of the Income-tax Act, 1961 cannot be invoked merely on the basis of third-party seized documents unless ownership and possession of cash are conclusively established. The decision in Bipin Agarwal vs Assistant Commissioner of Income Tax reiterates the settled legal principle that presumption cannot substitute proof, especially in cases arising from search-related material of third parties.

Background of the Case

The case arose pursuant to a search and seizure operation under Section 132 conducted on the CFM Group of Companies on 08.12.2021. During the search, certain seized tally ledgers titled “BCM” and “Porwal” were allegedly found, which, according to the Assessing Officer (AO), indicated payment of commission of ₹5,50,000 in cash to the assessee, Mr. Bipin Agarwal, during FY 2018-19.

Based solely on these entries and a statement recorded from a third party during the search, the AO reopened the assessment under Section 147, issued notice under Section 148, and ultimately made an addition of ₹5,50,000 under Section 69A, treating the amount as unexplained money.

Assessment and First Appellate Proceedings

During the reassessment proceedings, the assessee consistently denied having received any cash from the CFM Group. It was specifically contended that:

• No cash was found from the assessee during any search.
• The alleged ledger was not prepared, maintained, or owned by the assessee.
• The invoices relied upon by the AO did not corroborate the alleged cash entry.
• No independent enquiry was conducted to establish actual receipt of cash.

Despite these submissions, the AO proceeded to make the addition, which was subsequently confirmed by the Commissioner of Income Tax (Appeals), holding that the seized material and third-party statements were sufficient to justify the addition.

Core Legal Issue Before the ITAT

The principal issue before the Tribunal was:

Whether an addition under Section 69A can be sustained solely on the basis of third-party seized ledgers and statements, when no cash is found in the possession of the assessee and no independent evidence establishes ownership of such cash.

Tribunal’s Analysis and Findings

The ITAT undertook a detailed examination of the statutory requirements of Section 69A, emphasizing that ownership of money is a sine qua non for invoking the provision. The Tribunal categorically noted that:

• It was an admitted fact that no cash was found in the possession of the assessee.
• The entire addition was based on documents seized from a third party.
• The assessee had consistently denied the transaction, and no corroborative evidence was brought on record by the Revenue.

The Tribunal held that mere notings in a third-party ledger, without further enquiry or corroboration, cannot lead to a presumption that the assessee was the owner of the alleged cash.

Reliance on Coordinate Bench Decision

The ITAT placed significant reliance on its earlier decision in DCIT vs Yograj Arora (ITA No. 2440/Del/2022), wherein it was held that:

• Presumption of ownership cannot arise unless the assessee is found in possession of cash.
• Additions based on conjectures and surmises, without satisfying statutory preconditions, are unsustainable.

Applying the same ratio, the Tribunal observed that Section 69A cannot be invoked in a vacuum, and the Revenue must conclusively establish both existence and ownership of unexplained money in the hands of the assessee.

Final Decision of the ITAT

Respectfully following the binding precedent and settled legal position, the ITAT:

• Deleted the addition of ₹5,50,000 made under Section 69A
• Allowed the appeal of the assessee
• Held that the orders of the AO and CIT(A) were legally unsustainable

The appeal was thus allowed in favour of the assessee by order pronounced on 17 December 2025.

Key Takeaways for Taxpayers and Professionals

1. Section 69A requires strict proof of ownership – mere third-party documents are insufficient.
2. No cash found = no presumption of unexplained money.
3. Statements of third parties must be corroborated with independent evidence.
4. Reassessment proceedings cannot rely solely on borrowed satisfaction.
5. The ruling reinforces judicial discipline against additions based on suspicion rather than evidence.

Conclusion

Onus probandi incumbit ei qui dicit, non ei qui negat — the burden of proof lies upon the one who asserts, not upon the one who denies — squarely applies to the facts and findings in Bipin Agarwal vs ACIT. In the present case, the Revenue asserted that the assessee had received unexplained cash commission of ₹5,50,000 and sought to invoke Section 69A solely on the basis of third-party seized ledgers and statements recorded during a search on another group. However, the assessee consistently denied receipt or possession of any such cash, and no money was found in his possession nor was any independent corroborative evidence brought on record by the Assessing Officer. The Tribunal rightly held that once the assessee denies the allegation, the statutory burden rests entirely on the Revenue to establish ownership and possession of unexplained money — a foundational requirement under Section 69A. In the absence of such proof, mere assertions or presumptions drawn from third-party records cannot sustain an addition, thereby reaffirming the classical evidentiary principle that the person who alleges must prove, while the person who denies carries no such burden.

Disclaimer: This write-up is a brief analytical overview and does not capture all aspects of the judgment. Readers are advised to refer to and read the judgment in its entirety for a complete and detailed understanding of the facts and legal reasoning.