ITAT Kolkata Deletes ₹43.98 Lakh Addition on SBN Deposits, Says Explained Receipts Cannot Be Taxed Under Section 69A

April 6, 2026 : The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of ₹43.98 lakh made against Disha Eye Hospitals Pvt. Ltd., holding that receipts from identifiable and genuine sources cannot be treated as unexplained money merely because they were received in demonetised specified bank notes (SBNs).

In its order dated 6 April 2026, the Tribunal clarified that Section 69A of the Income-tax Act applies only where the nature and source of money remain unexplained. Where receipts are duly recorded in the books and form part of declared income, a separate addition is legally unsustainable.

Background

The assessee, Disha Eye Hospitals Pvt. Ltd., a multi-branch eye care service provider in West Bengal, filed its return for Assessment Year 2017–18 declaring income of ₹18.94 crore. During scrutiny, the Assessing Officer noted deposits of ₹43,98,500 in ₹500 and ₹1,000 notes between 9 November and 15 November 2016, immediately following demonetisation.

While the overall cash deposits were accepted, the Assessing Officer treated the SBN component as “unexplained money” under Section 69A solely on the basis that such notes had ceased to be legal tender after 8 November 2016.

The Commissioner of Income Tax (Appeals) upheld the addition, reasoning that private hospitals were not permitted under the government notification dated 8 November 2016 to accept SBNs, and therefore such receipts lacked legal validity.

Tribunal’s Findings

The Tribunal rejected this approach as legally flawed and internally inconsistent. It observed that:

• The source of receipts, i.e. patient payments, was never disputed by the Revenue.
• The amounts were duly recorded in the books and included in the turnover.
• Section 69A cannot be invoked where the source and nature of money are satisfactorily explained.

The Bench further noted a contradiction in the Revenue’s stance. If the SBNs were considered invalid legal tender, they could not simultaneously be treated as “money” for the purpose of making an addition under Section 69A.

Importantly, the Tribunal emphasised that the assessee had already included these receipts in its income, which had been accepted by the Assessing Officer. Any further addition would result in double taxation of the same amount.

Ruling

Setting aside the orders of both the Assessing Officer and the CIT(A), the Tribunal held that:

• Mere receipt of SBNs during the demonetisation window does not justify addition under Section 69A when the source is explained.
• Additions based solely on the mode of receipt, without disputing the underlying transaction, are unsustainable.

Accordingly, the addition of ₹43.98 lakh was deleted, and the assessee’s appeal was partly allowed.

Case Details

Bench: George Mathan (Judicial Member), Rakesh Mishra (Accountant Member)

Case Title: Disha Eye Hospitals Pvt. Ltd. v. DCIT, Circle-14(1), Kolkata

Case No.: ITA No. 2420/KOL/2025

Assessment Year: 2017–18