Mode of Payment Is Not a Ground: ITAT Deletes Section 69A Addition on Car Sale. Same Buyer, Same Car, Two Verdicts: How ITAT Struck Down a Section 69A Addition.

 CA VEERESH M S

Partner, Nirupam & Associates · Chartered Accountants · August 2026 · 8 min read

Can the Income Tax Department call a genuine car sale “unexplained money” — only because part of the payment came in cash?

The Hon'ble ITAT Visakhapatnam has answered with a firm no.

THE CASE IN 30 SECONDS

Case	ITA No. 271/Vizag/2026 — AY 2020-21
Issue	Rs. 2,72,500 cash from car sale added u/s 69A, taxed at ~83% u/s 115BBE
The flaw	Revenue accepted Rs. 3,25,000 by NEFT from the same buyer for the same car
Outcome	Addition deleted in full. Appeal allowed.

Order of the ITAT Visakhapatnam Bench, pronounced 13.08.2026

A car, a relocation, and a reassessment

Mr. Sujin Kumar Anagani was a salaried employee of Cisco Systems India Pvt. Ltd. In June 2019 he was transferred to Cisco USA and moved to Morrisville, North Carolina.

Before leaving, he sold his personal Hyundai i20 (KA01MJ6120) to a friend, Mr. Ankur Omar, for Rs. 5,97,550 — received in two parts:

IN CASH Rs. 2,72,550 Advance on 31.05.2019 Banked next day, 01.06.2019

BY NEFT Rs. 3,25,000 Balance consideration ICICI Bank account

Stranded in the USA through COVID-19, having lost access to his Indian mobile number and the e-filing portal, Mr. Anagani did not file his return for AY 2020-21. The Assessing Officer reopened the case under Section 148 on 19.03.2024.

From Rs. 74.49 lakhs to zero

The case travelled through three forums. Here is how the numbers moved:

	STAGE 1 · DRAFT ORDER u/s 144C · 25.03.2025 Rs. 74,49,010 proposed • Rs. 44,69,247 — Section 10 exemption denied • Rs. 18,77,540 — cash deposits u/s 69A • Rs. 11,02,123 — addition u/s 69C
	STAGE 2 · DRP-1 BENGALURU · 22.12.2025 Rs. 2,72,500 sustained • Section 10 addition — deleted in full • Section 69C addition — deleted in full • Section 69A — reduced to the cash component only
	STAGE 3 · ITAT VISAKHAPATNAM · 13.08.2026 Rs. NIL — appeal allowed • Entire addition of Rs. 2,72,500 deleted • Consequential 115BBE levy and 271AAC penalty fall away

The DRP's order of 21.01.2026 had taxed the surviving Rs. 2,72,500 under Section 115BBE — 60% tax, 25% surcharge and 4% cess, an effective burden of roughly 83.25%. Penalty proceedings under Section 271AAC were initiated alongside.

The contradiction at the heart of the case

One buyer. One car. One transaction. Two completely different treatments:

✓ ACCEPTED Rs. 3,25,000 Received by NEFT From: Ankur Omar For: Hyundai i20 sale

✗ REJECTED Rs. 2,72,550 Received in cash From: Ankur Omar For: Hyundai i20 sale

The only variable that changed was the mode of payment. Not the payer. Not the transaction. Not the asset.

“Does Section 69A distinguish between cash and bank transfer?”

It does not.

What Section 69A actually requires

The section bites only when all three conditions are met:

1	The assessee is found to be the owner of money, bullion, jewellery or other valuable article
2	It is not recorded in the books of account, if any are maintained
3	The assessee offers no explanation of its nature and source, or the explanation is not satisfactory

Note what is absent. There is no fourth condition reading “and the money was received in cash.” Parliament could have written one. It did not. The section turns on ownership and source — never on the channel through which money arrived.

Five documents that closed the door

Our paper book before the DRP and the Tribunal carried a complete evidentiary chain:

DOCUMENT	WHAT IT ESTABLISHED
RC (Form 23A) KA01MJ6120	Mr. Anagani was the registered owner of the vehicle
Motor insurance policies FY 2017-18 & 2018-19	Continuous ownership, confirmed by an independent insurer
B-Register Extract Transport Dept., Karnataka	Government record of transfer to Ankur Omar
Buyer's declaration PAN: AARPO2156N	Buyer confirmed purchase, the cash advance and the NEFT balance
ICICI Bank statement	Cash banked the next day; NEFT credits from the same person

Every ingredient of the section was met head-on — identity of the payer, nature of the transaction, source of the deposit, and genuineness corroborated by government, third-party and banking records alike.

The Tribunal's finding

The Bench — Vice President Shri Vijay Pal Rao and Accountant Member Shri Manjunatha G — heard the matter on 10.08.2026 and pronounced on 13.08.2026:

“Considering the explanation with supporting evidence filed by the assessee, we are of the view that the addition made by the AO of Rs. 2,72,500/- is not justified and the same is deleted.”

— Para 5.2, ITA No. 271/Vizag/2026

Para 5.2 of the order, with the buyer's declaration reproduced by the Bench

Appeal allowed in full.

The operative part, signed by both Members and pronounced in open court

Five takeaways worth keeping

01   Mode of payment is not a ground

Cash, by itself, does not attract Section 69A. The section asks whether the source is explained — not whether the money arrived by cash, cheque or transfer. Where the payer is identified and the transaction documented, the section has no application.

02   The Revenue cannot blow hot and cold

Accepting one leg of a transaction while rejecting another from the same payer, for the same consideration, is internally contradictory. The principle of consistency in Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) requires a uniform view on identical facts.

03   A personal car is not a capital asset

A motor car used personally is a “personal effect” excluded by Section 2(14)(a). Its sale yields a non-taxable capital receipt — making an addition on such proceeds unsustainable twice over. See ACIT v. V.N. Devadoss, ITA No. 2459/Chny/2018 (ITAT Chennai).

04   Section 115BBE has a purpose — and limits

The provision was built for those offering no explanation at all, in demonetisation and search matters. Applying an ~83% rate to a salaried NRI who produced five independent documents for a Rs. 2.72 lakh car sale stretches it well past its design.

05   Documentation decides cases

Government records, third-party records, a buyer's confirmation and a clean bank trail carried this appeal. Suspicion, however strong, cannot displace evidence. Maintain records, preserve them, and produce them at the right stage.

If you are an NRI, read this before you relocate

✓	File your return on time, even when all income is covered by TDS. Non-filing is the single most common trigger for a Section 148 notice.
✓	Paper every significant transaction — asset sales, gifts, fund transfers — with written confirmations and a bank trail.
✓	Keep your Indian mobile number and portal access live. Most missed notices trace back to lost access after relocating.
✓	Update your address on the PAN database so physical notices actually reach you.
✓	Engage a CA before the transaction, not after the notice. Advice costs a fraction of litigation.

Closing thought

Tax law does not run on suspicion. Where an assessee offers a cogent, documented explanation backed by independent evidence, the Revenue must bring positive material to displace it. Pointing at the mode of payment — cash rather than NEFT — is not a finding. It is an assumption. And assumptions cannot sustain additions.

Our thanks to the Hon'ble ITAT Visakhapatnam Bench for an order that restates a settled position with welcome clarity.

ABOUT THE AUTHOR

CA Veeresh M S

Partner at Nirupam & Associates, Chartered Accountants (FRN: 323575E). Practice focused on direct tax litigation, international taxation and NRI advisory, appearing before the Income Tax Appellate Tribunal, Dispute Resolution Panels and appellate authorities across India.

[veeresh@cavac.in]  ·  [9035865365]  · 

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