MANISH DUBEY,OBEDULLAGANJ vs. ADDL/JCIT (A)-1, LUDHIANA

आदेश/ O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by order of the first appeal dated 24.01.2025 passed by the learned Addl/JCIT(A)-1, Ludhiana ["CIT(A)"], which in turn arises out of the assessment order dated 23.12.2019 passed by the learned Income Tax Officer, Raisen ["AO"] u/s 143(3) for Assessment Year 2017-18 ["AY"] of Income-tax Act, 1961 [“the Act”], the assessee has filed this appeal on the grounds as mentioned in Form No. 36 (Appeal Memo).

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 2. The background facts leading to present appeal are such that the

assessee, an individual, is engaged in the business of stamp vending. The

assessee filed return of income for AY 2017-18 declaring total income of Rs.

2,88,210/- (including business income of stamp vending activity). The case

was selected for scrutiny under CASS to examine “large cash deposits

compared to returned income” during previous year 2016-17 and the AO

issued notices u/s 143(2)/142(1). In response to notices, the assessee made

submissions to AO. On examination of statements of bank accounts of

assessee, the AO extracted details of deposits made by assessee in three

bank a/cs, one with State Bank of India [“SBI”] and two with Madhya

Pradesh Gramin Bank [“MPGB”], and details of sale transactions of stamps

done by assessee, during previous year 2016-17 for three periods, namely (i)

01.04.2016 to 08.11.2016 (pre-demonetisation), (ii) 09.11.2016 to

30.12.2016 (demonetization) and (iii) 31.12.2016 to 31.03.2017 (post-

demonetisation). These data are given by AO in a tabular format in Para 5 of

assessment-order. Thereafter, in later part of very same para 5, the Ld. AO

noted that the assessee had deposited an aggregate sum of Rs. 2,65,500/-

in Demonetised Currency Notes/Specified Bank Notes ("SBNs") during the

demonetization period in accounts with SBI and MPGB. The details of such

deposits in SBNs, as noted by AO, are as under:

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18

Account No. & Bank Date Amount in SBNs

30388993026; SBI 03.12.2016 Rs. 11,500/-

201211330001862; MPGB 17.11.2016 Rs. 46,000/-

201211330001862; MPGB 03.12.2016 Rs. 1,08,000/-

201211130000490; MPGB 17.11.2016 Rs. 1,00,000/-

Total Rs. 2,65,500/-

treating the same as personal past savings and held that the remaining sum

of Rs. 2,54,000/- [46,000 + 1,08,000 + 100,000] constituted undisclosed

money u/s 69A on the premise that the assessee, being a stamp vendor,

was not an authorized person to receive SBNs after 09.11.2016

(commencement of demonetization) when they ceased to be legal tender. The

total income was accordingly assessed at Rs. 5,42,210/- against the

returned income of Rs. 2,88,210/-. Aggrieved, the assessee preferred an

appeal before Ld. CIT(A). The Ld. CIT(A), vide impugned order of first appeal,

confirmed AO’s action holding that no substantial evidence was furnished

by assessee to establish that the SBNs deposits constituted business

receipts and also that the transactions in SBNs during demonetization

period were not valid for the business of stamp vending carried by assessee.

Now, the assessee has filed present appeal.

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 4. Presently, the short issue for our consideration is whether the

addition of Rs. 2,54,000/- made u/s 69A on account of deposits in SBNs

during demonetization period is sustainable?

(i) The assessee is engaged in stamp vending business where cash

collections from constituents towards sale of stamps are inherent to

the nature of business. The assessee has deposited such business

collections in bank accounts from time to time.

(ii) With regard to the deposit of Rs. 46,000/- made on 17.11.2016 in

MPGB account (A/c No. 201211330001862), the Ld. AR successfully

demonstrated, from bank statements of both SBI and MPGB placed in

Paper-Book, that the assessee had made a cash withdrawal of Rs.

50,000/- from SBI account on the preceding day i.e. 16.11.2016, out

of which Rs. 46,000/- was re-deposited in MPGB account on

17.11.2016. The Ld. AR submitted that the MPGB account is an

Overdraft A/c carrying a debit balance on which the bank was

charging interest, and the purpose of withdrawal from SBI and re-

deposit in MPGB by assessee was to reduce interest burden. This

inter-account movement of funds is explained with the support of

entries in bank statements placed in Paper-Book.

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 (iii) With regard to the remaining deposits of Rs. 1,00,000/- on

17.11.2016 (MPGB A/c No. 201211130000490) and Rs. 1,08,000/- on

03.12.2016 (MPGB A/c No. 201211330001862), the Ld. AR submitted

that these amounts were received from constituents in SBNs prior to

declaration of demonetization for the purpose of purchase of stamps.

Since the assessee was already having a Credit balance in his A/c

with Stamps Department (this fact is demonstrated by Ld. AR by

drawing our attention to the the Copy of assessee’s A/c with Stamps

Department filed in Paper-Book), there was no immediate necessity to

deposit such collections in bank a/c. When the Bench raised a query

seeking the names of the constituents from whom the impugned

amounts were received, Ld. AR candidly submitted that the assessee

serves multiple constituents and maintains a running account with

the Stamps Department in which lump sum deposits are made

routinely from time to time for the business of stamp vending,

therefore it is not feasible to correlate each receipt with a specific

constituent. He, however, submitted forcefully that the deposits in

assessee’s Bank a/cs as well as transfers from Bank a/cs to running

A/c of Stamps Department from time to time, are referrable to genuine

business transactions made in the ordinary course of stamp vending

business carried on assessee and so is the case of impugned deposits

of Rs. 1,00,000/- and Rs. 1,08,000/-.

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 (iv) Ld. AR also submitted that the aggregate of the deposits that remain

to be explained (after excluding the deposit of Rs. 46,000/- which

stands fully explained from cash withdrawal from SBI A/c) amounts to

Rs. 2,08,000/- only, which is commensurate with the volume of

business as reflected in the records before the AO, extracted by AO in

tabular format in Para 5 of assessment-order. Therefore also, the

deposit of just Rs. 2,08,000/- should not be adversely viewed.

authorities and submitted that the assessee has failed to furnish

satisfactory evidence to establish the source of deposits and that the receipt

of SBNs during the demonetization period was not permissible for a stamp

vendor. He, however, left the matter for the wisdom of bench in view of the

fact that the quantum of addition is very less.

material on record. The dispute between assessee and revenue authorities

relates to the source of deposit of Rs. 2,54,000/- made by assessee in SBNs

during the demonetization period. The disputed deposits are of Rs. 46,000 +

1,08,000 + 100,000.

MPGB Overdraft A/c. The Ld. AR has demonstrated, from bank statements

of both SBI and MPGB placed in Paper-Book, that a cash withdrawal of Rs.

50,000/- was made by the assessee from his own SBI account on

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 16.11.2016 and Rs. 46,000/- was deposited in the MPGB account on the

very next day of 17.11.2016. This establishes a direct and verifiable nexus

between the withdrawal and deposit. The explanation that such re-deposit

was made in Overdraft A/c with MGPB to reduce interest burden is

commercially plausible and remains uncontroverted by Revenue.

Accordingly, the addition to the extent of Rs. 46,000/- is not sustainable

and is directed to be deleted.

viz., Rs. 1,00,000/- on 17.11.2016 and Rs. 1,08,000/- on 03.12.2016. The

explanation of assessee is that these amounts represent cash received from

constituents prior to demonetization for purchase of stamps, in the course

of stamp vending business. After a careful consideration, we give our

mindful and judicious understanding as under:

(i) It is an undisputed fact that the assessee is a stamp vendor

conducting business predominantly in cash, and that the Ld. AO had

himself accepted, without any addition, the cash deposits made in the

very same bank accounts for the period other than demonetization (i.e.

01.04.2016 to 08.11.2016 and 31.12.2016 to 31.03.2017) by

reference to the same records of stamp vending activity [Para 5 of

assessment-order]. The sole basis for treating the SBNs deposits

differently is only the notification of demonetization, without any

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 independent finding that the underlying business transactions or

records were not reliable.

(ii) The total sales of the assessee for the period 01.04.2016 to

08.11.2016 alone stood at Rs. 76,13,391/- as noted by AO in Para 5

of assessment order itself. Given the cash-intensive nature of the

stamp vending business, the existence of accumulated cash collection

from constituents as on 09.11.2016 is plausible and probable.

(iii) The aggregate amount in question, viz., Rs. 2,08,000/-, is relatively

small in the context of the overall business turnover of assessee. The

CBDT had, vide Para 6 of Annexure to the Instruction No. 3/2017

dated 21.02.2017 (SOP to be followed by Assessing Officers in

verification of Cash Transactions relating to demonetization),

instructed that cash deposits made during the demonetization window

should be assessed in the context of the nature, volume and pattern of

business activity of assessee. The guidance given by CBDT shows that

the deposits of business are not to be treated as unexplained. The

amount of Rs. 2,08,000/-, having regard to the nature and scale of

business, adequately passes the tests laid down by CBDT.

(iv) The Revenue has brought no positive material on record to

demonstrate that the impugned deposits represent income from any

source other than the business of stamp vending or to rebut the

assessee's explanation.

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 10. Upon judicious consideration of the facts as noted above and the legal

position, we are of the view that the section 69A can be invoked only where the explanation offered by assessee is found to be unsatisfactory based on material on record. In present case, the assessee has offered an explanation

that is consistent with the nature of the business and corroborated by surrounding circumstances, namely, the volume of sales, the cash-intensive nature of stamp vending, the running account with the Stamps Department,

and the Ld. AO's own acceptance of similar deposits for other periods. No contrary material has been placed on record by the Revenue to establish the existence of unexplained income held by assessee.

deleted in its entirety.

Order pronounced in open court on 17/04/2026

Sd/- Sd/-

(PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 17/04/2026 Patel/Sr. PS

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Manish Dubey ITA No. 297/Ind/2025 – AY 2017-18 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

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