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Facts
The Assessee, a liquor reseller, deposited INR 6,66,000 in Specified Bank Notes (SBN) during the demonetization period, which the Assessing Officer added back as unexplained money under Section 69A. This addition was upheld by the CIT(A). The Assessee appealed, arguing that the cash was from legitimate business sales and supported by a sufficient cash balance as per the cash book before demonetization.
Held
The Tribunal found that the Assessee maintained audited books of accounts, GST returns, and had a sufficient cash balance as per the cash book before demonetization. Since the Assessing Officer did not doubt other cash deposits from business sales, the Tribunal concluded that the addition of INR 6,66,000 under Section 69A was unsustainable and ordered its deletion.
Key Issues
Whether a cash deposit of INR 6,66,000 in Specified Bank Notes (SBN) during demonetization could be treated as unexplained money under Section 69A, given the assessee's explanation of business sales and available cash balance.
Sections Cited
147, 144B, 69A, 115BBE, 271AAC(1), 274, 148, 143(2), 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
order : 23.12.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1. 1. The present appeal preferred by the Assessee is directed against the order, dated 29/07/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 28/03/2022, passed under Section 147 read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2017-2018.
2. The Assessee has raised following grounds of appeal :
“1. The learned Commissioner of Income Tax erred in upholding the additions made by the Assessing Officer and deterring the Total Income at Rs.17,19,960/-. Assessment Year 2017-2018
Addition of Rs.6,66,000/- as Unexplained money U/s.69A of the Income Tax Act 1961. 2.1. The Learned Commissioner of Income Tax erred in upholding the additions of Rs.6,66,000/-. 2.2. The Learned Commissioner of Income Tax failed to appreciate that the Appellant had Rs.19,30,330/- as cash balance with him as on 08th November 2016, when the demonetization was announced.
3. Initiation of Penalty U/s. 271AAC(1) r.w.s 274 of the Income Tax Act 1961. .”
3.1. The Learned Commissioner of Income Tax erred in upholding the penalty proceedings U/s 271AAC(1) of the Income Tax Act 1961.
The relevant facts in brief are that the Assessee is an individual engaged in the business of liquor and wine as a reseller under the name ‘Johnson Wines’. For the Assessment Year 2017-2018, t he Assessee filed return of income on 28.10.2017 declaring income of INR.10,52,960/- The Assessing Officer received information that the Assessee had deposited cash amounting to INR.63,31,500/- in its bank account maintained with the Bank of Maharashtra during the demonetization period from 09/11/2016 to 30/12/2016. Therefore, the case of the Assessee was picked for reassessment proceedings under Section 147 of the Act. The Assessing Officer obtained bank statement of the Assessee. The Assessing Officer noted that out of the cash deposits aggregating to INR.63,61,500/- deposits of aggregating to INR.6,66,000/- were made in specified bank during the demonetization period on following dates: Date of Nos. of Old Currency Nos. of Old Currency Total Deposit (INR.500/-) (INR.1000/-) 11/11/2016 923 135 5,96,500/- 15/11/2016 20 1 11,000/- 17/11/2016 10 -- 5,000/- 22/11/2016 2 -- 1,000/- 2 Assessment Year 2017-2018 24/11/2016 4 -- 2,000/- 28/11/2016 18 -- 9,000/- 29/11/2016 4 -- 2,000/- 01/12/2016 10 -- 5,000/- 05/12/2016 8 -- 4,000/- 07/12/2016 2 -- 1,000/- 08/12/2016 2 -- 1,000/- 13/12/2016 18 -- 9,000/- 15/12/2016 2 -- 1,000/- 19/12/2016 23 -- 11,500/- 27/12/2016 14 -- 7,000/- Total old currency amounts 6,66,000/- The Assessing Officer concluded that the Assessee was not eligible to receive SBN notes during the demonetization period and therefore, made an addition of INR.6,66,000/- under Section 69A read with Section 115BBE of the Act.
Being aggrieved, the Assessee has carried the issue in appeal before the Learned CIT(A). Vide order, dated 29/07/2025, the Learned CIT(A) dismissed the aforesaid appeal retreating the observations made by the Assessing Officer.
Being aggrieved, the Assessee has preferred the present appeal before the Tribunal.
We have heard both the sides and have perused the material on record.
On perusal of the Assessment Order, we find that in response to notice under Section 148 of the Act, the Assessee had filed revised return of income on 16/08/2021. Subsequently, notice was issued under Section 143(2) of the Act requiring the Assessee to place on record business activity (with registration certificate, VAT returns, bank account statements, ledger extracts for loans and advances etc.). In response to the same, the Assessee uploaded the relevant documents and details. We note that in Paragraph 3.3 of the 3 Assessment Year 2017-2018 Assessment Order, the Assessing Officer observed as under:
3.3. On various dates, the assessee has uploaded all the details in which relevant to the assessment proceedings. On verification, it is found that the assessee is carried out in the business of sale of liquor in the name of 'Johnsons Wines'. Further it is seen that the assessee has maintained three bank accounts for his business. One is with Bank of Maharashtra, another one is with HDFC Bank Ltd and third one is with Union Bank of India. The assessee has maintained books of account for his business and admitted business turnover of Rs.4,97,86,922/- for the year ended 31.03.2017. For the assessment year 2016-17, he admitted business turnover of Rs.4,29,30,648/- for the year ended 31.03.2016. It is seen from VAT return and ledger extract, the assessee's business turnover for Rs.4,97,86,922/- during the financial year 2016-17 relevant to the assessment year 2017-18. It is observed that business transactions are entered in bank account statements. Bank closing balances are verified with bank account statements.
On perusal of above, we find that the Assessee had complied with the notice issued under Section 143(2) of the Act has explained that the Assessee is engaged in the business of sale of liquor and had a turnover of around 4.29 Crores for the relevant previous year. The Assessee explained that the source of Specified Bank Notes (SBN) deposited in the bank account was the sale proceeds from the business operations. We note that it is admitted position that out of cash of INR.63,31,500/- deposited by the Assessee in the bank account, cash deposits aggregating to only INR.6,66,000/- were made in SBN. Further, out of the aforesaid amount of INR.6,66,000/-, deposits aggregating to INR.5,96,500/- were made on 11/11/2016 and the balance amount was deposited in the bank account by way of 14 deposits is between 15/11/2016 to 27/12/2016. On perusal of records it becomes clear that the Assessee had complied with the show-cause notices issued during the assessment proceedings and had placed on record the relevant documents and details. In compliance of the show cause notice, dated 24/03/2022, requiring the Assessee to explain the source of INR.6,66,000/-, the Assessee 4 Assessment Year 2017-2018 had filed written submissions along with cash book for the relevant previous year. Material on record shows that the Assessee had cash balance of INR.19,30,329/- as on 08/11/2016. It is admitted position that after declaration of demonetization the Assessee deposited SBN aggregating to INR.5,96,500/- on 11/11/2016. We note that the Assessing Officer did not find any infirmity in the cash book produce by the Assessee and had rejected the explanation offered by the Assessee observing that the Assessee had failed to upload bills/vouchers for cash sales as supporting evidence. In this regard, we note that the cash book and bank statements were filed before the authorities below. On perusal of the same, we find that the Assessee was depositing cash deposits in the bank account on a regular basis. During the assessment proceedings, the Assessee had explained that given the nature of business, the Assessee was making cash sales and making deposit of cash sale proceeds in the bank account on a regular basis. We note that no addition has been made by the Assessing Officer in respect of cash deposits of INR.55,65,500/- (INR.63,31,500/- less INR.6,66,000/-) made by the Assessee during the relevant previous year. Thus, the Assessing Officer accepted the contention of the Assessee that the business operation undertaken by the Assessee resulted in cash sales which were deposited in the bank account on a regular basis. As regards objection raised by the Learned Departmental Representative regarding receipt of SBN after declaration of demonetization on 08/11/2016, we find that as per daily cash-book the Assessee had sufficient cash of INR.19,30,330/- as on 08/11/2016 and had deposited SBN’s aggregating to INR.5,96,500/- on 11/11/2016 itself. Therefore, to that extent the contention raised by the Revenue that the Assessee had accepted SBN’s after demonetization is rejected. As regards balance amount of cash deposits of INR.69,500/- (INR.6,66,000/- less INR.5,96,500/-) made in SBN are concerned, we note that the said amount was deposited by way of 14 deposits is between 15/11/2016 to 5 Assessment Year 2017-2018 27/12/2016 ranging between INR.1000/- to INR.11,000/- (details given in Paragraph 3 above). It was contended on behalf of the Assessee that the same were deposited out of cash of INR.18,30,957/- as at the end of 07/11/2016. Perusal of the daily cash book shows that the Assessee had maintained sufficient cash balance to support the aforesaid contention and that there is nothing on record to suggest that the SBN’s were received by the Assessee after demonetization. During the course of hearing it was submitted by the Assessee that the books of the accounts of the Assessee were duly audited under Section 44AB of the Act, day to day books of accounts and stock records were maintained by the Assessee as per Maharashtra Excise Rules for sale and purchase of liquor and wines. The auditors did not make any adverse comments on the account and books of accounts were not rejected by the Assessing Officer. The Assessee reported the monthly sales to GST authorities by filing the GST returns and the said reported sales with GST were duly reconciled with the turnover reported in income tax return. The Assessee had filed GST returns declaring therein the sales and purchases to the government authorities. It was contended that the Assessing Officer was not justified in treating cash sales as unexplained money. We find merit in the aforesaid contention advanced on behalf of the Assessee which corroborates the stand taken by the Assessee. We have already noted hereinabove that the Assessee had produced cash book, bank statement, GST Return before the Assessing Officer and the CIT(A). The Assessing Officer has not doubted the cash sales made by the Assessee and the deposits made during the relevant previous year which were not in SBN. Taking into the overall facts and circumstances of the present case and keeping in view the explanation offered by the Assessee, we are of the view that addition of INR.6,66,000/- made by the Assessing Officer under Section 69A of the Act cannot be sustained in the facts and circumstances of the present case and the same is deleted. 6 Assessment Year 2017-2018 Accordingly, Ground No.1 to 2.2 raised by the Assessee are allowed. Ground No. 3 to 3.1 raised by the Assessee are dismissed as having been rendered infructuous at this stage.
In terms of Paragraph 8 above, the present appeal is allowed.