USHA GUPTA,NAHAN vs. INCOME TAX OFFICER, NAHAN

The issue involved in these two appeals are so intervened together and the facts of the case needs to be appreciated first in a comprehensive manner taking both the appeal together. 3. Appellant has raised following grounds in ITA No. 637/Chd/2026: 1. That on the facts and circumstances of the case and in law, the National Faceless Appeal Centre (hereinafter referred to as 'NFAC') has grossly erred in not appreciating that the Assessment Order passed by National Faceless Assessment Centre (hereinafter referred to as 'AO') u/s 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') is bad in law. 2. That on the facts and circumstances of the case and in law, the NFAC has failed to appreciate that the addition of Rs. 2,25,000 made by AO u/s 69A

Appellant has raised following grounds in ITA No. 638/Chd/2026: 1. That on the facts and circumstances of the case and in law, the National Faceless Appeal Centre [hereinafter referred to as NFAC] has grossly erred in sustaining the addition of Rs 13,71,060 made by the Assessment Unit u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 2. That on facts and circumstances of the case and in law, the NFAC has failed to appreciate that the Assessment Order passed by the Assessment Unit u/s 147 r.w.s. 263 r.w.s 144B is bad in law. 3. That on facts and circumstances of the case and in law, the NFAC has failed to appreciate that the Assessment Order passed by the Assessment Unit is bad in law since it is in violation of the directions issued by the Ld. Commissioner of Income Tax in order dated 20.03.2024 passed u/s 263 of the Act and therefore the order passed by the Assessment Unit is unsustainable in law. 4. That on facts and circumstances of the case and in law, the NFAC has failed to appreciate that the Assessment order is bad in law in as much as it had not followed the letter and spirit of the directions in the order u/s 263 of the Act dated 20.03.2024 which had specifically directed the Jurisdictional Assessing Officer to examine the factual matrix of the case while following the principle of natural justice.

During the scrutiny assessment proceedings of Shri Chaman Lal Gupta Husband of the assessee, he was asked about certain cash deposits in the bank account with SBI Account No. 35889001616. Shri Chmana Lal Gupta explained that this account was of his wife Smt. Usha Gupta, proprietor of M/s Vikki Traders and his PAN was wrongly entered by the bank. This fact was confirmed by the bank. On receipt of this information including the information of deposit of cash of Rs. 13,71,060/- during the demonetization period, the assessee’s case was reopened by issuing of notice under section 148.

During the course of reassessment proceeding it was noticed that the deposits in Specified Bank Notes (SBN) were only of Rs. 2,25,000/- and the remaining cash deposits were not in SBN. The assessee explained that its total

The Ld. CIT(A) confirmed this addition of Rs. 2,25,000/- vide order dt. 27/01/2026 against which the assessee has filed an appeal in ITA No. 637/Chd/2026. The order of the Ld. CIT(A) mentions that the appeal is against the order passed under section 144 which is not correct as the assessment order dt. 15/03/2022 was passed under section 144B. The main reason for addition by the AO was that the cash book, bank statement and the sales book were not produced, as mentioned on page 3 of the assessment order.

Before the Ld. CIT(A) the assessee stated that the AO never asked for cash book and sales book and also submitted the bank statement, cash book and sales book of the relevant period as mentioned in the assessee’s reply reproduced on page 7 of the appellate order dt. 27/01/2026. The decision of the Ld. CIT(A) given in para 7.3 of the appellate order is reproduced herein under: 7.3 Decision: I have carefully examined the assessment order and the written submissions filed by the appellant. It is noticed that the AO has clearly mentioned in the assessment order as follows: “The sufficient opportunity were provided to assessee to explain these source of cash deposits. Assessee had deposited old note on different dates. The assessee has not furnished cash books ,Bank statement and sale book. The assessee has failed to prove genuineness of cash deposit. It means assessee has not cash balance in hand. The assessee deposited undisclosed cash. As assesse failed to explain the cash deposits . The assessee had deposited total (Old notes) cash of Rs. 2,25,000/- in the State Bank of India. During the assessment proceedings assessee has not furnished details and explanation of cash deposits (old notes(SBN) on various dates during the demonization period). On perusal of assessee’s reply, it is not found considerable. The burden to identify the source lies upon the assessee and he was required to explain the genuineness of cash deposits in this bank account. The assessee failed to offer any explanation about the nature and source of acquisition of the money i.e. cash deposits in bank account therefore it is presumed that cash deposits of Rs. 2,25,000/- is out of unexplained source and treated as unaccounted and

From the paper book and also from a perusal of the assessment order, it is noticed that the assessee furnished the bank book, VAT return, purchase and sale bills, cash book etc. of the relevant period. However, the AO made the addition in the second round mainly on the ground that the stock details were not furnished in the format required as mentioned on page 11 of the assessment order. The addition in the first round was made under section 69A while in the second round the addition has been made under section 68. The Ld. CIT(A) in the second round confirmed the addition in the order dt. 30/01/2026 which has been challenged by the assessee in ITA No. 638/Chd/2026.

It is evident from the above that the assessee had explained its stand before the Ld. PCIT also and the use of the word by Ld. PCIT “ in the unlikely likelihood” conveys that he was primafacie satisfied with the assessee’s explanation. However, he set aside the matter to the JAO for verification. Since it is not an appeal against the 263 order, we refrain from making any further observation on the order of the 263.

The Ld. DR on the other hand relied on the order of the lower authorities and submitted that the assessee had failed to discharge its onus under section 68/69 A of the Act, the two different sections under which the additions were made in the two assessment orders.

The rival contentions have been examined. It is noticed that Revenue had occasions to examine the details on multiple occasions. The issue first arose in the case of assessee’s husband and later on in the assessee’s case in the first round and then in the second round of assessment. The Ld. PCIT also had a occasion to examine the facts in processing under section 263. The assessee’s account are audited, the assessee did furnish the audit report, bank book, cash book, purchase and sale bills of the relevant period. Still not only the AO but also the Ld. CIT(A) decided the issue against the assessee. The deposits are only 13% of the total turnover of the assessee. Therefore after considering the totality of the circumstances we are of the view that the assessee explained the source of deposit in bank account and the onus was

We have considered the rival submissions and perused the material available on record. The assessee is carrying on the business of a Karyana (Kirana) and General Merchandise shop under the name and style of M/s Vikky Traders, with disclosed turnover of Rs. 1,05,95,395/- The assessee explained that the cash deposits in the bank account represented cash sales arising from the regular business of the Karyana (Kirana) shop, which were duly recorded in the books of account and formed part of the disclosed turnover. The books of account were duly audited and were not rejected by the Revenue 16. In the nature of such business, the payment of such purchases is often made in cash. It cannot, therefore, be presumed that every customer of a small Karyana(Kirana) shop would necessarily make payment through banking channels. The fact that the business receipts were received in cash and subsequently deposited in the bank, including during the demonetisation period, does not by itself render such receipts unexplained.

The assessee has consistently explained the source of the deposits as business sale proceeds, and the record also contains the cash book, bank account and details of sales/purchases supporting the explanation. The Revenue has not brought on record any specific material to demonstrate that the corresponding sales were bogus or that the cash deposits represented any source independent of the assessee's disclosed Karyana (Kirana) business.

We, therefore, find the explanation of the assessee regarding the nature and source of the cash deposits as business receipts to be duly relatable to her regular business activity. Consequently, the addition of Rs.2,25,000/- under section 69A in one appeal and Rs.13,71,060/- under

In the result, both the above appeals are allowed.