NIHARIKA SIDHARTH DAGA,SURAT vs. INCOME TAX OFFICER, CIRCLE1(1)(1),SURAT, SURAT

आदेश / O R D E R Per B.M. Biyani, A.M.:

Feeling aggrieved by the order of first appeal dated 05.12.2025 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)-1, Nashik [“Ld. CIT(A)”], which in turn arises out of the assessment-order dated 26.12.2019 passed by learned ACIT, Circle-1(2), Surat [“Ld. AO”] u/s 143(3) of Income- tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal.

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ITA No.123/SRT/2026 Niharika Sidharth Daga 2. The background facts leading to present appeal are such that the assessee-individual is engaged in the business of manufacturing grey fabrics under the name and style of “M/s Tulsi Polyweaves”. For AY 2017-18 under consideration, the filed her return of income declaring a total income of Rs. 44,04,580/-. The case of assessee was selected for scrutiny assessment and the Ld. AO issued notices u/s 143(2)/142(1) which were complied with by assessee. During proceeding, the Ld. AO found that the assessee made cash deposits aggregating to Rs. 33,24,000/- during demonetization period in the accounts maintained with ICICI Bank and Yes Bank. The Ld. AO has noted the date-wise details of deposits in Para 3.1 of assessment-order. The Ld. AO asked assessee to explain the sources of deposits so made. In reply, the assessee filed submission claiming that the impugned deposits were made from cash held by assessee duly reflected in cash-book. The Ld. AO examined assessee’s submission and observed that the assessee made cash withdrawals of Rs. 1,34,50,000/- from her OD a/c with ICICI Bank and paid heavy interest thereon to the bank and at the same time, the assessee had shown cash holding of more than Rs. 50 lac during the period from 01.06.2016 to 30.11.2016. Taking into account these facts, the Ld. AO observed that it made no sense to hold cash of more than Rs. 50 lac while making huge cash withdrawals from interest-bearing OD A/c. Therefore, the Ld. AO issued a show-cause notice to assessee seeking further explanation. The assessee filed reply. Ultimately, the Ld. AO analysed the position of cash flows reflected in assessee’s books of account; allowed the limited benefit of

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ITA No.123/SRT/2026 Niharika Sidharth Daga opening cash balance of Rs. 7,58,534/- as on 01.04.2016 and a cash withdrawal of Rs. 5,00,000/- made by assessee from bank a/c on 26.10.2016 (immediately before the declaration of demonetization); and treated the differential of Rs. 20,65,466/- [total deposit of Rs. 33,24,000 (-) cash balance of Rs. 7,58,534 on 01.04.2016 (-) cash withdrawal of Rs. 5,00,000 on 26.10.2016] as unexplained money and accordingly made an addition of Rs. 20,65,466/- u/s 69A r.w.s. section 115BBE of the Act. Further, the AO also made a disallowance of Rs. 54,652/- u/s 36(1)(va) r.w.s. 2(24)(x) on account of belated payment of employees’ contribution to PF/ESI. Aggrieved, the assessee carried matter in first-appeal before Ld. CIT(A) but, however, did not get any relief. Now, the assessee come in next appeal before us.

“I) Addition of Rs. 20,65,466: (1) On the facts and circumstances of the case and as per law, the learned CIT(A) was not justified in confirming the addition of Rs. 20,65,466/-being cash deposited during demonetization period. (2) The Appellant submits there was no justification for confirming addition of deposit of cash, as the appellant was having sufficient cash in hand and the cash was deposited out of Cash balance. (3) Without prejudice to the above, the learned CIT(A) ought to have appreciated that year of demonetization was not the only year where cash deposits were made but all the papers submitted demonstrated that cash deposits were made out of cash in hand which was withdrawn from bank. (II) Legal grounds:

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ITA No.123/SRT/2026 Niharika Sidharth Daga (1) The learned CIT(A) failed in appreciating the non-applicability of section 69A to the facts of the case. (2) The learned CIT(A) ought to have not confirmed the act of applicability of provision of section 115BBE to the cash deposits during demonetization period when the cash deposits were prior to 15-12-2016. (3) The appellant seeks benefit of Rs. 5 lacs with spousal deduction. (III) Miscellaneous (1) All the above grounds are without prejudicial to one another. (2) The Appellant craves leave to add, alter or vary any of the grounds of appeal.” 4. Thus, by means of Ground No. I, the assessee is challenging the addition of Rs. 20,65,466/- made by the AO u/s 69A in respect of cash deposited in bank a/c during demonetization period.

(i) That the impugned deposits of Rs. 33,24,000/- were made out of cash-in-hand duly reflected in the cash-book regularly maintained by assessee. The assessee filed cash-book of financial year 2016-17 (relevant to AY 2017-18 under consideration) as well as the cash-book of immediately preceding financial year 2015-16 to Ld. AO during scrutiny proceedings; the same are placed at Pages 20-110 of Paper- Book.

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ITA No.123/SRT/2026 Niharika Sidharth Daga (ii) That the assessee’s books of account including cash-book as aforesaid, were duly audited and the Ld. AO had neither rejected the books of account nor pointed out any defect therein.

(iii) That the assessee is in the habit of maintaining high cash in hand in the regular course of business and this fact is clearly evident from the month-wise details of cash held during the financial years 2015-16 and 2016-17 compiled and furnished by assessee to Ld. AO. The Ld. AR drew our specific attention to the said details, which have been duly noted by the Ld. AO at Pages 5–6 of the assessment order. For immediate reference, the same are reproduced below:

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ITA No.123/SRT/2026 Niharika Sidharth Daga (iv) That the section 69A applies only when the cash is not recorded in books of account whereas in present case, the cash is duly recorded in books of account. Therefore, the Ld. AO is patently wrong in invoking section 69A which is not applicable at all.

(i) That, the assessee has failed to satisfactorily explain the availability of cash, particularly when substantial cash withdrawals were made from interest-bearing OD A/c and the assessee was simultaneously claiming to maintain heavy cash balances.

(ii) That, the Ld. CIT(A) has observed in Para 9.1.3 of impugned order that no contemporaneous Cash Flow Statement or reconciliation has been placed to establish availability of sufficient cash-in-hand as on the date of deposit.

(iii) That, during first appellate proceedings, the CIT(A) called remand report from AO which the Ld. AO submitted. The Ld. AO reported that although the assessee maintained a Cash-Book, the explanation of source was not satisfactory [Para 9.1.4 – sub-para (i) of impugned order passed by Ld. CIT(A)].

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ITA No.123/SRT/2026 Niharika Sidharth Daga whether, on the facts and circumstances of the present case, the cash deposits of Rs. 33,24,000/- made by the assessee in bank a/cs during demonetization period, could be regarded as unexplained money to the extent of Rs. 20,65,466/- u/s 69A of the Act.

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ITA No.123/SRT/2026 Niharika Sidharth Daga during the demonetization period but also during the preceding financial year. Thus, the assessee's explanation is supported by the regular books of account and the historical cash position reflected therein. The Ld. AO, however, did not accept the explanation primarily on the ground that the assessee had made cash withdrawals aggregating to Rs. 1,34,50,000/- from an interest-bearing OD account, while simultaneously maintaining substantial cash balances. In our considered view, the said circumstance may give rise to a doubt as to the manner in which the assessee managed her cash and banking operations; however, such circumstance, by itself, cannot establish that the cash balances recorded in the regular books were fictitious or otherwise unavailable. The Ld. AO has neither pointed out any specific defect in the Cash-Book nor brought any material on record to demonstrate that the entries therein were false, fabricated or unreliable.

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ITA No.123/SRT/2026 Niharika Sidharth Daga prepared Cash Flow Statement cannot, by itself, be treated as a ground to disregard the cash position reflected in the books.

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ITA No.123/SRT/2026 Niharika Sidharth Daga the absence of any corroborative material, cannot constitute a sufficient basis for sustaining the addition.

Order pronounced in open court on 01/09/2026

Sd/- Sd/- (SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat िदनांक /Dated : 01/09/2026 * Kishore, Sr. P.S.

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ITA No.123/SRT/2026 Niharika Sidharth Daga

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File

By Order,

Sr. Private Secretary, I.T.A.T., Surat

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