PERIASAMY SIVASAKTHI,ERODE vs. ITO, WARD-1(1), ERODE

The Assessee raised the following grounds of appeal : “1. The order passed by the Learned Commissioner of Income Tax (Appeals) is contrary to facts, law, and principles of natural justice.

The Learned CIT(A) has erred in confirming the addition of ₹40,00,000 under section 68 of the Income-tax Act, 1961, even though the appellant had not maintained any books of accounts. Hence, no addition could have been made under section 68 in the absence of books.

The Learned CIT(A) has wrongly held that working sheets and cash flow statements prepared during proceedings constitute quasi books of accounts. These are merely explanatory workings and cannot be treated as books of accounts for the purpose of invoking section 68.

The Learned CIT(A) erred in ignoring the binding judgment of the Hon'ble Madras High Court in CIT v. Taj Borewells (2007) 291 ITR 232 (Mad), wherein it was categorically held that in the absence of books of accounts, section 68 cannot be invoked.

The Learned CIT(A) failed to consider multiple judicial precedents supporting the appellant, including:

The Learned CIT(A) erred in relying solely on a case favourable to the revenue, ignoring the settled principle that when conflicting judicial views exist, the view favourable to the assessee must prevail, particularly when supported by jurisdictional High Court authority.

The Learned CIT(A) has ignored the fact that the peak balance in the Axis Bank account was only 7,65,570 (on 20.12.2014), as against an arbitrary addition of ₹40,00,000 made by the Assessing Officer.

The Learned CIT(A) has failed to appreciate that only the profit element embedded in the deposits can be subjected to tax and not the entire credit summation. Reliance is placed on:

The Learned CIT(A) ought to have restricted the addition, if any, to an estimated percentage of turnover/credits, as held by the Hon'ble ITAT Chennai in Sundarrajan Venkateshkumar v. ITO (ITA No. 2439/Chny/2024, dated 12.12.2024).

The Learned CIT(A) has erred in passing the order without properly considering the written submissions, case laws, and evidences filed by the appellant which is arbitrary and perverse.

The appellant craves leave to add, alter, modify or withdraw any of the above grounds of appeal at the time of hearing before the Hon'ble Tribunal.”

Briefly, the facts of the case are that the appellant is an Individual engaged in the business of Turmeric. The Return of Income for the Assessment Year 2015-16 was filed on 18.02.2016 disclosing a total income at Rs.4,40,070/-. Against the said Return of Income, the assessment was completed by the Income Tax Officer, Ward-1(1), Erode vide order dated 08.12.2017 passed u/s.143(3) of the Income Tax Act, 1961 at a total income of Rs.44,40,070/-. While doing so, the Assessing Officer made addition of cash deposits in the bank account of Rs.40 lakhs as unexplained money of the appellant rejecting the explanation of the appellant that the said money was received from the partners of Turmeric Commodity Business, the details of whom were extracted by the Assessing Officer vide page no. 3 and 4 of the Assessment Order. It was stated that the said parties advanced money to the appellant out of their agricultural income. However, the Assessing Officer disbelieved the explanation provided by the appellant as the appellant had failed to prove the earning of agricultural income by those parties. Similarly, the Assessing Officer also disbelieved the explanation that the Gift of Rs.2 lakhs was received from his father Late Shri R. Periyasamy.

Being aggrieved by the above assessment order, the appellant preferred an appeal before ld.CIT(A), who vide impugned order confirmed the action of the Assessing Officer by holding that the identity of the creditors, genuineness of the transaction and creditworthiness of the creditors were not proved.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. The learned AR submits that the ld.CIT(A) ought not have confirmed the addition of Rs.40 lakhs in the absence of any books of accounts maintained by the appellant. Without prejudice to the above, he contends that the ld.CIT(A) ought to have estimated only the profit element embedded in the deposits, and not the entire amount.

On the other hand, Learned Sr.DR supports the order of Lower Authorities.

We heard rival submissions and perused the material available on record. The Assessing Officer made addition of cash deposit in the bank account as unexplained money of the appellant for the failure of the appellant to offer a satisfactory explanation as to the source of the cash deposits. It is an undisputed fact that the appellant stated that the cash deposits were made out of the money advanced to him by creditors. However, the appellant had not filed any evidence establishing the ingredients of identity, creditworthiness and genuineness of the transaction. The contention of the appellant that in the absence of books of accounts, no 68 addition cannot be made accepted for the reason that addition on account of cash deposit in the bank account can be made the provisions of section 69/69A of the Act.

As regards to the contention of the appellant that only addition of profit element embedded in the deposit cannot be accepted in the absence of any material on record establishing the nexus between the business and the cash deposits. Therefore, we do not find any merit in the grounds of appeal filed by the appellant.

In the result, appeal filed by the assessee stands dismissed. Order pronounced in the open Court on 11th August, 2026.