ASHUTOSH PRASAD SINGH,VARANASI vs. DCIT - R 2, VARANASI

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH (SMC), VARANASI BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.142/VNS/2024 Assessment Year: 2017-18 Ashutosh Prasad Singh v. The DCIT 81, Gandhi Nagar Range 2 Sigra, Varanasi (U.P) Varanasi TAN/PAN:AEAPS3389G (Applicant) (Respondent) Applicant by: Shri Arvind Shukla, Advocate Respondent by: Shri Sabayasachi Chakraborty, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 20.06.2024, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.

2.0 The brief facts of the case are that the assessee filed his return of income for the year under consideration on 30.10.2017 declaring a total income of Rs.21,35,580/-. The case was selected for Complete Scrutiny under Computer-Assisted Scrutiny Selection (CASS). Accordingly, notice under section 143(2) of the Income Tax Act, 1961 (hereinafter called 'the Act’) was issued to the assessee on 21.09.2018. Thereafter, notices under section 142(1) of the Act calling for details were issued to the assessee. The assessee filed submissions through the e-portal of the Income Tax Department. The AO observed that the assessee was

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stated to be engaged in the business of running a Restaurant & Bar and had debited a sum of Rs.8,05,690/- under the head ‘Power & Fuel’ in the Profit and Loss Account and the said expenses were paid in cash. Since documentary evidences and explanations in support of the cash payments were not furnished by the assessee, the AO disallowed the same under section 40A(3) of the Act. Further, the assessee had deposited cash in the bank account during demonetization period (between 09.11.2016 to 30.12.2016) in Specified Bank Notes (SBNs), totalling to Rs.15,00,000/- and had paid a sum of Rs.2,10,500/- in SBNs on 10.11.2016 to his landlord for Power and Fuel. The AO observed that as per the cash book, the cash in hand was only Rs.14,68,329/-. The AO held that the cash deposited in SBNs into the bank exceeded by Rs.2,42,500/- which was treated as unexplained money of the assessee and added to the total income of the assessee under section 69A of the Act. The AO completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.31,83,770/-.

2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 270A and 271AAC read with section 274 of the Act, separately.

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2.2 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee and confirmed the order of the AO.

2.3 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

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under section 40A(3) of the Act, being cash payments in excess of Rs.20,000/, the AO has failed to appreciate the fact that the said payments were towards Electricity Bills paid to Electricity Department, U.P.( Purvanchal Vidyut Vitran Nigam). It was further submitted that these bills were in the name of the landlord, Sri Rakesh Prasad Singh in whose premises the business of the assessee was being conducted and, hence, the Receipts were in his name but the bills were being paid by the assessee. It was also submitted by the Ld. A.R. that while making the said addition, the AO has neither given any opportunity to explain the case of the assessee properly before him nor the proposed addition was ever confronted to the assessee. It was submitted that the assessee was not maintaining any Bank Account at that place and that the payment to Government owned Electricity Department is not hit by the provisions of section 40A(3) of the Act. The Ld. A.R. prayed that the addition which is bad in law as well as on facts, deserves to be deleted.

3.1 Apropos the addition of Rs.2,42,500/- under section 69A of the Act, the Ld. A.R. submitted that the assessee had deposited cash in SBNs in the Bank, aggregating to Rs.15,00,000/- on 17th and 18th November, 2016. It was submitted that the payments were flowing directly from the cash book of the assessee's business which was duly produced before

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the AO. The Ld. A.R. submitted that the AO had picked up the cash balance as on 08.11.2016 amounting to Rs.14,68,329/- to reach the conclusion that the cash was short by Rs.2,42,500/-. The Ld. A.R. also submitted that while making the said addition, the AO had neither given any opportunity to explain the case of the assessee nor the proposed addition was ever confronted to the assessee and the addition was made on presumptions and surmises, against the principles of natural justice. The Ld. A.R. further submitted that the provisions of Section 69A of the Act are applicable only when there is no entry in the books of account in respect of money, jewellery, etc. found in possession of the assessee. It was submitted that since the assessee had already made the accounting entry in the books in respect of cash deposited by him, the provisions of section 69A of the Act would not be applicable. The Ld. A.R. submitted that since the assessee had already placed the profit and loss account along with extract of cash book before the AO, where all the relevant entries were recorded, the assessee had duly discharged his onus and it was for the AO to demolish the said evidences, which he had failed to do. The Ld. A.R. also submitted that the AO had simply ignored the evidences, which was illogical, illegal and judicially incorrect. Inviting my attention to Instruction No.3/2017 dated 21.02.2017 of the C.B.D.T., the Ld. A.R.

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submitted that the AO was required to take into account the records of the assessee and then reach a conclusion and further the binding C.B.D.T Instruction had not been followed by him. The Ld. A.R. submitted that the fact is that the assessee had withdrawn Rs.5,00,000/- from the firm, M/s Maharani Builders where he was a partner. Inviting my attention to Ledger Account of Shri Ashutosh Prasad Singh, Partner, from the books of M/s Maharani Builder and Audited Accounts of M/s Maharani Builder, which are placed at pages 21 to 27 of the Paper Book, the Ld. A.R. submitted that debit entry of Rs.5,00,000/- on 05.11.2016 was recorded therein. He submitted that just after 3 days, the Central Government had announced demonetization and, accordingly, the assessee, who had SBNs of Rs.5.00 lakhs in his possession, deposited Rs.2,50,000/- in the books of his proprietorship firm on 09.11.2016 simply for the sake of convenience of sending the SBNs to Bank along with the SBNs of the firm. He submitted that there was no bar against the proprietor in depositing cash in his account in the firm. The Ld. A.R. submitted that the existence of SBNs of Rs.2.5 lakhs in the cash book has been ignored by the AO to arrive at the conclusion that the deposit in the bank account was made from undisclosed cash. The Ld. A.R. submitted that the addition, based on non- appreciation of factual position, without giving opportunity of

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being heard and confronting the assessee with the proposed addition and that too under incorrect provisions of section 69A of the Act, deserves to be deleted in the interest of justice.

4.0 Per contra, the Ld. Sr. D.R. submitted that the assessee had failed to produce any evidence regarding the payment of Electricity Bill directly to the Electricity Department. It was submitted that it was very much evident from record and as was also duly admitted by the assessee that the payment of electricity had been made to the owner of the property and not directly to the Electricity Department and, therefore, provisions of section 40A(3) of the Act had been rightly invoked.

4.1 As far as the issue of cash deposits in SBNs was concerned, it was submitted that the assessee had failed to offer any explanation and the details regarding cash deposits during the demonetization period and, therefore, the AO was left with no other option but to make the impugned addition. It was prayed that the appeal of the assessee be dismissed.

5.0 I have heard the rival submissions and have also perused the material on record. It is seen that the first issue before me is the addition of Rs.8,05,690/- made under section 40A(3) of the Act being cash payment in excess of Rs.20,000/-. It is the submission of the assessee that these payments were made

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to the owner of the property towards payment of electricity bills due to Purvanchal Vidyut Vitran Nigam, U.P. The assessee has filed copies of Receipts of the impugned amount, in this regard, to justify that, although payments have been made to the owner of the property, the fact remains that the amounts had been paid towards payment to electricity bills. In this regard, I am in agreement with the submissions made by the Ld. A.R. that although payments has been made in cash, the provisions of section 40A(3) of the Act would not apply because the payments were towards payment of electricity bill to a Government owned Electricity Distribution Company and although the assessee had made payments in cash, the same has ultimately been utilized for payment of electricity bill and, therefore, the impugned addition is bad in law. I am of the considered view that since the electricity meter was not in the name of the assessee and as per the understanding between the owner of the property and the assessee, the assessee was obliged to make payments towards electricity bills, the impugned payment has essentially been made for the payment of electricity bills and, therefore, the provisions of section 40A(3) of the Act would not be attracted, in this regard. Accordingly, this addition of Rs.8,05,690/- under section 40A(3) of the Act is directed to be deleted.

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5.1 As far as the issue of addition of Rs.2,42,500/- on account of cash deposited in Bank is concerned, the Ld. A.R. has submitted that the assessee has deposited cash in SBNs aggregating to Rs.15.00 lakhs on 17th and 18th November, 2016 and the excerpts of cash book from 07.11.2016 to 18.11.2016 were also submitted (as is evident from the paper book filed, in this regard). It is seen that the AO picked up cash balance of Rs.14,68,329/- as on 08.11.2016 to reach a conclusion that the cash was short by Rs.2,42,500/-. It is further seen that it is the submission of the assessee that the assessee had withdrawn Rs.5.00 lakhs from another firm, M/s Maharani Builders, wherein he was a partner and that such withdrawal had been utilized for making cash deposits on 17th and 18th November, 2016. However, it is seen that this aspect has not been duly considered by the AO while making the impugned addition and as per the claim of the assessee, the assessee was never given an opportunity to explain the case. Therefore, in view of these facts, I am of the considered view that this issue of addition on account of cash deposits needs to be decided afresh by the AO after giving proper opportunity to the assessee, in this regard. Accordingly, this issue of cash deposit is restored to the file of the AO wherein the AO will restrict himself only to examine whether there was

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any shortfall of cash of Rs.2,42,500/- in the books of the assessee or not.

6.0 In the final result, the appeal of the assessee stands partly allowed for statistical purposes.

Order pronounced in the open Court on 10/08/2026.

Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:10/08/2026 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar/DDO