NANDA ALA,HYDERABAD vs. ACIT., CENTRAL CIRCLE-7(1), HYDERABAD

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad �ी रिवश सूद,�ाियक सद� एवं �ी मधुसूदन साविड़या लेखा सद� सम� | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.766/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2017-18) Shri Nanda Ala Vs. Assistant Commissioner Hyderabad of Income Tax PAN:ADXPA7089H Central Circle 7(1) Hyderabad (Appellant) (Respondent) आ.अपी.सं /ITA No.2173/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2017-18) Income Tax Officer Vs. Shri Nanda Ala Ward-7(1) Hyderabad Hyderabad PAN:ADXPA7089H (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: CA Sharad Chandra Toshniwal राज� व �ारा/Revenue by: Shri Mohan Babu, Sr. AR सुनवाई की तारीख/Date of hearing: 03/08/2026 घोषणा की तारीख/Pronouncement: 07/08/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

Thess cross appeals are filed by Shri Nanda Ala (“the assessee”) and the Revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 21.03.2025 for the A.Y. 2017-18. Since the issues raised by the assessee and the Revenue are interrelated, for the sake of

convenience, these cross appeals were heard together and are being disposed of by this common and consolidated order. 2. At the outset, it is noticed that there is a delay of 188 days in filing the present appeal by the Revenue before the Tribunal. In support of the petition seeking condonation of delay, the Revenue has filed an affidavit explaining the reasons which occasioned the delay. The Ld. AR did not raise any objection to the condonation of the delay and fairly submitted that he has no serious objection if the delay is condoned. On perusal of the affidavit filed by the Revenue explaining the delay we observe that, the reasons assigned constitute sufficient cause for not preferring the appeal within the prescribed period. Accordingly, we condone the delay of 188 days in filing the appeal by the Revenue and admit the appeal for adjudication on merits. 3. The assessee has raised the following grounds of appeal:

certificate, the total cash deposited during the demonetization period was Rs. 2,09,23,700/-, out of which deposits in Specified Bank Notes (“SBNs”) was amounted to Rs. 63,48,000/-. In view of the said certificate, it transpired that the figure of cash deposits adopted by the Ld. AO at Rs. 8,44,05,675/- was incorrect. After considering the certificate issued by the bank and the submissions of the assessee, the Ld. CIT(A) held that the addition made by the Ld. AO in respect of cash deposits in non-SBN currency out of the total cash deposits of Rs. 2.09,23,700/- was unsustainable and accordingly deleted the addition to that extent. However, in respect of cash deposits made in SBNs amounting to Rs. 63,48,000/-, the Ld. CIT(A) reduced therefrom the cash balance available with the assessee as on 08.11.2016 amounting to Rs. 9,91,487/- and sustained the balance addition of Rs. 53,56,513/-. Thus, the appeal of the assessee was partly allowed by the Ld. CIT (A). 7. Aggrieved by the order of the Ld. CIT (A), both the assessee as well as the Revenue are in appeal before the Tribunal. The Learned Authorized Representative (“Ld. AR”) submitted that the solitary issue arising out of the appeal of the assessee relates to the sustenance of addition of Rs. 53,56,513/- by the Ld. CIT(A). In this regard, the Ld. AR submitted that the assessee is engaged in the business of retail trading of liquor and during the relevant period was regularly carrying on sale of liquor. It was submitted that the cash deposited during the demonetization period represented the sale proceeds realized by the assessee in SBNs in the ordinary course of business and such receipts had been duly recorded in the regular books of account maintained by the assessee.

The Ld. AR submitted that the books of account of the assessee were duly audited and were produced before the Ld. AO. It was further submitted that the Ld. AO has nowhere rejected the books of account maintained by the assessee under section 145 of the Act nor has he disputed the trading results declared by the assessee. Having accepted the books of account and the sales recorded therein, the Ld. AO could not have separately treated the very same cash receipts as unexplained investment under section 69 of the Act. According to t he Ld. AR, once the sales stand accepted, the corresponding cash generated from such sales also necessarily stands explained and any separate addition would amount to taxing the same amount twice. 8. In the alternate submission, the Ld. AR submitted that the Ld. AO has erred in invoking the provisions of section 69 of the Act and making the addition in the hands of the assessee. The Ld. AR further submitted that the addition has been made merely on account of the fact that the deposits were made during the demonetization period in SBNs without appreciating that the deposits represented business receipts duly reflected in the books of account. It was argued that the provisions of section 69 of the Act have absolutely no application to the facts of the present case. Inviting our attention to the language employed in section 69 of the Act , the Ld. AR submitted that an addition under section 69 of the Act can be made only where the assessee is found to have made investments which are not recorded in the books of account maintained by him. In the present case, the impugned cash represented business receipts which formed part of the regular books of account. Therefore, the very jurisdictional requirement for invoking section 69 of the Act was absent. Accordingly, the Ld. AR submitted that the

entire addition made by the Ld. AO by invoking the section 69 of the Act is liable to be vacated. 9. Per contra, the Learned Departmental Representative (“Ld. DR”) supported the order of the Ld. CIT(A) to the extent the addition of Rs. 53,56,513/- had been sustained. The Ld. DR submitted that after the announcement of demonetization by the Central Government on 08.11.2016, acceptance of SBNs was prohibited except in the case of certain specified entities and businesses notified by the Government. According to him, the business of retail trading of liquor carried on by the assessee did not fall within the category of businesses authorized to accept SBNs during the relevant period. Therefore, the assessee was not legally entitled to accept SBNs against sale of liquor after the notification issued by the Government. The Ld. DR further submitted that even applying the test of human probabilities, the explanation furnished by the assessee could not be accepted. According to him, no prudent businessman, having knowledge that the SBNs had ceased to be legal tender and their acceptance had been restricted by the Government, would continue to accept such notes against sale of liquor. Therefore, the claim that the SBNs deposited in the bank represented business sales was inherently improbable and contrary to normal commercial conduct. The Ld. DR submitted that the more probable inference was that the assessee had introduced its unaccounted cash in the guise of business receipts by depositing the same in the bank during the demonetization period. He therefore submitted that the Ld. CIT(A) was fully justified in sustaining the addition to the extent of Rs.

53,56,513/-, after giving credit for the cash balance available with the assessee as on 08.11.2016. 10. Replying to the alternate contention of the assessee regarding the applicability of section 69 of the Act, the Ld. DR invited our attention to page no. 2 of the assessment order and submitted that the Ld. AO has categorically recorded that despite repeated opportunities, the assessee neither responded to the statutory notices nor furnished any explanation regarding the source of cash deposits made during the demonetization period. In the absence of any explanation before the Ld. AO, the source of cash deposited in the bank remained unexplained and, therefore, the Ld. AO was justified in treating the same as unexplained investment under section 69 of the Act. According to the Ld. DR, merely because the assessee subsequently sought to explain the deposits before the appellate authorities would not render the assessment order erroneous. 11. So far as the appeal preferred by the Revenue is concerned, the Ld. DR submitted that the Ld. CIT(A) committed an error in deleting the addition relating to cash deposits made in non-SBN currency. Inviting our attention to para no. 5 of the impugned appellate order, the Ld. DR submitted that the Ld. CIT(A) failed to record any finding whatsoever regarding the actual source of such cash deposits. According to the Ld. DR, before deleting the addition, it was incumbent upon the Ld. CIT(A) to verify from the books of account whether the cash deposits were duly recorded and whether the assessee had sufficient cash available for making such deposits. In the absence of any such verification, the deletion granted by the

Ld. CIT(A) could not be sustained. The Ld. DR accordingly submitted that the issue relating to cash deposits made in non- SBN currency also required fresh verification from the books of account maintained by the assessee. It was, therefore, prayed that the order of the Ld. CIT(A) on this issue be set aside and the matter be restored to the file of the Ld. AO for fresh adjudication after proper verification of the source of the entire cash deposits. 12. In rejoinder, the Ld. AR submitted that the observation made by the Ld. AO in the assessment order that the assessee had not furnished any explanation during the assessment proceedings was factually incorrect. Inviting our attention to page no. 8 to 33 of the paper book, it was submitted that the assessee had duly participated in the assessment proceedings and had furnished all the relevant documentary evidence, including the return of income, computation of income, audited financial statements, tax audit report, cash book for the relevant period, bank statements, cash deposit details, purchase register, stock register and other books of account. According to the Ld. AR, once the primary records were produced before the Ld. AO, the assessee had discharged the burden cast upon him under the Act. The Ld. AR further submitted that the Ld. AO had neither examined the books of account produced by the assessee nor pointed out any discrepancy therein. Instead, without appreciating the documentary evidence available on record, the Ld. AO proceeded to make the addition solely on the basis of the cash deposits reflected in the bank account.

statements, cash deposit details, purchase register, stock register and other supporting documents, had in fact been furnished before the Ld. AO during the course of assessment proceedings. The assessee has also sought to rely upon the documents placed at page nos. 8 to 33 of the paper book in support of the aforesaid contention. We have carefully examined the index of the paper book, which is to the following effect:

the file of the Ld. AO for fresh adjudication. The assessee shall be at liberty to place before the Ld. AO all documentary evidence in support of its claim that the impugned cash deposits represented business receipts duly recorded in the regular books of account. The Ld. AO shall examine the books of account, cash book, stock register, purchase and sale records, bank statements and such other material as may be produced by the assessee and thereafter adjudicate the issue afresh in accordance with law after providing adequate opportunity of being heard. 21. As regards the alternate contention of the assessee that the invocation of section 69 of the Act by the Ld. AO is not in accordance with law since the cash deposited in the bank was duly recorded in the books of account of the assessee, we find no merit in the said contention. Though the assessee has contended that the cash deposits were duly accounted for in the books of account, the assessee has failed to substantiate the said claim by placing any documentary evidence on record to establish that the books of account containing the impugned entries were produced before the Ld. AO during the course of the assessment proceedings. In the absence of any such material, the contention of the assessee that the provisions of section 69 the Act are inapplicable cannot be accepted. Accordingly, the alternate plea of the assessee is rejected. 23. Coming to the appeal preferred by the Revenue, we find that the Ld. CIT(A), while deleting the addition relating to cash deposits made in non-SBN currency, has not recorded any categorical finding regarding verification of the source of such deposits from the books of account maintained by the

assessee. In this regard, we have gone through para no. 6 to 6.2 the order of the Ld. CIT (A), which is to the following effect:

demonetization period is adjudicated comprehensively. Accordingly, the Ld. AO shall verify the source of the entire cash deposits aggregating to Rs. 2,09,23,700/-, including deposits made in both SBNs and non-SBNs currency, on the basis of the books of account and other supporting documentary evidence that may be produced by the assessee. Needless to mention, the Ld. AO shall pass a speaking order dealing with each of the contentions raised by the assessee after granting adequate opportunity of being heard. The assessee is directed to extend full cooperation during the remand proceedings and shall not seek unnecessary adjournments. In case the assessee fails to cooperate or fails to produce the relevant records despite reasonable opportunity, the Ld. AO shall be at liberty to decide the matter on the basis of the material available on record in accordance with law. Accordingly, the impugned order of the Ld. CIT(A) on the issue relating to cash deposits made during the demonetization period is set aside and the entire matter is restored to the file of the Ld. AO for fresh adjudication in accordance with law and in the light of the observations made hereinabove. 24. In the result, the cross appeals filed by the assessee and the Revenue are allowed for statistical purposes Order pronounced in the Open Court on 7th August, 2026. Sd/- Sd/- (RAVISH SOOD) (MADHUSUDAN SAWDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 7th August, 2026. Vinodan/sps

Copy to:

S.No Addresses 1 Shri NANDA ALA H.NO. 14-2-337/13/2 RAZACKPURA ,PAN MANDI, GOSHAMAHAL, HYDERABAD, 500012 ,Telangana 2 Income Tax Officer Ward-7(1),Hyderabad and Assistant Commissioner of Income Tax Central Circle 7(1) Signature Towers, Kothaguda, Serilingampally, RR Distt. Hyderabad 500084 3 Pr. CIT –Central, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order

TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.08.07 12:42:41 +05'30'