INCOME TAX OFFICER, PARWANOO vs. M/S ARTEX INDUSTRIES, NAHAN

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 03.07.2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 21.12.2019. The only grievance of the revenue is deletion of

addition of Rs.412.18 Lacs as made by the Ld. AO on account of cash deposits during demonetization period. 2. The Ld. CIT-DR advanced arguments and referred to the findings of Ld. AO in the assessment order. The Ld. AR also advanced arguments and stated that the assessee’s sales were duly substantiated by VAT returns which were not revised by the assessee as alleged by Ld. AO. Having heard rival submissions, the appeal is disposed-off as under. 3. Assessment Proceedings 3.1 The assessee filed return of income on 02.11.2017 at Rs.6.48 Lacs. The assessee is stated to be engaged in manufacturing & trading of Textiles, Handlooms, Power looms etc. The main issue as identified by Ld. AO was cash deposit by the assessee during demonetization from 08.11.2016 to 30.12.2016 for Rs.412.18 Lacs in three bank accounts as held by the assessee with Axis Bank, Bank of Baroda and Allahabad Bank. Accordingly, the assessee was required to prove the sources of these deposits. 3.2 At para 5.9 of assessment order, Ld. AO produced a comparative chart of cash sales and cash deposit for Financial Years 2015-16, 2016-17 and 2017-18 as under: -

3 ARTEX INDUSTRIES 219/270, SADHAURA ROAD, KALA AMB TEHSIL- NAHAN, DISTT. SIRMOUR (H.P.) Month of the F.Y.2015-2016 F.Y.2016-2017 F.Y.2017-2018 FY Cash Cash Cash Sales Cash Cash Sales Cash Sales Deposited Deposited Deposited APRIL 0 0 3605275 2613096 2189591 2929200 MAY 0 10000 2126244.91 2500000 1327300.25 2705700 JUNE 0 200000 6248261.45 7813808 1831199.11 400000 JULY 0 0 2350221.9 2837000 0 0 AUGUST 0 0 3459663.45 3407120 0 0 SEPTEMBER 0 0 20326971.86 4176030 0 0 OCTOBER 0 0 14564691.95 2565966 0 0 1 0 0 14214300.95 812900 0 0 NOVEMBER TO 8th NOVEMBER NOVEMBER 0 0 14214300.95 40832900 0 0 DECEMBER 0 0 0 1198000 0 0

3.3 On the basis of the same, Ld. AO alleged that the assessee failed to prove to have carried out cash sales in the aforesaid period. No evidence was on record to establish whether the assessee had reasonable stock for making cash sales. It could also not be ascertained whether the assessee revised its VAT Return. Accordingly, the claim of the assessee was rejected and the impugned deposits were added u/s 68 and the assessment was framed.

Appellate Proceedings 4.1 The assessee contended that the nature of business inherently involved significant volume of cash transactions particularly from walk- in customers and those in less digitized Tier-II and rural markets. It was stated that regular books of accounts were maintained which were subjected to Tax Audit as required under law. During assessment proceedings, the assessee, inter-alia, furnished copies of Audited financial statements, VAT returns, Sales Bills / Invoices, Monthly Chart of Cash Sales & Cash deposited in the bank for FYS 2015-16 to 2017- 18. The assessee also met each and every objection as raised by Ld. AO in its written submissions. It was contended that the books were not rejected by Ld. AO and entire sales was duly supported by corresponding purchases. The purchases and sales as reported by the assessee were duly reconciled with the VAT returns. The copies of VAT returns were duly furnished. The assessee also stated that it maintained quantitative details of stock. There was complete correlation of cash sales with purchase and stock which was further corroborated by the VAT returns. The sales were offered to tax and adding the same again would amount to double taxation which was impermissible. Reference was made to various decisions of Tribunal favoring the case of the assessee. 4.2 The Ld. CIT(A), upon perusal of above tabulation, observed that cash sales were regular feature of assessee’s business. The cash sales in September, 2016 & October, 2016 were Rs.203.26 Lacs & Rs.145.64 Lacs respectively whereas the sales in November, 2016 was

at comparative figure of Rs.142.14 Lacs. The increase in sales was due to festive and marriage season. No defect was found in the books and no discrepancy was pointed out by Ld. AO in assessee’s stock, sales and purchases. There was no finding that the purchases were inflated to show inflated sale to cover up the cash deposits. Finally at para 7.11, the impugned additions were deleted on the ground that Ld. AO did not dispute the fact that the cash receipts were nothing but sale proceeds in the business of the assessee. The addition was made only on the basis that post-demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added u/s 68 then the impugned addition would amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It was also on record that the assessee was having only one source of income from trading in Manufacturing & Trading of Textiles, Handloom, Power looms and therefore provisions of Sec.115BBE will have no application so as to treat the income of the assessee as income from other sources. When the assessee had sufficient cash-in-hand in the books of accounts, there was no reason to treat the cash deposits as income from undisclosed sources. Therefore, the impugned addition was deleted against which the revenue is in further appeal before us. Our findings and Adjudication 5. From the facts, it clearly emerges that the assessee is engaged in Textile business and cash sales is the regular feature of assessee’s

business. The above tabulation would show that the assessee has consistently carried out cash sales from April, 2016 onwards whereas the demonetization was announced on 08.11.2016. There is increase in sales during the months of September & October, 2016 which period also falls before announcement of demonetization. The sales and purchases transactions are duly evidenced by corresponding invoices and VAT Returns. The VAT returns are filed on monthly basis. The assessee’s books of accounts are duly audited under law and the assessee has reflected sales turnover of more than Rs.28.98 Crores. No defect has been pointed by Ld. AO in the books of accounts and no discrepancies have been noted in quantitative details of the assessee. The books have not been rejected u/s 145(3). The assessee has ample cash-in-hand in its books of accounts to make impugned deposits in the bank accounts. No actual case of non- genuine sales or inflated sales has been quoted by Ld. AO. In our considered opinion, the assessee has duly discharged its onus of proving the sources of cash deposits and it was onus of Ld. AO to rebut the evidences of the assessee which has not been done. It is trite law that no addition could be made on mere presumption, suspicion, conjectures or surmises. The assessee duly discharged its onus by furnishing plethora of documents. The available cash-in-hand in audited books as on 08.11.2016 was sufficient enough to make impugned deposits in the bank accounts. The sales receipts were already offered to tax and adding the same again would amount to double addition which is impermissible. On these facts, no addition

could be sustained in the hands of the assessee. The adjudication of Ld. CIT(A) could not, therefore, be faulted with. 6. The appeal stand dismissed. Order pronounced on 06th August, 2026

-Sd- -Sd- (RAJESH DAMODARLAL SHARMA) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AS Dated: 06-08-2026 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

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ITAT CHANDIGARH