INCOME TAX OFFICER, KOTDWAR, PAURI GARHWAL vs. JAGDAMBA DANGWAL, SATPULI SAIN, PAURI GARHWAL

ITA No.261/DDN/2026 JAGDAMBA DANGWAL

IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH “DB” DEHRADUN BEFORE SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No.261/DDN/2026 Assessment Year: 2019 INCOME TAX OFFICER, Vs. JAGDAMBA DANGWAL, Income Tax Office, S/o Zandu Ram, Satpuli Najibabad Road, Kotdwar, Pauri, Sain, Satpuli Bazar, Pauri, Uttarakhand 246149. Uttarakhand 246172. PAN No. AJDPD1454D Appellant Respondent Assessee by Shri Pankaj Goel, Adv. Revenue by Shri Deepak Chaudhary, JCIT Date of hearing: 22.07.2026 Pronouncement on 22.07.2026 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: 1. This appeal arises from order dated 28.03.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC.

1.1 In this case, the Ld.AO passed an order u/s 147 r.w.s. 144B of the Act dated 13.03.2024. Through this order it is noticed that the assessee is a liquor vendor in whose case cash deposits of Rs.2,22,56,300/- were noticed during the year under consideration. It is seen that the many opportunities given by the Ld. AO during the course of assessment proceedings were not availed of by the assessee, leading to an ex parte

ITA No.261/DDN/2026 JAGDAMBA DANGWAL order through which an addition of Rs.2,22,56,300/- was made u/s 69A r.w.s. 115BBE of the Act.

1.2 The aggrieved assessee approached the Ld. CIT(A) where he filed considerable new evidence which was admitted under Rule 46A and a remand report was also called for from the Ld. AO. It is noteworthy that the remand report dated 25.03.2026 submitted by the Ld. AO, as extracted at page 38 of the impugned order, reveals that the Ld. AO has admitted that the addition was made due to non-compliance by the assessee but the Ld. AO has admittedly not offered any adverse comments on the documents admitted as new evidence. Thereafter, the Ld. CIT(A) proceeded ahead to delete the impugned addition after giving a finding that the same was justified and in line with the entries in the books of account.

1.3 The Revenue is aggrieved with this action of Ld. CIT(A) and has approached the ITAT with several grounds as under: -

“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition of Rs 2,22,56,300/-made by the Assessing Officer u/s 69A of the Income-tax Act, 1961 on account of unexplained cash deposits, without appreciating that the assessee had failed to furnish any explanation or supporting evidence during the assessment proceedings despite repeated statutory notices. 2. The learned CIT(A) has erred in accepting additional evidences in contravention of Rule 46A of the Income-tax Rules, 1962, without properly appreciating that the assessee was provided sufficient opportunities during assessment proceedings and no sufficient cause was demonstrated for non- compliance. 3. The learned CIT(A) has erred in holding that cash deposits represent business receipts, merely relying, upon documents submitted at appellate stage, without

ITA No.261/DDN/2026 JAGDAMBA DANGWAL any independent verification and despite the fact that the Assessing Officer had specifically objected to admission of such evidences in the remand report. 4. The learned CIT(A) has failed to appreciate that the assessee did not file return of income and did not respond to notices issued u/s 142(1) and 148, and therefore, the Assessing Officer had rightly completed the assessment based on material available on record. 5. The learned CIT(A) has erred in law and on facts in ignoring that the primary onus to explain the nature and source of cash deposits lies upon the assessee, which remained un-discharged during assessment proceedings. 6. The learned CIT(A) has erred in deleting the addition by accepting the theory of cash sales and business cycle (cash sales-deposit- purchases) without examining the initial source of investment/capital and without establishing genuineness of entire business transactions. 7. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs.1,85,44,451/-made u/s 69 of the Act on account of unexplained investment in purchases, ignoring that the assessee had failed to explain the source of such investments during assessment proceedings. 8. The learned CIT(A) has erred in accepting that purchases were explained merely on the basis of bank entries and subsequent submissions, without examining the source of funds used for initial purchases and without proper verification. 9. The learned CIT(A) has failed to appreciate that acceptance of additional evidences at appellate stage without proper verification and contrary to the remand report vitiates the appellate order. 10. The learned CIT(A) has erred in not exercising the powers available under section 251(1)(a) (as amended) to set aside the assessment in a case completed u/s 144, despite serious deficiencies in facts and verification, thereby resulting in escapement of taxable income. 11. The learned CIT(A) has erred in granting relief without conducting necessary inquiries or directing the Assessing Officer to verify the claims, thereby passing an order which is not sustainable in law. 12. The learned CIT(A) has erred in ignoring material facts on record and has passed an order based on assumptions and unverified submissions, rendering the order perverse. 13. The appellant craves leave to add, amend, alter or withdraw any ground of appeal at the time of hearing.” 2. Before us the Ld. DR took us through the assessment order and

pointed out that the cash deposits could not be tallied properly by the

Ld. AO while preparing the remand report since it is mentioned that in that report that due to paucity of time the entries in the books of

ITA No.261/DDN/2026 JAGDAMBA DANGWAL account could not be independently verified. It was the submission that the matter could be remanded back to the file of Ld. AO for a deep analysis of the entries.

2.1 The Ld. AR relied on the order of Ld. CIT(A).

“8.1.1 The submissions made by the appellant along with facts of the case, asst. order, documents on record including additional evidences filed during appeal proceedings, which have already been admitted under Rule 46A and remand report submitted by the AO have been perused and considered carefully on merits of the case and additional evidences, the AO in the remand report dt. 25.03.2026, has submitted that the appellant has furnished copies of the Profit & Loss Account, Balance Sheet, and details of expenses, including license fees paid in respect of the liquor business. Purchase and sale details, which have been examined and bank statements have also been examined however, due to limitation of time, the same could not be independently verified in detail and hence, no conclusive comments are being offered on these submissions. 8.1.2 From all the above details, documents, submissions made by the appellant and remand report, it is noticed that during the year, the appellant was engaged in licensed retail trading of liquor under authorization/ License granted by the State Excise Department. The appellant has also submitted copy of allocation letter by the Excise Department In the assessment order, the AO has himself held that the appellant runs business of liquor. The AO has relied upon Form 26AS and third party confirmations to hold that the appellant purchased liquor. Further, it is also explained by the appellant that the nature of retail liquor trade is such that sales are affected in cash on a daily basis and the cash so generated is deposited into the bank accounts. The appellant has also filed copy of cash ledger accounts from its books of accounts, which clearly demonstrate that the cash received on retail sale is regularly deposited in its current bank account and the sales declared in the Trading account/books of accounts also confirms the same. Further, the copy of bank

ITA No.261/DDN/2026 JAGDAMBA DANGWAL statement also tallies with the cash ledger account, which further confirms that the cash deposit in the bank represent cash retail sale declared by the appellant. In the remand report also, the AO has submitted that the sale details filed and the bank statements have been examined but. However, no adverse comments have been given by the AO in this respect nor any doubt have been raised about genuineness of the sale bills/sale details/cash ledger. Thus, from all the above facts/ documents, it is clear that the cash deposited in bank account has arisen from sale of liquor only. The AO has also not disproved the business nexus. Further, all the sales transactions are duly recorded in the books of the appellant and the deposits are made in the current account and hence, provisions of section 69A are not applicable in the case of the appellant. It is thus clear that the cash deposits in the case of the appellant represent business turnover. The appellant has also filed Profit and Loss Account showing total liquor sales during the year at Rs.4,78,76,690/- which is recorded in the books and completely in line with the cash deposited in bank. The cash ledger has also been filed showing that the cash generated from such sales was deposited into the bank account. Thus, on the basis of above, it is clear that the cash deposited into the bank is directly sourced from recorded business sales and there is no independent or unexplained inflow of funds. Therefore, once sales are recorded in books and cash deposits are traceable to such sales, the same cannot be treated as "unexplained money" under section 69A as the essential condition for invoking section 69A is that the money must not be recorded in the books and its source must remain unexplained. In the present case, sales are recorded in books and cash deposits are linked to such sales and the profit embedded in turnover has also been declared by the appellant as his income. Thus, considering the facts of the case and legal provisions, the addition made by the AO u/s 69A of the Act amounting to Rs.2,22,56,300/- on account of cash deposit in the current account is hereby deleted. Thus, this ground of appeal no.1 is allowed. ……………. ………………… “It is also noticed that the said purchases are duly recorded in the books of accounts and also reflecting in Form 26AS and that confirmations and details in this respect were also received by the AO u/s 133(6) from various parties. Further, it is also noticed that the nature of retail liquor trade is such that sales are affected in cash on a daily basis and the cash so generated is deposited into the bank accounts and thereafter utilized for making payment to liquor suppliers and other expenses and thus, the source of purchases is sale proceeds of liquor. Such cash sale, which has been deposited in the bank account, have already been accepted in the earlier part of this order in preceding paras. Thus, the entire business of retail

ITA No.261/DDN/2026 JAGDAMBA DANGWAL liquor trade of the appellant therefore operates through a continuous and traceable cycle as under: Cash Sales Cash in Hand License Fee / Expenses Deposit into Bank Payment for Purchases / License Fee/Expenses In the remand report also, the AO has submitted that the purchase and sale details filed and the bank statements have been examined however, no adverse comments have been given by the AO in this respect nor any doubt have been raised about sources of purchase payments from the bank Further, during assessment proceedings also, the AO has called for bank statements and copies of the same have also been filed by the appellant during appeal proceedings. From perusal of the same, it is apparently clear that the payments to various liquor suppliers namely M/s Radio Khaitan Ltd., M/s United Breweries Ltd, M/s India Glycols Ltd, M/s Dhampur Sugar Mills Ltd, M/s Maa Sheetala Distributors Pvt. Ltd, M/s Allied Blenders and Distilers Pvt. Ltd., M/s Bacardi India Pvt. Ltd. PVK Distributors M/s Dewans Modern Breweries Ltd. Pernod Ricard India Pvt. Ltd. are duly reflected in the said bank statements through proper banking channels and names of these suppliers are also reflecting in the description against debit entries. Thus, from the above, it is clear that payments to these parties on account of purchase have been made only from the bank account of the appellant, the sources of which is the deposits in the bank against cash sales. Hence, sources of purchases are clearly explained from the bank statement itself, which was also available with the AO before passing the asstt. order. Copies of bank statement showing names of these suppliers in the description against debit entries for payment through proper banking channels are under: …… ……. “Thus, from the above, it is clear that the source of purchases are duly explained from the sales revenue deposited in bank and that all the purchase payments have been made through banking channels and duly recorded in books. Thus, considering the facts of the case and legal provisions, the addition made by the AO u/s 69 of the Act amounting to Rs.1,85,44,451/-on account of unexplained investment for purchases is hereby deleted. Thus, this ground of appeal no.2 is allowed.” Considering the categorical finding of fact in the impugned order, we are not inclined to interfere with the same as they are worthy of being supported.

ITA No.261/DDN/2026 JAGDAMBA DANGWAL 4. In the result, the appeal is allowed.

Order pronounced in the open court on 22.07.2026

Sd/- Sd/- (RAJ KUMAR CHAUHAN) (SANJAY AWASTHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 11.08.2026 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI