DHARAM SHANKAR YADAV,PANCHKULA vs. INCOME TAX OFFICER, WARD 2(1), CHANDIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: PHYSICAL MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 1606 /Chd/2025 िनधा�रण वष� / Assessment Year : 2011-12 Dharam Shankar Yadav बनाम The ITO 267, Sector 12A, Panchkula-134113 Ward-2(1) Chandigarh �ायी लेखा सं./PAN NO: AAAPY9723C अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Pritish Goyal, C.A & Shri Nikhil Garg, C.A राज� की ओर से/ Revenue by : Shri Prabodh Sharma, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 25/06/2026 उदघोषणा की तारीख/Date of Pronouncement : 15/07/2026 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A) Addl/JCIT(A)-2, Lucknow dt. 26/09/2025 for the Assessment Year 2011-12. 2. In the present appeal Assessee has raised the following grounds: 1. The Impugned order passed by Ld. ADDL/JCIT(A) is against facts and law. 2. The Ld. ADDL/JCIT(A) erred in upholding the assessment under without considering the fact that no assessment order was served to assessee. 3. The Ld. ADDL/JCIT(A) erred in upholding the reopening of assessment under Section 148 of the Income Tax Act, 1961, which was initiated without valid reasons to believe that income had escaped assessment thus reopening was based mere assumptions, surmises and conjectures. 4. The Ld. ADDL/JCIT(A) erred in dismissing the appeal without properly appreciating that the appellant was not afforded adequate opportunity to produce evidence before the Ld. AO during assessment proceedings. 5. The Ld. ADDL/JCIT(A) erred in sustaining the addition of Rs. 17,20,010/- under Section 68 of the Income Tax Act, 1961, treating the same as unexplained cash credits where the same have already been explained before the Ld. AO and CIT(A). 6. The Ld. ADDL/JCIT(A) failed to appreciate that the appellant had declared income from business and salary from the partnership firm in the

return of income, and the cash deposits were part of the same business operations. 7. The appellant craves leave to amend or alter the grounds of appeal before the same are heard and disposed-off.

3.1 The Ld. AR further submitted that the assessee had originally filed the return of income declaring salary received from the partnership firm and share of profit/business income. It was argued that the assessee was a partner in M/s Yadav Steel Industries engaged in the business of manufacturing and trading of screws and that the impugned cash deposits represented petty sale proceeds of screws deposited by various customers situated across different parts of the country. It was contended that the assessee had consistently maintained that the deposits were relatable to business transactions and were duly explained before the Assessing Officer as well as before the first appellate authority. Additional evidence was also furnished before the CIT(A) under Rule 46A in support of the explanation.

3.2 It was further submitted that the authorities below failed to appreciate that the assessee had no independent source of income apart from salary and business income from the partnership concern and that the deposits were intrinsically connected with the business activities. It was argued that merely because the deposits were made by different persons at different locations, the same could not automatically be treated as unexplained cash credits under section 68 without making any meaningful enquiry regarding the nature of business and corresponding sales. It was accordingly prayed that the reopening as well as the addition of Rs.17,20,010/- be deleted.

Assessing Officer had received credible information regarding substantial cash deposits of Rs.17,20,010/- in the assessee's bank account, whereas the returned income was only around Rs.1.99 lakh. Therefore, there existed sufficient material to form a reasonable belief that income chargeable to tax had escaped assessment.

4.1 The Ld. DR further submitted that despite adequate opportunities, the assessee failed to substantiate the source of cash deposits with cogent documentary evidence during the assessment proceedings. It was pointed out that enquiries made by the Assessing Officer from the bank revealed that cash deposits were made from different branches across the country by different persons. The deposit slips were not signed by the assessee and did not support the explanation advanced by him. It was also submitted that the assessee himself had stated during recording of his statement that he had no independent business except being a partner in the partnership firm.

4.2 The Ld. DR further argued that even during the remand proceedings the assessee failed to establish any nexus between the impugned cash deposits and the books of account of M/s Yadav Steel Industries or to demonstrate that such deposits had been reflected as business receipts in the firm's accounts. It was therefore submitted that the explanation remained wholly unsubstantiated and the addition under section 68 had rightly been sustained by the lower authorities. Accordingly, the order of the CIT(A) deserved to be upheld.

5.1 Insofar as the challenge to the reopening under section 147/148 of the Act is concerned, I find that the Assessing Officer had received definite information regarding cash deposits aggregating to Rs.17,20,010/- in the bank account of the assessee during the relevant previous year, whereas the income declared by the assessee was substantially lower. The reasons recorded disclose a rational nexus between the information available with the Assessing Officer and the formation of belief regarding escapement of income. At the stage of initiation of reassessment proceedings, the Assessing Officer is only required to possess a prima facie reason to believe and not conclusive evidence establishing escapement of income. I,

therefore, do not find any infirmity in the assumption of jurisdiction under section 147 of the Act. The legal grounds challenging the reopening are, accordingly, dismissed. Coming to the addition under section 68 of the Act, I find that the Assessing Officer treated the entire cash deposits of Rs.17,20,010/- as unexplained merely because the deposits were made from different branches and by different persons. The assessee has consistently explained that he was a partner in M/s Yadav Steel Industries and that the impugned deposits represented petty sale proceeds of screws deposited by various customers spread across different States. In my considered view, the explanation furnished by the assessee could not have been rejected solely on the basis that deposits originated from different places, particularly when the business itself involved supply of goods to customers situated across the country.

5.2 At the same time, we also find that the assessee has failed to substantiate the entire explanation by producing complete books of account, corresponding sale invoices, stock records or any satisfactory reconciliation establishing that the whole of the cash deposits had been duly accounted for in the books of the partnership concern. The additional evidence produced by the assessee also does not conclusively establish that the entire deposits represented disclosed business receipts.

5.3 Thus, the Assessing Officer was not justified in treating the entire cash deposits of Rs.17,20,010/- as unexplained cash credits. Equally, the assessee cannot be granted complete relief in the absence of satisfactory evidence explaining the entire deposits. In my considered opinion, a reasonable estimate is called for in the peculiar facts and circumstances of the case.

5.4 Considering the totality of the facts, the nature of the business carried on by the assessee, the explanation offered regarding business receipts, the absence of complete corroborative evidence and the overall probabilities emerging from the record, I deem it fair and reasonable to sustain an addition of Rs.5,00,000/- under section 68 of the Act as representing the unexplained component of the cash deposits. Consequently, the balance addition of Rs.12,20,010/- out of the total addition of Rs.17,20,010/- is directed to be deleted.

5.5 The Assessing Officer is directed to recompute the income and consequential tax liability after giving effect to this order.

Order pronounced on 15/07/2026

Sd/- ( LALIET KUMAR) JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकर आयु�/ CIT 3. आयकर आयु� (अपील)/ The CIT(A) 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH