PARVEEN KUMAR,LUDHIANA vs. CIT(A), DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: VIRTUAL MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 968 /Chd/2026 िनधा�रण वष� / Assessment Year : 2017-18 Parveen Kumar बनाम The CIT(A) H.No. B-III-1321, Bajwa Nagar Delhi Ludhiana, Punjab-141003 �ायी लेखा सं./PAN NO: ABVPK9463F अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Rajesh Mahru, C.A राज� की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR (Virtual Mode) 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)/NFAC, Delhi dt. 30/03/2026 for the Assessment Year 2017-18. 2. In the present appeal Assessee has raised the following grounds: Ground No. 1: Jurisdictional Issue – Invalid Reassessment Proceedings That on the facts and in the circumstances of the case and in law, the reassessment proceedings initiated under Section 148 and the consequent assessment order dated 28.03.2022 are bad in law, without jurisdiction and liable to be quashed, as the same have not been carried out in accordance with the statutory framework governing faceless proceedings, including Section 151A of the Income Tax Act, 1961, thereby vitiating the entire assessment proceedings. Faceless Assessment was notified from 29.03.2022 vide notification No. 18/2022/F.No.370142/16/2022-TPL(Part1)m, whereas Assessment was made on 28.03.2022 thereby is without jurisdiction as per provisions of Section 151A which is well supported by case laws. Ground No. 2: Erroneous Addition of ₹24,00,000 a.) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the addition of ₹24,00,000, being cash deposits made during the demonetisation period, which are duly explained as arising from business operations, and therefore the provisions of Section 68/69A of the Act are not applicable. b.) That the Ld. CIT(A) has erred in not appreciating that the impugned cash deposits are out of recorded cash sales duly accounted for in the books of accounts and supported by documentary evidences including VAT returns, cash book, audited financial statements and income tax returns, and therefore the source of such deposits stands fully explained.

c.) That the Ld. CIT(A) has erred in sustaining the addition despite the fact that the books of account of the appellant are duly audited, no defect or discrepancy has been pointed out therein, and the same have not been rejected under Section 145(3) of the Act, and therefore the entries recorded therein cannot be disregarded. d.) That the Ld. CIT(A) has failed to appreciate that the pattern of cash sales and corresponding cash deposits during the year under consideration is consistent with that of preceding years, thereby establishing that such deposits are part of regular business activity and not unexplained in nature. e.) That the Ld. CIT(A) has erred in ignoring the direct nexus and correlation between cash sales and deposits, particularly the substantial cash sales made during October 2016, and the corresponding deposits made thereafter and has wrongly drawn adverse inference based on isolated monthly comparison. f.) That the Ld. CIT(A) has erred in recording incorrect facts with respect to cash deposits for the preceding financial year, which has materially affected the analysis of cash pattern and led to an erroneous conclusion, thereby rendering the impugned order factually unsustainable. g.) That the addition sustained by the Ld. CIT(A) is legally unsustainable as the Ld. Assessing Officer invoked Section 68, whereas the Ld. CIT(A) has proceeded on the basis of Section 69A, thereby demonstrating inconsistency, lack of clarity and non- application of mind; and in any case, both provisions are inapplicable as the impugned amount is duly recorded in the books of account. h.) That the Ld. CIT(A) has erred in sustaining the addition without appreciating that the cash sales forming part of such deposits have already been offered to tax and therefore treating the same again as unexplained income results in impermissible double taxation. i.) That the Ld. CIT(A) has erred in disregarding and not properly appreciating the documentary evidences furnished by the appellant, including bank statements, VAT returns, cash book and audited financial statements, which clearly establish the nature and source of the cash deposits. Ground No. 3: Defective Notice under section148 was Issued Notice u/s 148 has been issued on 28.03.2021 having the following defects a) Reasons for approval were not accompanied in this notice and the notice was unverified. b) It has been stated that the notice was issued after obtaining necessary satisfaction of the RANGE-1, LUDHIANA, but as per Section 151 of the IT Act, 1961 Approval is required instead of necessary satisfaction, Moreover the proper authority for the Approval u/s 151 should be mentioned. c) As per section 151 of the Income Tax Act, 1961 Sanction for the Issue of notice u/s 148 should be approved from the specified authority but in the present case necessary satisfaction of Range-1, Ludhiana has been specified. d) In the Assessment order dated 30.03.2026, On page. no 2 the Ld. AO has stated that the copy of the reasons for re-opening of the case has been provided on 29.06.2021 but the same was not provided neither through mail nor through portal till now. Moreover, in the Notice issued under section 143(2) dated 29.06.2021, the reasons for re-opening were written “null”. Moreover, the Notice was an Unverified Notice as Digital Signature applied of the Jurisdictional Assessing Officer was unverified. Ground No. 4: Non-Consideration of Remand Reply That the Ld. CIT(A) has erred in not properly considering the appellant’s reply to the remand report, wherein it was clearly demonstrated that the cash book had already

been furnished before the Ld. Assessing Officer during the assessment proceedings and did not constitute additional evidence. Ground No. 5: Violation of Principles of Natural Justice That the assessment and appellate proceedings have been completed without providing effective and meaningful opportunity to the appellant and without proper examination of evidences, thereby violating the principles of natural justice. Ground No. 6: Procedural Irregularities in Reassessment That the reassessment proceedings are vitiated due to procedural irregularities, inasmuch as the reasons for reopening were not properly furnished, the mandatory approval under Section 151 has not been demonstrated on record, and other technical defects exist, thereby rendering the proceedings invalid in law. Ground No. 7: Addition Based on Suspicion and Conjecture That the addition sustained by the Ld. CIT(A) is based merely on suspicion arising from cash deposits during the demonetisation period, without any adverse material or evidence on record, and is therefore unsustainable in law. Ground No. 8: General Ground That the appellant craves leave to add, amend, alter or withdraw any of the above grounds of appeal at or before the time of hearing. 3. At the outset, the Ld. AR submitted that Ground relating to the legal challenge against the validity of the reassessment proceedings, including the jurisdiction assumed under sections 147/148 of the Act and the approval obtained under section 151 of the Income-tax Act, 1961, were not being pressed during the course of the hearing. It was submitted that the assessee does not wish to invite any adjudication on the said legal grounds in the present proceedings, and the same may kindly be treated as withdrawn with liberty to raise the issue in appropriate proceedings, if so advised. Accordingly, it was prayed that the legal grounds be dismissed as not pressed, with the issue left open.

3.1 On merits, the Ld. AR submitted that the assessee is engaged in the business of manufacturing and trading of hosiery goods and has been carrying on the said business for several years. The addition of Rs. 24,00,000/- has been made merely because cash was deposited during the demonetisation period without appreciating that the source of such deposits was duly recorded cash sales forming part of the regular business of the assessee. It was contended that the books of account were duly maintained and audited, and the sales recorded therein had neither been rejected nor had any defect been pointed out by the Assessing Officer.

3.2 The Ld. AR further submitted that the cash sales constituted only a small percentage of the total turnover and were duly reflected in the books of account as well as the VAT returns. The pattern of sales clearly demonstrated that the assessee was carrying on a seasonal hosiery business, in which substantial sales normally take place during the winter months from October onwards. Therefore, the increase in cash sales during the relevant period could not, by itself, be regarded as suspicious. It was further argued that once the sales have been accepted and the corresponding stock has not been doubted, the realization of sale proceeds in cash cannot be treated as unexplained money.

3.3 The Ld. AR also submitted that the Assessing Officer had accepted the regular cash deposits made throughout the year and had chosen to treat only the deposits made during the demonetisation period as unexplained without bringing any material on record to establish that the cash represented income from undisclosed sources. It was accordingly prayed that the addition be deleted. 4. Per contra, the Ld. DR supported the orders of the Assessing Officer as well as the Ld. CIT(A). It was submitted that the assessee had deposited substantial amounts of specified bank notes during the demonetisation period and had failed to satisfactorily establish the genuineness of the source of such deposits.

4.1 The Ld. DR submitted that there was an abnormal spurt in cash sales immediately preceding the demonetisation announcement, which was not supported by any independent corroborative evidence such as complete customer details, sale bills or other contemporaneous records. According to the Revenue, the sudden increase in cash sales immediately before demonetisation created a reasonable inference that the entries had been manipulated to explain the impugned cash deposits. 4.2 The Ld. DR further argued that the burden squarely lay upon the assessee to establish the identity and source of the cash deposited, which burden had not been satisfactorily discharged. It was therefore submitted that the Assessing Officer was justified in treating the unexplained portion of the cash deposits as income of the assessee and that the order of the Ld. CIT(A) deserved to be sustained.

order of the Ld. CIT(A), the grounds of appeal and the documentary evidence furnished by the assessee.

5.1 At the outset, it is noticed that the Ld. AR has categorically submitted that the legal grounds challenging the validity of the reassessment proceedings are not pressed. The said submission has been recorded. Accordingly, the legal grounds are dismissed as not pressed, leaving the issue open for the assessee to agitate in appropriate proceedings, if permissible under law.

5.2 Coming to the merits of the addition, I find that there is no dispute regarding the fact that the assessee is engaged in the business of hosiery goods and has been carrying on the said business over the years. The books of account of the assessee have not been rejected under section 145 of the Act. The sales recorded in the books have also not been discarded in their entirety, nor has the Assessing Officer established that the corresponding stock position was incorrect or that the sales themselves were fictitious. 5.3 At the same time, I find substance in the observations of the Assessing Officer that there was a significant increase in cash sales immediately preceding demonetisation and that the assessee could not fully substantiate the entire claim by producing complete supporting evidence regarding every cash transaction. The explanation furnished by the assessee, though acceptable to a substantial extent, does not completely dispel the doubts arising from the abnormal pattern of cash sales during the relevant period.

5.4 In my considered opinion, the Revenue was not justified in treating the entire cash deposits as unexplained merely on the basis of suspicion, particularly when the business activity, turnover, maintenance of books of account and cash sales as a mode of business have not been disputed. Equally, considering the surrounding circumstances and the deficiencies noticed in the supporting evidence, complete deletion of the addition would also not meet the ends of justice. 5.5 Having regard to the entirety of the facts and circumstances of the case, I am of the considered view that only a part of the impugned addition deserves to be sustained, while the balance addition is liable to be deleted. Accordingly, the Assessing Officer is directed to restrict the addition to Rs. 4,00,000/- and delete the remaining addition of Rs. 20,00,000/-. Thus, the assessee succeeds partly on merits.

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