AADIL KAZI,MUMBAI vs. DCIT - 20(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “A”, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No.4447/Mum/2025 (Assessment year: 2017-18)

Aadil Kazi vs NFAC, DCIT-20(1), Mumbai 226, Nagri Building, Maulana Room No.305, Piramal Chambers, Azad Road, Madanpura, Parel Mumbai-400012 Mumbai-400008 PAN:AKWPK8009M APPELLANT RESPONDENT Assessee by : Shri Vimal Punmiya Revenue by : Shri Surendra Mohan (Sr. DR) Date of hearing : 21/04/2026 Date of pronouncement : 28/04/2026 O R D E R Per: Anikesh Banerjee (JM): The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2017-18, date of order 11.06.2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax Circle 20(1), Mumbai (for brevity the ‘Ld. AO’) order passed under section 143(3) of the Act date of order 27.12.2019.

2 ITA No.4447/Mum/2025 Aadil Kazi 2. The brief facts of the case are that the assessee is an individual and having a proprietorship under the name of M/s. A.A.Kazi Stores which is engaged in business of general stores and pharmaceutical distributor. During the impugned assessment year assessee filed the return and declaring total income Rs.42,98,230/-. The assessee’s case was selected for scrutiny. The Ld. AO passed the order u/sec. 143(3) of the Act by determining total income of the assessee amount to Rs.1,30,08,225/- as against the return income of Rs.42,98,230/-. The Ld. AO added back the cash deposit amount to Rs.77,20,000/- as unexplained cash deposit u/sec. 68 of the Act and added agricultural income earned by the assessee amounting to Rs.9,90,000/- as unexplained income u/sec. 68 which comes total amount to Rs.87,10,000/-. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) rejected the appeal of the assessee and uphold the impugned assessment order. Being aggrieved assessee filed an appeal before us. 3. The Ld. AR argued filed paper books comprising pages 1 to 503 which has been placed on record. The Ld. AR contended that during the impugned assessment year the assessee deposited cash amount to Rs.90,29,000/- in multiple dates in SBN between 13.11.2016 to 30.12.2016 in DCB Bank Ltd. During assessment and appeal proceeding, the assessee submitted the source of cash deposits in bank account. The Ld. AR stated that the assessee withdrawal the cash from DCB Bank Account No.1854, amount to Rs.20,00,000/-, from DCB Bank Account No.329 amount to Rs.62,20,000/- and also assessee earned agricultural income amount to Rs.9,90,000/- in cash which comes total amount to Rs.92,10,000/- which is enough source for explaining the cash deposit in bank. Further, the explanation with supporting evidence was duly submitted before the

3 ITA No.4447/Mum/2025 Aadil Kazi Ld. AO. The Ld. AO had noted observation contained in paragraphs no.7.9 to 8 which are reproduced as below: “7.9 The explanation offered by the assessee as discussed above is not accepted for the following reasons also: I) In the ordinary course, the person will not withdraw the cash with the intention to redeposit it. When the cash is being withdrawn, it has a specific purpose of withdrawal No human being withdraws the cash and keeps it at home thereby inviting the risk of safety and security ii) In the ordinary course, it is human tendency that a person who possesses a large amount of cash in hand, will deposit the same into the bank account immediately once he comes to know that the currencies which he holds/possesses are banned by the prescribed authorities from circulation and that too, he will deposit all the currencies in on a single day as one time deposit and not in piece-meal at different dates. If it is not done within a reasonable time, it is for the assessee to prove the reasons for not doing so. "Human Probability Test" is one of the important tests laid down the highest Court of India in order to check the genuineness of the transactions entered into the books of account of the assessee. The "Human Probability Tests were laid down for the first time in the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) and followed in the case of SumatiDayal vs. CIT (1995) 214 ITR 801 (SC) The Human Probability test was also applied in the following cases:  1.A. Rajendran &Ors. vs. ACIT (2006) 204 CTR (Mad) 9  2.Hacienda Farms (P) LTD. vs. CIT (2011) 239 CTR (Del) 212  3. Major Metals Ltd. vs. UOIAND ORS (2012) 251 CTR (Bom) 385  4 Pradip Kumar Loyalka vs. ITO (1997) 59 TTJ (Pat)(TM) 655  5.ACIT vs. Sampat Raj Ranka (2001) 73 TTJ (Jd) 642 iii) Thus, the Court has laid down a test to analyze the genuineness of the entry through the logical analysis. The "Human Probability Test" could be applied when the Assesseemakes the Officer to believe his/her story as a valid event. The false claims of the Assessee cannot sustain before the test of Human Probabilities. iv) Applying the ratio in the "Theory of Human Probability", no prudent person will hold such Specified Bank Notes(SBNs) in hand in large number in his possession and deposit the same into the bank account on various dates spread over for 40-50 days It has been held by the Hon'ble Supreme Court in the Case of SumatiDayal Vs CIT (cited supra) that the time period between cash in hand and deposit of such cash in bank account should not be too long and

4 ITA No.4447/Mum/2025 Aadil Kazi therefore, must not be against human probabilities. In the case of the assessee, it is seen that the deposits of SBN were made on 12.11.16 to 29.12.2016, which the assessee could not substantiate with reasonable explanation.

v) Thus in all possibility, the very act of the assessee cannot be subscribed or supported to as the same is against the intention and the very purpose for which the ban on SBNs were clamped by the Government of India. Thus, by the human test of probabilities as laid down and tested by the Highest Court of the land as well as the circumstances of the case, the plea of the assessee is not acceptable vi) Conclusion As enumerated in the decision of the Hon'ble Supreme Court in the case of Roshan Di Hatti Vs CIT (1977) 107 ITR 938 (SC), Kale Khan Mohammed Hanif Vs CIT (1963) 50 ITR 1 (SC), it has been held in various judicial pronouncement that where the nature and source of any receipt/investment, whether it be a money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. In the case of the assessee, the assessee could not explain the sources for making deposit of cash in SBN notes to the extent of Rs. 8220000/- It is however seen that the last withdrawal of Rs. 500000/- has been made by the assessee on 04.11.2016. The same can be considered for deposit purpose considering the short time gap. 8. In view of the above the cash deposit of Rs. 77.20.000/- is treated as unexplained cash credit u/s 68 of the Act.” 4. The Ld. AR has advanced his argument and submitted a written note related to the details of explanations of source of cash deposits. The relevant paragraphs of the written submission of the Ld. AR is reproduced as below: “The source of this amount is- The father of the assessee had received land by the government of Maharashtra on account of compulsory acquisition of his land. Out of such land received, the father of the assessee had sold the land received by compulsory acquisition and a part of the sale proceeds were received in this joint bank account of the assessee and his father. Copies of the relevant agreements showcasing the chain of transactions namely (i) compensation land received on compulsory acquisition, and (ii) sale agreement of land are annexed in the Paper Book at pg. no 235-495.

5 ITA No.4447/Mum/2025 Aadil Kazi The Ld. AO in the AY under consideration has questioned on the deposition of cash in the bank account of the assessee stating that the cash deposited in the bank is unexplained cash u/s 68 We are reproducing the complete cash withdrawal and cash deposition in the bank account of the assessee during the year for your honours reference- Cash Withdrawal Details - In bank account bearing current account no. 329 as per table below :- Sr. No. Date of cash withdrawal from bank Amount in Rs. 1 06/06/2016 5,00,000/- 2 15/06/2016 5,00,000/- 3 29/06/2016 5,00,000/- 4 04/07/2016 2,00,000/- 5 13/07/2016 2,00,000/- 6 14/07/2016 1,00,000/- 7 19/07/2016 1,50,000/- 8 25/07/2016 1,50,000/- 9 26/07/2016 1,00,000/- 10 27/07/2016 2,00,000/- 11 29/07/2016 30,000/- 12 01/08/2016 5,00,000/- 13 06/08/2016 6,00,000/- 14 11/08/2016 1,25,000/- 15 18/08/2016 2,00,000/- 16 22/08/2016 50,000/- 17 29/08/2016 1,50,000/- 18 30/08/2016 5,00,000/- 19 01/09/2016 1,65,000/- 20 03/09/2016 2,50,000/- 21 06/09/2016 1,00,000/-

6 ITA No.4447/Mum/2025 Aadil Kazi 22 08/09/2016 1,50,000/- 23 09/09/2016 1,00,000/- 24 12/09/2016 1,30,000/- 25 19/09/2016 1,50,000/- 26 21/09/2016 70,000/- 27 29/09/2016 1,00,000/- 28 05/10/2016 1,50,000/- 29 07/10/2016 1,00,000/- Total 62,20,000/-

In bank account bearing OD account no.1854 as per table below: Sr. No. Date of cash withdrawal from bank Amount in Rs. 1 31/10/2016 5,00,000/- 2 02/11/2016 5,00,000/- 3 04/11/2016 5,00,000/- 4 07/10/2016 5,00,000/- Total 20,00,000/-

Cash Deposit details - From the above table and the cash book summary, it can clearly be seen that the assessee has made total cash withdrawals of Rs. 82,20,000/- during theyear prior to 12/11/2016 and during the demonetization period, the assesser has deposited an amount of Rs. 90,29,000/- in his bank account. Details of cash withdrawn from DCB Bank A/c No. 324- During the year the assessee has made various cash withdrawal transactions as firstly the assessee had handed over a substantial cash amount to his father as his father is an elderly person (mother of the assessee is aged 81yrs and father of the assessee is 85yr old) and is not familiar with modern banking systems, online transfers, or digital modes of payment. Being old and conservative in his approach, he feels more comfortable keeping cash at home rather than

7 ITA No.4447/Mum/2025 Aadil Kazi relying entirely on bank transactions. For him, having physical cash available provides a sense of security and convenience, especially in urgent situations. Further, both the assessec's parents are aged (mother of the assessee is aged Slyrs and father of the assessee is 85yr old) and require regular medical attention. Considering their health condition and advanced age, there is always a possibility of sudden medical emergencies. In such circumstances, immediate availability of cash becomes very important. With this practical concern in mind, the assessee withdrew cash to ensure that sufficient funds were readily available at home for hospital expenses, medicines, and other urgent household requirements. The withdrawals were therefore made out of prudence and genuine family needs, and not for any undisclosed purpose. Some part of the cash withdrawals were used in the assessee's general store and pharmaceutical business for purchase of stock, making payments to suppliers and meeting day- to-day operational expenses. The assessee's business model inherently involves cash inflow and outflow, and therefore the pattern of withdrawals and redeposits is fully consistent with commercial realities of retail trade. Details of cash withdrawn from OD A/c 1854- The cash withdrawn from the overdraft (OD) account of the assessee was also for a genuine personal reason. The assessee's cousin got married in the month of January 2017, and certain family responsibilities and wedding arrangements had to be managed. In Indian families, it is common to incurvarious expenses in cash for wedding-related functions, advance bookings. decorations, catering, and other customary payments. Therefore, the assessee withdrew cash from his OD account to meet such wedding-related expenses and family obligations. The withdrawal was made out of disclosed bank funds and for a clear and genuine purpose. Hence, the same should not be treated as unexplained in any manner. It is also important to note that merely because cash has been withdrawn from a bank account, no negative inference should automatically be drawn. The bank statements clearly show that sufficient funds were available in the account before the withdrawals were made. The source of these funds is fully explained and supported by documentary evidence. Once the source of money in the bank account is established, the withdrawal of such money cannot be treated as unexplained simply because the cash was later redeposited or used for other purposes.” 5. The Ld. AR further argued that the Ld. AO had observed that the assessee has deposited cash in SBN to the extent of Rs.82,20,000/-. The Ld. AO considered

8 ITA No.4447/Mum/2025 Aadil Kazi the withdrawal only amount of Rs.5,00,000/- on 04.11.2016 and after allowing benefit of the cash withdrawal the Ld. AO treated Rs.77,20,000/- deposited cash as unexplained cash credit and added back u/sec. 68 of the Act. The Ld. AR respectfully relied on the order of the Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs CIT reported in (1959) 37 ITR 288 SC. The relevant observations is reproduced as below: “The position as it obtained in this case was closely analogous to that which obtained in Mehta Parikh & Co.'s case (supra) . In that case the assessee had to satisfactorily explain the possession of 61 high denomination notes of Rs. 1,000 each and the Tribunal came to the conclusion that the assessee had satisfactorily explained the possession of 31 of these notes and not of the remaining 30. The High Court had treated the finding of the Tribunal as a finding of fact. It was held by this court that the entries in the cash book and the statements made in the affidavit in support of the explanation, which were binding on the revenue and could not be questioned, clearly showed that it was quite within the range of possibility that the assessee had in their possession the 61 high denomination notes on the relevant date and their explanation in that behalf could not be assailed by a purely imaginary calculation of the nature made by the Income-tax Officer or the Appellate Assistant Commissioner. It further held that the Tribunal made a wrong approach and while accepting the assessee's explanation with regard to 31 of the notes, it had absolutely no reason to exclude the rest as not covered by it in the absence of any evidence to show that the excluded notes were profits earned by the assessee from undisclosed sources. The assessee having given a reasonable explanation the Tribunal could not, by applying a rule of thumb, discard it so far as the rest were concerned and act on mere surmise. In arriving at its decision this court referred to the case of Chunilal Ticamchand Coal Co. Ltd. v. Commissioner of Income-tax [1955] 27 ITR 602 and stated that the case before it should also have been similarly decided by the High Court in favour of the assessee. A decision of the Allahabad High Court reported in Kanpur Steel Co. Ltd. v. Commissioner of Income-tax [1957] 32 ITR 56 may also be noted in this context. The assessee there encashed 32 currency notes of Rs. 1,000 each on January 12, 1946, when the High Denomination Bank Notes (Demonetization) Ordinance, 1946, came into force, and when the Income-tax Officer called upon it to explain how these currency notes came into its possession, the assessee claimed that the notes represented part of its cash balance which, on that date, stood at Rs. 34,313.”

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9 ITA No.4447/Mum/2025 Aadil Kazi 6. Related to earning of agricultural income amount to Rs.9,90,000/- in cash the Ld. AO had duly observed and noted in the impugned assessment order which is reproduced as below: “9.8 From the above it is seen that the all the debit entries made of Rs. 50000/- except the last one for Rs. 40000/-. No agricultural income shown after the period 07.11.2016. 9.9 The assessee claimed to have sold the mangoes. It is however seen that the period in which the cash claimed to have received against agricultural income is from 21.09.2016 to 07.11.2016 which cannot be treated to season for the mango. 9.10 It is further seen that the asseseee is just having 1.5 acres of the land, which is just not enough to generate net income of Rs. 990000/-. 9.11 In view of the above facts of the case, the asseseee failed to explain the agricultural income shown and therefore agricultural income shown Rs. 990000/- is treated as unexplained cash credit u/s 68 of the Act.”

10 ITA No.4447/Mum/2025 Aadil Kazi demonstrating the source of such deposits, supported by cash withdrawal details from bank accounts, cash book, and other documentary evidences placed in the paper book. The revenue has not brought on record any cogent material to controvert the availability of cash in hand or to establish that the said deposits represented undisclosed income. The addition has been made primarily on the basis of conjectures and application of the “human probability test” without disproving the documentary evidences furnished by the assessee. In such circumstances, and following the settled judicial principles, we are of the considered view that the addition made under section 68 of the Act in respect of cash deposits is not sustainable. Accordingly, the same is directed to be deleted.

11 ITA No.4447/Mum/2025 Aadil Kazi 8. In the net result, the appeal of the assessee bearing ITA No.4447/Mum/2025 is partly allowed for statistical purposes. Order pronounced in the open court on 28th day of April 2026. Sd/- Sd/- (OM PRAKASH KANT) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 28/04/2026 SAUMYASr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI