KATHIRVEL,MUNDUVELAMPATTI SITHUR vs. INCOME TAX OFFICER, TIRUPPUR

The Assessee raised the following grounds of appeal :

The learned CIT(A) erred in confirming the addition of ₹28.38.300/- made by the Assessing Officer as unexplained money under section 69A of the Act, which is illegal arbitrary and unsustainable.

The authorities below failed to appreciate that the impugned cash deposits represented business receipts arising from cash sales, effected in the normal course of business and duly recorded in the regular books of account. It is evident that cash sales made by the appellant the duly reported and disclosed in his return of income as sales turnover for the relevant assessment year. Thus, it can be said that the appellant had already declared the cash sales in his return of income and was also offered to tax

The learned Assessing Officer erred in invoking section 69A, even though the impugned amounts were recorded in the books of account and formed part of the audited financial statements.

The addition made under section 69A is bad in law, as the said provision applies only to money not recorded in the books of account, whereas in the present case, the cash deposits were duly accounted for

The learned Assessing Officer erred in making the impugned addition without rejecting the books of account under section 145 of the Act, despite accepting the turnover, trading results and audited accounts.

The authorities below erred in law in selectively disbelieving recorded cash sales, while simultaneously accepting the books of account, which is impermissible under the Act.

The impugned addition results in impermissible double taxation, as the same receipts have already been assessed as business income under the normal provisions of the Act.

The learned CIT(A) erred in law in upholding the addition, ignoring the settled legal position that once sales are accepted, the realization thereof cannot be taxed again as unexplained income, as held by the Hon ble Gujarat High Court in CIT v. Vishal Exports Overseas Ltd

The learned Assessing Officer erred in law in doubting the genuineness of cash sales, ignoring the settled legal position that in cases of retail cash sales, absence of names and addresses of customers cannot, by itself, render the transactions non-genuine, as held by the Hon'ble Bombay High Court in R.B. Jessaram Fatechand v CIT (75 ITR 33), Held that, in the case of a cash transaction where delivery of goods staken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser. There was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for cannot be regarded as a circumstance giving rise to suspicion concerning the genuineness of the transactions

The authorities below erred in law in invoking section 69A in respect of cash deposits arising from disclosed business receipts, ignoring the settled legal position that section 69A is not applicable to cash deposits arising from recorded business transactions, as held by the Hon'ble ITAT, Mumbai Bench, in ITO v. Zee Bangles Pvt. Ltd. (ITA No. 815/Mum/2022)

The authorities below failed to appreciate the nature of the appellant's business, wherein cash sales are a normal trade practice, and the quantum of such cash sales was reasonable and commensurate with the business carried on. That the cash sales made during the year is very small and meagre amount when compared to total turnover of the assessee and the details of the same for the previous two years are as follows:

The learned Assessing Officer erred in applying section 115BBE, even though the impugned income does not fall within the ambit of sections 68 to 69D of the Act.

The application of section 115BBE is bad in law, as income already assessed under the normal provisions cannot be subjected to taxation under section 115BBE

The orders of the lower authorities are bad in law, contrary to the facts of the case and settled legal principles.

The appellant craves leave to add, alter, amend or withdraw any of the above grounds at or before the time of hearing

Delete the addition of Rs.28,38,300/- made u/s 69A,

Quash the application of Section 115BBE and consequential penalty u/s 271AAC.

Grant such other relief as deemed fit in the interest of justice.”

Briefly the facts of the case are that appellant is an Individual. No regular return of income under the provision of section 139 of the Act was filed by the appellant for the Assessment Year 2018-19. However, based on the information that the appellant during the previous year relevant to A.Y.2018-19 had entered into huge financial transactions, the Jurisdictional Assessing Officer(JAO) formed an opinion that income got escaped assessment from tax. Accordingly, a notice u/s.148 was issued on 26.04.2022 after duly complying with the procedure laid down u/s.148A of the Act. In response to notice u/s.148, the appellant filed return of income on 13.05.2022 disclosing income of Rs.4,22,030/-. Against the said return of income, the assessment was completed by e-Assessment Unit of the Department (hereinafter called ‘AO’) vide order dated 19.02.2024 passed u/s.147 r.w.s 144B of the Income Tax Act, at a total income of Rs.32,60,330/-. While doing so, the Assessing Officer made addition of Rs.28,38,300/- disbelieving explanation of the appellant that the said amount was received on the sale of onion seeds. The AO disbelieved the explanation as the appellant failed to furnish the Name, Complete Address, PAN and other details of the persons to whom he claimed to have sold onion seeds of Rs.28,38,300/-.

Being aggrieved by the above order, an appeal was preferred before the ld.CIT(A) who vide impugned order confirmed the action of the Assessing Officer by passing the cryptic order.

Being aggrieved, the appellant is in appeal before us in the present appeal. The ld.Counsel submits that the cash deposits represents the receipts arising on the sale of onion seeds which are duly recorded in the regular books of accounts maintained by the appellant and disclosed in the Return of Income as a part of the turnover for the relevant Assessment Year. Therefore, the question of addition as unexplained money of the appellant u/s.69A does not arise. He further submits that the Assessing Officer without rejecting the books of accounts ought not to have made addition u/s.69A of the Act.

On the other hand, ld.CIT(DR) submits that the appellant had failed to offer any plausible explanation with regard to the sources of the money credited in bank account.

We heard rival submissions and perused the material available on record. The issue that arises for our consideration whether the ld.CIT(A) justified in confirming addition of Rs.28,38,300/- as unexplained money of the appellant. On perusal of the assessment order, it would be evident that the Assessing Officer has made addition of the said amount merely for the reason that the appellant had failed to furnish the details as called for the Assessing Officer such as Name, Address, PAN and other details etc, to whom the appellant claimed to have sold the onion seeds. During the course of proceedings before the ld.CIT(A), the appellant made very detailed written submission explaining the source of the said cash deposits as well as nature of business etc., However, the ld.CIT(A) without making reference to the written submissions, merely dismissed the appeal by passing a cryptic order. In the ordinary course, we could have remitted the matter to the file of ld.CIT(A), but however, the appellant filed a detailed submission before the ld.CIT(A) which requires verification by the Assessing officer.

In the result, appeal of the assessee stands partly allowed for statistical purpose. Order pronounced in the open Court on 27th April, 2026.