INCOME TAX OFFICER, WARD-60(4), DELHI, VIKAS BHAWAN, DELHI vs. MOHD SULTAN, GHAZIPUR,

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ITA 4679/DEL/2024Status: DisposedITAT Delhi24 June 2026AY 2017-187 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the cash deposits were explained as arising from recorded cash sales and were part of the assessee's books of account, Section 69A could not be invoked. The CIT(A)'s deletion of the addition was confirmed.

What were the facts?

The assessee, engaged in poultry farming, deposited a large sum of cash during the demonetization period. The Assessing Officer (AO) treated this cash as unexplained income under Section 69A and made an addition, also invoking Section 115BBE.

What were the issues?

Whether cash deposits made during demonetization, explained as arising from recorded cash sales, can be treated as unexplained income under Section 69A.

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI “E” BENCHES, NEW DELHI

Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL

PER MANISH AGARWAL, A.M.: The present appeal is filed by Revenue against the order dated 22.08.2024 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi- 19/10807/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 25.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.

ITA 4679/DEL/2024 MOHD SULTAN 2. Brief facts of the case are that the assessee is an individual and sole proprietor of M/s. Sallahuddin & Company, engaged in the business of running of Poultry Forms for past many years. The return of income was filed u/s 139(1) of the Act on 02.11.2017, declaring total income of INR 19,48,610/- and the case was selected for complete scrutiny under CASS for the reason of large cash deposit during demonetization period. The AO observed that the assessee has deposited cash of INR 3,32,63,500/- in his bank account in SBN during the demonetization period where a sum of INR 2,69,43,500/- was deposited in bank of Maharashtra and INR 6,32,000/- in Janta Cooperative Bank account. Thereafter, the AO compared the cash sales and the cash deposited during the year with the preceding years and alleged that the assessee has failed to substantiate the source of the cash deposited during demonetization and treated the said cash as unexplained money u/s 69A of the Act and made the addition of INR 3,32,63,500/-. Further, the AO invoked the provision of section 115BBE of the Act for charging tax at special rates.

3.

Against the said order, the assessee preferred an appeal before ld. CIT(A) where it was claimed that cash was deposited out of the cash accumulated from the sale of live birds, poultry which have not been doubted and trading results were accepted. Ld. CIT(A) after considering these facts vide impugned order dated 22.08.2024, have deleted the addition made by the AO and allowed the appeal of the assessee.

4.

Aggrieved by the order of Ld.CIT(A), the Revenue is in appeal before the Tribunal by taking following Ground of appeal mentioned in the appeal memo:- 1) “On the fact and the circumstances of the case, whether the Ld. CIT(A) has erred on fact and in law to delete the addition made u/s 69A r.w.s. 115BBE of the Act, amounting to Rs. 3,32,63,500/- on account of cash deposits made in the bank account of the assessee. The assessee through his submissions either during assessment proceedings or during appellate proceedings has not disclosed

ITA 4679/DEL/2024 MOHD SULTAN

denominations of cash deposits made and has not disclosed that the business activity taken by him was ever covered under the essential services during demonetization period. That the appellant craves leave to add/alter/delete/modify any/all the grounds of appeal before or during the course of hearing of the appeal.” 5. Apart from this, during the course of hearing in terms of letter dated 18.06.2025, the Revenue has filed revised Grounds of appeal which reads as under:-  “On the fact and the circumstances of the case, whether the Ld. CIT(A) has erred on fact and in law to delete the addition made u/s 69A r.w.s. 115BBE of the Act, amounting to Rs. 3,32,63,500/- on account of cash deposits made in the bank account of the assessee especially when the assessee either during assessment proceedings or during appellate proceedings has not disclosed denominations of cash deposits made.  That the Ld. CIT(A) has erred both on facts and in law by failing to appreciate that the sales during the pre-demonetization period (April 2016 to October 2016) amounted to Rs. 6,49,09,000/-, whereas the sales during the post-demonetization period (November 2016 to March 2017) amounted to Rs. 36,50,37,531/-which is abnormally high as compared to the regular sales.  That the Ld. CIT(A) has erred in not appreciating the fact that prior to demonetization, the assessee has deposited more cash than the cash sales whereas during and in post-demonetization period the cash deposit is far less than the cash sales reported.  That the appellant craves leave to add/alter/delete/modify any/all the grounds of appeal before or during the course of hearing of the appeal.”

6.

Before us, ld. CIT DR for the Revenue vehemently supported the order of AO and submits that assessee has not been able to substantiate the source of cash and merely stated that it was out of cash accumulated from the monthly sales made. Ld. CIT DR drew our attention to the fact that during the month of October, 2016, substantial cash sales of INR 2,22,33,014/- was shown by the assessee out of which cash of more than 3.30 crores was deposited. Ld. CIT DR submits that looking to the past history of the assessee, cash sales declared by the assessee, cannot be accepted as such and therefore, the AO has rightly made the additions which deserves to be uphold.

ITA 4679/DEL/2024 MOHD SULTAN 7. Per contra, ld.AR for the assessee vehemently supported the order of ld. CIT(A) and drew our attention to the table reproduced at para 2.2 at page 3 of the assessment order according to which, it is evident that during the year under appeal, assessee has deposited total cash of INR 1.53 crores in the month of May, 2016; INR 1.8199 crores in the month of June, 2016; INR 2.12 crores in the month of July, 2016 and INR 1.01 crores in the month of August, 2016. Thus, it cannot be said that the cash deposited during the month of November, 2016 i.e. during the demonetization period, was abnormally high. He further stated that the cash sales of the assessee in the month of April to August 2016, would further justify the availability of cash in SBN with the assessee. Ld. AR submits that ld. CIT(A) has appreciated these facts and further appreciated the fact that trading results in respect of purchases and sales have been accepted and the turnover have not been doubted. He thus submits that after appreciating these facts, ld. CIT(A) has deleted the additions which order deserves to be confirmed.

8.

Heard the contentions of both the parties at length and perused the material on record. At the outset, it is observed that total sales declared by the assessee was of INR 42.99 crores out of which cash deposited was INR 12.26 crores only. The corresponding Turnover in AY 2016-17 was INR 14.06 crores as against which cash deposited was INR 7.55 crores and in AY 2015-16 as against the total sales of INR 11.47 crores and cash deposited was INR 7.07 crores. It is observed that percentage of cash deposited as against the total sales made has reduced from 53.70% to 28.52% in the year under appeal. Besides this, assessee made regular cash deposit in bank account starting from April, 2016 to August, 2016 where cash in crores was deposited as has been stated herein above. It is further observed that trading results declared by the assessee have not been doubted and it is also a fact that the assessee has filed complete details of the cash book containing entries of day-to-day transactions and

ITA 4679/DEL/2024 MOHD SULTAN purchases and sales recorded therein had never been doubted. Considering the overall facts, ld. CIT(A) has deleted the additions made on account of cash deposits.

9.

It is also a matter of fact that once the sales have been recorded in the books of accounts which is main source of cash generated and such cash was forming part of the regular books of accounts therefore, it cannot be held that the cash deposited in SBN during demonetization period out of such cash balance is unexplained money of the assessee for which provision of section 69A could be invoked. The relevant extract in Section 69A is hereby reproduced as under:- [Unexplained money, etc. 69A. “Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]”

10.

As per provisions of section 69A of the Act, the officer can invoked the provision of section 69A of the Act if the following conditions are satisfied: (i) the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income; (ii) No explanation is offered about the nature and source of the same; (iii) Explanation offered by Appellant is not upto the satisfaction of AO.

11.

Thus, the primary condition for invoking the provisions of section 69A is that there must be books of accounts and such money, bullion, jewellery or valuable article and if the same is not found recorded therein, the question about the source thereof come into play. When the same is recorded in the books of accounts and assessee claimed that the source is duly recorded as sales, before

ITA 4679/DEL/2024 MOHD SULTAN rejecting such explanation, the AO has to give his observations expressly as to why the explanation furnished by assessee is not acceptable.

12.

In the instant case, it is not the allegation of the AO that the assessee has not maintained any books of account or the cash deposited in SBN in bank was not recorded in the books of account so maintained. The AO rather accepted the turnover declared by the assessee which is inclusive of the amount of cash sales deposited into bank in SBN. Further it is not eh case where assessee not offered the explanation regarding nature and source of deposits but also substantiated the same with documentary evidences in the shape of Audited Financial Statements and Cash book. The AO has not provided any reason to invoke the provisions of section 69A for making addition when the source of such cash deposits, being cash sales, was duly recorded in the books maintained in regular course. Therefore, addition so made u/s 69A of the Act is unjustified and has rightly been deleted by ld. CIT(A).

13.

The Hon’ble Delhi High Court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court) has held as under:

“In the facts of above case cash of Rs.24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs.24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department.”

14.

In view of overall discussions made herein above and considering the facts and circumstances of the case and by respectfully following the above

ITA 4679/DEL/2024 MOHD SULTAN judicial pronouncements, we are of the view that ld. CIT(A) has rightly deleted the additions which order is hereby, confirmed. Accordingly, all Grounds of appeal raised by the Revenue are dismissed.

15.

In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 24.06.2026. Sd/- Sd/-

(MAHAVIR SINGH) (MANISH AGARWAL) ACCOUNTANT MEMBER VICE PRESIDENT

Date- 31.08.2026 *Amit Kumar, Sr. P.S*

Copy to: INCOME TAX OFFICER, WARD-60(4), 1 ROOM NO.207A, 2ND FLOOR, BLOCK-D, VIKAS BHAWAN, NEW DELHI-110002 MOHD SULTAN, 2 SHOP NO.56, POULTRY MARKET, GHAZIPUR, DELHI-110096 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE TRUE COPY

ASSISTANT REGISTRAR I.T.A.T., DELHI

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