NOSHIRWAN & COMPANY PRIVATE LTD,INDORE vs. ASSISTANT COMMISSIONER OF INCOME TAX WARD- 3(1), INDORE, INDORE

Per Paresh M Joshi, J.M.:

This is an Appeal filed by the Assessee under section 253 of

the income tax Act 1961,[ herein after referred to as the Act

for the sake of brevity] before this tribunal as & by way of a

second Appeal. The Assessee is aggrieved by the order

bearingNumber:-ITBA/APL/S/250/2025-26/1080731603(1)

dated 15.09.2025 passed by the Ld. CIT(A) u/s 250 of the

Act, which is herein after referred to as the “Impugned

order”. The Relevant Assessment year is 2017-18 and the corresponding previous year period is from 01.04.2016 to

31.03.2017.

2.1 That as and by way of an Assessment order made u/s

143(3) of the Act, the total income of the Assessee was

computed & assessed at Rs. 29,32,000/-. The returned

income was at Rs. 24,89,000/-. The addition on the account

of unexplained cash deposit was made of Rs. 4,43,000/-,

out of the receipts from the debtors during the

demonetization period. The aforesaid assessment order bears

NO. ITBA/AST/S/143(3)/2019-20/1022639045(1) and that

the same is dated 18.12.2019 which is herein after referred

to as the “Impugned Assessment Order”.

2.2 During the assessment year under consideration, the

assessee has derived income from the business & profession.

2.3 During the year consideration, the assessee had

deposited Rs. 3,61,85,500/-during the demonetization

period i.e. from 09.11.2016 to 30.12.2016. Out of these cash deposit the assessee had shown the receipts from the debtors

as under:- 2.4 As per the notification so no. 3408(E), the assessee was

only permitted/allowed to receive cash on sale of

petrol/diesel during the demonetization period & not in

respect of previous sale of Petrol/diesel.

2.5 It is recorded in the “Impugned Assessment Order” that

“if the money received from the debtors was receipt in

respect of sale of petrol & diesel then it would have been

shown by the debtors in the books of accounts and it was

his/her explained money. The debtors should have deposited

it in his/her own bank & should have transferred in the

account of the assessee.”

2.6 Copy of the gazette notification no SO-3407(E)-RBI

dated 08.11.2016 were in the RBI recommended that bank

notes of the denominations of existing series of the value of

five hundred rupees and one thousand rupees [herein after

referred to as specified bank notes] shall be ceased to be

legal tender. The relevant notification is reproduced below:-

“MINISTRY OF FINANCE (Department of Economic Affairs) NOTIFICATION New Delhi, the 8th November, 2016 S.O.3407(E). Whereas, the Central Board of Directors of the Reserve Bank of India (hereinafter referred to as the Board) has recommended that bank notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees (hereinafter referred to as specified bank notes) shall be ceased to be legal tender. And whereas, it has been found that fake currency notes of the specified bank notes have been largely in circulation and it has been found to be difficult to easily identify genuine bank notes from the fake ones and that the use of fake currency notes is causing adverse effect to the economy of the country;

And whereas, it has been found that high denomination bank notes are used for storage of unaccounted wealth as has been evident from the large cash recoveries made by law enforcement agencies;

And whereas, it has also been found that fake currency is being used for financing subversive activities such as drug trafficking and terrorism, causing damage to the economy and security of the country and the Central Government after due consideration has decided to implement the recommendations of the Board;

Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934) (hereinafter referred to as the said Act), the Central Government hereby declares that the specified bank notes shall cease to be legal tender with effect from the 9th November, 2016 to the extent specified below, namely:-

(2) Immediately after forwarding the return referred to in sub- paragraph (1), the specified bank notes shall be remitted to the linked or nearest currency chest, or the branch or office of the Reserve Bank, for credit to their accounts.

(i) the specified bank notes of aggregate value of Rs.4000/- or below may be exchanged for any denomination of bank notes having legal tender character, with a requisition slip in the format specified by the Reserve Bank and proof of identity.

(ii) the limit of Rs.4,000/- for exchanging specified bank notes shall be reviewed after fifteen days from the date of commencement of this notification and appropriate orders may be issued, where necessary:

(iii) there shall not be any limit on the quantity or value of the specified bank notes to be credited to the account maintained with the bank by a person, where the specified bank notes are tendered; however, where compliance with extant Know Your Customer (KYC) norms is not complete in an account, the maximum value of specified bank notes as may be deposited shall be Rs.50,000/-;

(iv) the equivalent value of specified bank notes tendered may be credited to an account maintained by the tenderer at any bank in accordance with standard banking procedure and on production of valid proof of Identity,

(v) the equivalent value of specified bank notes tendered may be credited to a third party account, provided specific authorisation therefor accorded by the third party is presented to the bank, following standard banking procedure and on production of valid proof of identity of the person actually tendering;

(vi) cash withdrawal from a bank account over the counter shall be restricted to Rs.10,000/- per day subject to an overall limit of Rs. 20,000/- a week from the date of commencement of this notification until the end of business hours on 24th November, 2016, after which these limits shall be reviewed vii) there shall be no restriction on the use of any non-cash method of operating the account of a person including cheques, demand drafts, credit or debit cards, mobile wallets and electronic fund transfer mechanisms or the like; (viii) withdrawal from Automatic Teller Machines (hereinafter referred to as ATMs) shall be restricted to Rs.2,000 per day per card up to 18th November, 2016 and the limit shall be raised to Rs.4,000 per day per card from 19th November, 2016;

(ix) any person who is unable to exchange or deposit the specified bank notes in their bank accounts on or before the 30th December, 2016, shall be given an opportunity to do so at specified offices of the Reserve Bank or such other facility until a later date as may be specified by it. 3. (1) Every banking company and every Government Treasury referred to in sub-paragraph (1) of paragraph 1 shall be closed for the transaction of all business on 9th November, 2016, except the preparation for implementing this scheme and remittance of the specified bank notes to nearby currency chests or the branches or offices of the Reserve Bank and receipt of bank notes having legal tender character.

(2) All ATMs, Cash Deposit Machines, Cash Recyclers and any other machine used for receipt and payment of cash shall be shut on 9th and 10th November, 2016. (3) Every bank referred to in sub-paragraph (1) of paragraph 1 shall recall the specified bank notes from ATMs and replace them with bank notes having legal tender character prior to reactivation of the machines on 11th November, 2016.

2.7 However the Government had notified certain

exemptions for the convenience of the members of public in

carrying out certain emergent and urgent transactions

using the SBNs. The relevant notification in this regards being No. 3408(E) of the MOF/DOR dated 08.11.2016 is

produced below:-

“MINISTRY OF FINANCE

(Department of Economic Affairs) NOTIFICATION

New Delhi, the 8th November, 2016

S.O. 3408(E). Whereas, by the notification of the Government of India in the Ministry of Finance, vide F. No. 10/3/2016-Cy.l dated 8th November, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated the 8th November, 2016, the Central Government declared that the bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees (hereinafter referred to as the specified bank notes), shall cease to be legal tender on and from the 9th November, 2016;

And whereas, it has become necessary to notify certain exemptions for the convenience of the members of public in carrying out certain emergent and urgent transactions using the specified bank notes;

Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government hereby declares that the specified bank notes shall not be ceased to be legal tender, with effect from the 9th November, 2016 until the 11th November, 2016, to the extent of transactions specified below, namely:-

(a) for making payments in Government hospitals for medical treatment and pharmacies in Government hospitals for buying medicines with doctor's prescription;

(b) at railway ticketing counters, ticket counters of Government or Public Sector Undertakings buses and airline ticketing counters at airports for purchase of tickets;

(c) for purchases at consumer cooperative stores operated under authorisation of Central or State Governments;

(d) for purchase at milk booths operating under authorisation of the Central or State Governments;

(e) for purchase of petrol, diesel and gas at the stations operating under the authorisation of Public Sector Oil Marketing Companies:

(f) for payments at crematoria and burial grounds:

(g) at international airports, for arriving and departing passengers, who possess specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character,

(h) for foreign tourists to exchange foreign currency or specified bank notes, the value of which does not exceed five thousand rupees to exchange them for notes having legal tender character.

[F. No. 10/03/2016-Cy. 1]

Dr. SAURABH GARG, Jt. Secy.

2.8 The Ld. AO in the “Impugned Assessment Order” has

recorded as under too:-

“4.3.3 On going through the above Notifications, it is evident that bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees (hereinafter referred to as the specified bank notes), had cease to be legal tender on and from the 9th November, 2016, therefore, it was totally prohibited to accept these notes by the Public except in some exempted cases. These exemptions were given looking to the convenience of the members of public in carrying out certain emergent and urgent transactions using the specified bank notes. It is clear that public was exempted to use specified bank notes where there was exigency to carry out emergent and urgent necessities to run normal life.

2.9 “The assessee was not permitted / allowed to receive any

cash in respect of previous credit sales as there was no

exigency and if the debtors were having explained money in

their hand, they should have squared up the debt through

banking channel after depositing that money into their bank

account. If he had done so then it is clear that he supported

in money laundering the Old currency of the debtors or

himself in the guise of Cash receipts in respect of

Petrol/Diesel Sale.”[4.3.4 of impugned assessment order]

2.10 The assessee is running the Petrol since long and well

qualified. He understands the directions/ notifications

issued by the Government very well and also intention

behind it. No doubt, intention of the Government was not to

make the Public suffer. Otherwise, Government would not

have issued notification for exempting Petrol Pump for

receiving Specified Bank Notes (Old currency of Rs.500 &

Rs.1000 whose legal tender was ceased). During

demonetization, Public was trying to use only that Cash

which was not accounted for and Public had no explanation

regarding source thereof, hence, it was just a piece of paper at their end. In these conditions, if someone helps the public,

in making that unaccounted/disclosed money legal for

squaring up any debts then that person becomes equal

responsible in sabotaging the intention of the Government

behind the demonetization. Therefore, assessee's plea that he

had just received debt in respect of credit sale of Petrol/

Diesel is not acceptable. When Government had issued

notification that legal tender of Specified Bank Notes (Old

currency of Rs.500 & Rs.1000 whose legal tender was ceased)

had ceased then it had lost its value and just remained piece

of paper. In these circumstances, if some prudent person

receives these SBN notes then it confirms that he is

sabotaging the intention of Government at the cost of

his/her vested interest.

2.11 In the light of above the Ld. AO in the “Impugned

Assessment Order” found the explanation of the assessee

that cash receipts of Rs. 4,43,000/- were from the debtors

as mentioned in para 2.3 supra as unacceptable & the same

was added to the ROI u/s 68 rws 115 BBE of the Act.

2.12 That the assessee being aggrieved by the aforesaid

“Impugned Assessment Order” prefers the first appeal

u/s 246A of the act before the Ld. CIT(A) who by the

“Impugned Order” has dismissed the first appeal of the

assessee on the grounds & reasons stated there in. The core

grounds & reasons for the dismissal for the first appeal was

as under:-

“6.4. Analysis of Grounds 6.4.1 Ground 1: Addition u/s 68 r.w.s. 115BBE unjustified a. The appellant contends that the sum represented cash sales of petrol/diesel and was already accounted as business income. However, the AO has not added the entirety of deposits; only Rs.4,43,000/- has been treated as unexplained where explanations were deficient. b. The appellant's claim of realization from debtors is not acceptable for two reasons: 1 Legal Prohibition - Under the demonetization notification, old notes could be accepted only for fresh sales of petrol/diesel at authorized outlets. The appellant has not established that the impugned deposits of Rs.4,43,000/- were directly linked to fresh sales at the pump. On the contrary, the appellant claimed they were collections from earlier credit sales, which were not permissible. 2. Evidence Deficiency Though confirmations were filed from some debtors, they do not establish that the sums realized in SBNs were validly accepted under law. Nor do they reconcile with the pattern of deposits in the bank, c. Accordingly, the AO was correct in invoking section 68. This ground is rejected.

6.4.2 Ground 2: Double addition of amounts deposited on 10/11, 12/11 and 24/11

a. The appellant alleges that sums of Rs.52,000, Rs.59,000 and Rs.9,000 were aggregated from multiple customers and added twice. However, the AO has dealt with total deposits and identified unexplained component of Rs.4,43,000. The appellant has not demonstrated from its books or bank statements that the AO double-counted the same sums.

b. Mere assertion without Burden lies on appellant to establish the error in absence thereof, this plea fails.

c. This ground is rejected.

6.4.3 Ground 3: Inclusion of new currency deposits

a. It is claimed that deposits of Rs. 10,000 (03.12.2016) and Rs.37,000 (23.12.2016) were in new notes of Rs.2000 and below, hence could not be treated as SBN deposits. b. The AO is directed to verify the same with the Bank and also verify the source vis-à- vis the books of account of the appellant. Even new notes, if unexplained, attract section 68.

c. The appellant has to correlate these deposits with specific sales entries or customer confirmations.

d. This ground is allowed for the purpose of verification.

6.4.4 Ground 4: Deposits in small denominations from debtors

a. The appellant has argued that it regularly received small denomination notes from customers, which were necessary to provide change. While this may be true in general, the issue here is not the denomination but the unexplained source. Unless the appellant proves that the impugned deposits were out of recorded sales, mere statement that notes were of Rs.100 or below is irrelevant. Furthermore, the AO's analysis of the denomination pattern showed lower percentage of small notes during the demonetization period compared to other months, indicating manipulation. Hence, this plea also fails.

b. This ground is rejected.

6.4.5 Ground 5: Comparison with earlier periods a. The appellant compared proportion of small denomination notes received before and during demonetization to claim consistency. However, the AO has already considered this data and found anomalies. Importantly, statistical comparison does not prove that the specific deposits of Rs.4,43,000 were from genuine sales. The onus under section 68 is transaction-specific, not merely based on broad trends.

b. This ground is rejected.

6.4.6 Ground 6: Double taxation AK of same income

a. The appellant contends that since sales were recorded in P&L, addition of deposits results in double taxation. This argument ignores the settled principle that bogus sales or unexplained credits cannot be sanctified merely by routing them through P&L account. If the AO finds that part of deposits are unexplained, they are to be taxed u/s 68 notwithstanding book entries.

b. The onus was on the appellant to prove that deposits reconciled with sales already recorded. The appellant failed to do so convincingly. Thus, there is no double taxation but only taxation of unexplained credits.

c. This ground is rejected.

6.4.7 Ground 7 and 8: General prayers

These are general and require no adjudication.

The appeal filed by the appellant is partly allowed.

2.13 The assessee being aggrieved by the “Impugned Order”

has preferred the instant second appeal before this Tribunal

and has raised following grounds of appeal in the from no.

36 against the “Impugned Order” which are as under:- “1. The CIT(A) has erred in maintaining the addition of rs. 3,96,000/- (4,43,000-47,000) for alleged cash credit u/s 68 of the IT Act.

3.1 The hearing in the matter took place before this Tribunal

on 15.04.2026 when the Ld. AR for & on the behalf of the

Assessee appeared before us & interalia contended that the

“Impugned Order” giving part relief only is bad in law,

illegal & not Proper. It therefore deserves to be set aside. The

Ld. AR has placed on the record of this Tribunal a paper

book containing pages 1 to 82. The Ld. AR has also placed on the record of this Tribunal a 3 pages submission too.

Cashbook of Nov 2016 is too placed on record.

3.2 The Ld. AR then submitted that total addition made is

of Rs. 4,43,000/-. The assessee company is in the business

of sale & purchase of petrol & diesel mainly. During the

period of demonetization assessee company received cash

amount from few debtors. Page 3, para 4.2 of the

“Impugned Assessment Order” was read out by the Ld. AR.

It was submitted that bills were raised & those bills were

shown to the Ld. AO. Page 3 of PB was too read out & basis

that it was contended that once bills are shown & amounts

are credited in the books of account no addition can be made.

Source is demonstrated of sale of petrol/diesel hence No

addition is required. Our attention was drawn to page 6

of PB that on 20.02.2025 submissions were filed before

Ld. CIT(A) i.e. submissions, TAR, Audited Financial

Statemnts, ITR Ack. Our attention was invited to page 51

of PB which was confirmation of CGR enterprise. i.e. Rs.

4,568.00 the cash deposit on 10.11.2016. Our attention

was then invited to PB page 78 i.e. details of debtors from whom cash was collected were in some detors have

confirmed. Our attention was invited to serial No. 3 of

statement were in the name of Indore hospital & research

foundation appears, at serial no. 4 name of STI India ltd.

appears. It was fairly submitted that amount is very slightly

mismatched on account of ‘rounding off’. Names of some

corporate entities & some concerns/ firm too appear at serial

no. 8,10,11,12. [PB page 78 falls under copy of confirmation

from parties’ page 51 to 80 of PB]. The Ld. AR submitted that

assessee company is highly reputed co. in Indore & all

replies, written statements were timely filled. Per contra

the Ld. DR submitted that the department of Income Tax rely

upon “Impugned Assessment Order” & “Impugned Order”.

In the rejoinder arguments the Ld. AR relied upon ITAT order

as per page 3 of PB & in particular ITAT order of Ahmedabad

Bench in case of abhishek prakash chand chhajed v/s ITO

2023, TAX scan (ITAT) 2449, ITAT order of Delhi Bench in case

of DCIT v/s M/s Bhanu Infrabuild Pvt. Ltd. 2023 Tax scan

(ITAT) 2159 & ITAT order of Dehli Bench in case of DCIT v/s

Atulah contractors & constructions Pvt. Ltd. 2023 Tax scan (ITAT) 2152 and others listed on page 4 of PB. Hearing was

then concluded & was closed.

Observations Findings & conclusions 4.

4.1 We have to decide the legality, validity and proprietary of the

“impugned order” basis records of the case & the rival

submission canvassed before us.

4.2 We have carefully perused the records of the case and have

heard the submissions.

4.3 We basis records of the case and after hearing & upon

examining the rival contentions of the Ld. AR & the Ld. DR

canvassed before us, are of the considered opinion that now

the sole surving issue only of Rs. 3,96,000/- out of Rs.

4,43,000/-[Rs. 4,43,000-47000] as the cash credit u/s 68

of the act. Under para 6.4.3 (a)(b)(c) of the impugned order

benefit of Rs. 47000/- i.e. Rs. 10,000/- on 03.12.2016 & Rs.

37000/- on 23.12.2016 which were claimed as deposit in

cash under new notes of Rs. 2000/-. The issue is remanded to the Ld. AO to verify including sources vis-à-vis books of

account.

4.4 We observe that the sheet anchor of the Ld. AR

pleadings, submission have been that arguments in

addition cannot survive u/s 68 of the act as unexplained

cash credit as the amount of additions are already

included in the books of account & credited to the P/L

A/C of the assessee company. If the additions broadly are

sustained then the same would amount to double

taxation. The books of accounts were produced to show

sales made by assessee on credit. Stock tally was produced

to show purchases & sales. Copy of cash book was filed to

show amount realized from debtors. Copy of bank statements

were shown that the deposits in the bank tallies with the

cash book. Confirmations-confirmed account of debtors with

names & address are on record. Bills raised for sale of

material on record. These documents, Material, papers etc

are not expressly discarded & or rejected by the lower

authorities. There is no harsh & concrete evidences from the

department side that the remainder amount of Rs.

3,96,000/- was realized by the assessee company in

demonetized currency (SBNs). The assessee company has

successfully demonstrated by explanation, material,

documents, that the money in cash is duly accounted &

audited. The Initial burden of proof is discharged & to

establish contrary the burden of proof shifts to the

department which department has failed to do so. The

transaction of purchase of petrol diesel, gas etc under SBNs

were not declared illegal & old transactions of realisation of

trade debts were not expressly prohibited under govt.

notifications from time to time. Ultimately assessee the

dealer of petrol/diesel could accept SBNs upto

02.12.2016[the new date which was reduced from

15.12.2016]. We therefore in view of above on cumulative

analysis hold that the additions have been made on basis of

assumptions & presumptions. Counter files of deposits in

bank were duly filed with lower authorities & same were

not rebutted by the department on entire deposit of

remainder amount of Rs. 3,96,000/-. We therefore set

aside the “impugned order”.

4.5 We additionally hold that reliance on various ITAT orders

on page 3 & 4 of paper book squarely applies to the facts &

circumstances of the present case. The Ld. DR has failed to

distinguish the same.

4.6 In view of above, we set aside the “impugned order” to

the extend of addition of Rs. 3,96,000/- only out of Rs. 4,

43,000/- whereby the addition of Rs.3,96,000/- is deleted.

Further we sustain the finding of the Ld. CIT(A) in the

impugned order at para 6.4.3 were in issue of Rs.47000/-

[addition][supra] in the aggregate is remanded back to the Ld.

AO for the verification only.

5 Order

5.1 The “impugned order” is set aside to extend of addition

of Rs.3,96,000/- only whereby the addition of Rs.3,96,000/-

is deleted. In so far as the remainder issue of Rs.47,000/-

[addition] in the aggregate is concerned, the issue is

remanded back to the file of the Ld. AO for the verification

only as ordered by the Ld. CIT(A). Hence the appeal of the

assessee is allowed partially/partly.

5.2 No order on cost. Ordered accordingly.

Pronounced in open court on 24.04.2026.

Sd/- Sd/-

(BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Indore Dated : 24 /04/2026 Patel/Sr. PS

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

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