ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 7(1), KOLKATA, AAYAKAR BHAWAN, KOLKATA vs. MEENAR POLYARDS YARNS LIMITED, KOLKATA

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ITA 2061/KOL/2024Status: DisposedITAT Kolkata20 May 2026AY 2017-20188 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, finding no significant rise in cash sales or deposits during the assessment year compared to previous periods. The Tribunal noted that the assessee normally deposited significant cash amounts even before demonetization and that sales figures in prior months were higher than those preceding demonetization.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of an addition of Rs. 2,77,13,000/- made by the AO on account of cash deposits during the demonetization period. The AO had treated these deposits as unexplained cash credit under Section 68.

What were the issues?

Whether cash deposits made during the demonetization period are to be treated as unexplained income under Section 68 or 69A, and whether the CIT(A) erred in deleting the addition made by the AO.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 69A

AI-generated summary — verify with the full judgment below

Before: ShriRajesh Kumar & ShriPradip Kumar Choubey

Per Pradip Kumar Choubey, Judicial Member:

ITA No.2061/Kol/2024 Assessment Year- 2017-18 This appeal filed by the Revenue is directed against the order dated 30.12.2019 of the Office of the Income Tax passed under Section 143(3) of the Assessment Year 2017-18 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). 2. At the very outset, it appears from the report of the Registry that the appeal filed by the Revenue after a delay of 11 days. Revenue has filed a petition to condone the delay which according to me are genuine one. Accordingly, we condone the delay.

3.

The brief facts of the case of the assesseeis that the assessee filed its return of income declaring total income of Rs. 81,97,800/-. The case of the assessee was selected for scrutiny, notice U/s 143(2) was issued and in response to the notices the assessee furnished relevant documents as asked. On perusal of the submission of the assessee, Assessing Officers finds that there was cash deposit during the demonetization period amounting to Rs. 2,92,72,599/-. The AO after considering the submission assess the total income of the assessee at Rs. 3,60,00,360/- and raised a demand of Rs. 44,93,671/-.

4.

Aggrieved by the said order assessee preferred appeal before the CIT(A) wherein appeal of the assessee has been allowed as CIT(A) deleted the addition of Rs. 2,55,1300/- made by the Assessing Officer as an unexplained cash deposit during the demonetisation period by observing thus:-

Vide ground nos 1 to 12 and 15 to 17, the appellant has challenged the addition of Rs. 2,77,13,000/- made by the AO u/s 68 of the Act on account of cash deposited during the demonetization period by him in A.Y. 2017-18. On perusal of the assessment order as well as the submission made by the appellant during appellate proceeding it is noticed that there was no significant rise in the cash sale/ cash deposit of the appellant during A.Y. 2017-18 viz-a viz A.Y. 2015-16. It is also noticed that the appellant was normally depositing significant amount of 2

ITA No.2061/Kol/2024 Assessment Year- 2017-18 cash in the bank as per the cash book even prior to demonetization period. Further, the AO without rejecting the books of account treated the cash deposited out of cash book as unexplained cash credit. Therefore, the action of the AO in treating Rs. 2,77,13,000/-cash deposited during demonetization period as unexplained cash credit and making addition of the same u/s 68 of the Act is not justified. Accordingly, the addition of Rs. 2,77,13,000/- as unexplained cash credit u/s 68 of the Act for AY 2017-18 is deleted. The ground nos 1 to 12 and 15 to 17 are allowed.

7.2 Grounds of appeal number 13 and 14

Vide ground nos 13 and 14 the appellant had assailed the addition of Rs. 89,560/- made by the AO for delayed deposit of Employees Share of Contribution to Provident Fund after the time limit prescribed under the respective Act. However, during the course of vide conferencing, the authorized representative of the appellant has accepted the addition made by AO on this ground and has not contested the issue. Therefore, no further adjudication is required in these grounds. Accordingly, these grounds are dismissed.

5.

Being aggrieved by and dissatisfied the Revenue preferred appeal by following grounds:-

1.

That on the facts and in the circumstances of the case, the learned National Faceless Appeal Centre (NFAC) erred in law and on facts in deleting the addition of Rs. 2.77.13,000/-made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961 on account of unexplained cash deposits during the demonetization period, without properly appreciating the evidence and material brought on record by the AO.

2.

That the learned CIT(A) (NFAC) failed to consider that the assessee could not satisfactorily explain the source of the cash deposits in old currency notes of Rs.

ITA No.2061/Kol/2024 Assessment Year- 2017-18 500 and Rs. 1000 during the demonetization period, which were unexplained and thus liable to be taxed as income under the provisions of Section 69A of the Income Tax Act, 1961.

3.

That the learned CIT(A) (NFAC) erred in accepting the assessee's explanation for the cash deposits without proper verification of the cash book, sales register, and other relevant documents, thereby failing to adhere to the Standard Operating Procedure (SOP) and guidelines issued by the Central Board of Direct Taxes (CBDT) for the assessment of cases related to the demonetization period which mandated a thorough scrutiny of large cash deposits during this period causing prejudice to the interest of the Revenue.

4 That the learned CIT(A) (NFAC) erred in relying on the assessee's submission that the cash deposits represented sales receipts without critically examining the quantum of sales with reference to the quantity sold, reconciliation with the stock available with the assessee, and whether the sales purportedly recorded were genuine and commensurate with the cash deposits.

5.

That the Revenue craves leave to add, alter, or amend any of the grounds of appeal at the time of hearing.

6.

Contrary to that Ld. AR supports the impugned order thereby submitting that the Ld. Assessing Officer has wrongly held that there was an abrupt increase in closing cash held by the assessee in the month prior to the demonetisation period ignoring the fact that in several other months amount of cash held by the assessee was high. The Ld. AR submits that assessee has deposited cash of Rupees more than Rs. 4,00,00,000/- during previous period also.When we compare the total cash deposits during the financial year 2016-17 with financial year 2015-16,it is evident that the total cash deposits has decreased by around 17.75% irrespective of the fact that the total sales have increased by approximately 12.99% during the financial year 2016-17 as 4

ITA No.2061/Kol/2024 Assessment Year- 2017-18 compared to the financial year 2015-16. The Ld. AR submits that Assessing Officers was himself confused and he was not assure and wrongly alleged that there was a sudden rise in the sales figures without consideration of facts of the case, as sales of several months in financial year 2015-16 and financial 2016-17 have been even higher than that of the September 2016 and October 2016. The Ld. AR further submits that the Ld. AO did not consider the fact that total sales of financial year 2016-17 when compared to total sales of financial year 2015-16 have increasedby almost 13% also cash sales in the month of June 2016 as compared to year 2015 has increased by approximately 6%. The submission of the AR is that Cit(A) has considered this fact and thereafter deleted the addition made by the AO.

7.

Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order we find that the assessee as a public limited company engaged in manufacturing of yarns, textiles, handloom and powerloom products and also trading of sarees. The assessing officers has imposed and allegation being abrupt increase in closing cash held by the assessee in the month prior to the demonetization period and also there is huge diversion from the trend of the previous year. The Ld. AR has submitted the list of all the month- end in which high cash has been held by the assessee.The list furnished by the assessee reveals that assessee has deposited cash of more than Rs. 4,00,00,000 during previous periods also. We further find that Ld. AO has alleged that there is a sudden rise in the sales figure in the month of September and October that as the month immediately preceding the month of demonetisation period that is far from the truth as the list of sales has been furnished by the assessee goes to established that sales of several months in financial year 2015-16 and financial year 2016-17 have been higher than that of September 2016 and October 2016. We further find that assessee had filed monthly VAT returns within due time. Going over impugned order, we find that

ITA No.2061/Kol/2024 Assessment Year- 2017-18 there was no significant rise in cash sale/cash deposit of the assessee during the assessment year 2017-18 viz-a viz AY. 2015-16. We further find that the assessee had normally depositing significant amount of cash in the bank as per the cash book even prior to the demonetisation period. This fact has been considered by the CIT(A) and noted in the impugned order.

8.

Keeping in view the discussion made above and considering the order passed we do not find any infirmity in the order. The order passed by the CIT(A) is hereby upheld.

As a result, the appeal filed by the revenue is here by dismissed.

Kolkata, the 20th May, 2026.

Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member

Dated:. 20 .05.2026. DC, PS

Copy of the order forwarded to: 1. Appellant - 6

ITA No.2061/Kol/2024 Assessment Year- 2017-18 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order

Assistant Registrar, Kolkata Benches

ITA No.2061/Kol/2024 Assessment Year- 2017-18

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