SHAHUL HAMEED SEYED FIAS,CHENNAI vs. ASSISSTANT COMMISSIONER OF TAX, CHENNAI

आयकर अपीलीय अधिकरण, ‘सी’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI श्री एस एस विश्वनेत्र रवि, न्याविक सदस्य एवं श्री एस. आर. रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2078/Chny/2025 ननिाारण वर्ा / Assessment Year: 2017-18 Shahul Hameed Seyed Fias The Assistant Commissioner of No.51, Sembudoss Street vs. Income-tax, George Town, Chennai-600 001. Non-Corporate Circle – 12(1) Chennai. [PAN: AMYPS2368F] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent)

अपीलार्थी की ओर से/Appellant by : Shri. Hitesh, Advocate प्रत्यर्थी की ओर से/Respondent by : Ms.R.Anitha, Addl.CIT सुनवाई की तारीख/Date of Hearing : 09.03.2026 घोर्णा की तारीख/Date of Pronouncement : 05.05.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : The present appeal is filed by the assessee against the order dated 28.05.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “ld.CIT(A)”), dismissing the appeal filed by the assessee against the assessment order dated 20.12.2019 passed u/s.143(3) of the Income Tax Act,

:-2-: ITA. No.2078/Chny/2025

1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2017-18. 2. The brief facts of the case emanating from the records are that the assessee is an individual and the proprietor of M/s.Delta Steel Corporation. For the impugned assessment year, the assessee filed his return of income on 11.10.2017 admitting a total income of Rs.45,94,340/-. During the financial year 2016-17, relevant to impugned Assessment Year 2017-18, the assessee made cash deposits using the SBNs from 09.11.2016 to 31.12.2016 to the tune of Rs.49,20,000/- in Union Bank of India account. Subsequently, the case of the assessee was selected for scrutiny under CASS and accordingly notices were issued upon the assessee who filed his responses to the same. In the course of assessment proceedings, the assessee submitted that these cash represent the cash sales made by him and the same were duly recorded in the VAT returns. However, the Assessing Officer ignored the contentions of the assessee and stated that majority of the sale are credit sales and not cash sales and therefore, the sudden spike in cash sales and the same being deposited in the bank. He further noted that the assessee failed to provide the details of the customers in the responses furnished by the assessee. While stating so, the Assessing Officer added a sum of Rs.49,20,000/- found in the Union Bank of India u/s.68 of the Act as unexplained cash credits. Thereafter, the Assessing Officer passed the assessment order u/s.143(3) of the Act on 20.12.2019 wherein a sum of Rs.49,20,000/- was added as unexplained cash credits and thereby a demand of Rs.51,31,639/- was raised. 3. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the ld.CIT(A) on 31.12.2019. Thereafter, notices were issued upon the assessee who duly responded to the same. During the appellate proceedings, the assessee submitted that the cash deposits are from the sales made by the assessee in the previous months and subsequently deposited in the bank after the announcement of demonetisation and hence the claim of the Assessing Officer that the assessee mainly had credit sales so, the cash

:-3-: ITA. No.2078/Chny/2025

deposits seem abnormal, is incorrect. The assessee further clarified that the cash transaction is duly recorded in the VAT returns and also furnished a table showing the monthly stock register for the year under consideration. The decision of the Hon'ble Income Tax Appellate Tribunal, Visakhapatnam in ACIT V. Hirapanna Jewellers [ITA No.253/Viz/2020] was relied by the assessee. However, the ld.CIT(A) rejected the submissions of the assessee while stating that the assessee failed to provide the details of the customers and so the claim that these transactions were duly reflected in books is unsubstantiated and thereby, dismissed the appeal and passed an order u/s.250 on 28.05.2025 confirming the order of the Assessing Officer. 4. Aggrieved by the order of the ld.CIT(A), the assessee has preferred an appeal before us. 5. Before us, the ld.AR for the assessee vehemently argued that the cash sales are not abnormal and that the gross profit ratio, net profit ratio as against the previous years and the year under consideration are within similar range. The ld.AR also submitted that the cash sales were duly recorded in the VAT returns of the assessee. Supporting the arguments put forth, the ld.AR submitted two paperbooks containing the daily cash book, date-wise summary of cash receipts, summary of cash flow, financials, VAT returns, comparative table showing the gross profit ratio, net ratio of previous years with the impugned Assessment Year and previous assessment years as well as subsequent assessment years financials, acknowledgement of ITR filed, Form 3CD. Further, the ld.AR submitted that the books of accounts of the assessee has been audited and which was not rejected by the AO. The ld.AR also stated that the source for cash deposit was explained as business receipts, which has already been shown as sales and corresponding profit is added in the income declared in the return of Income. Hence, the addition on account of the cash deposit amounts to double taxation, if the same is not reduced from the turnover of the assessee. Hence, prayed for deleting the addition as the same is unsustainable under the law.

:-4-: ITA. No.2078/Chny/2025

:-5-: ITA. No.2078/Chny/2025

accounts, an Assessing Officer cannot make an addition without rejecting the books so filed by the assessee, which has recorded the sales of the assessee. 10. Since, the assessee had substantiated by giving necessary evidence in respect of the cash sales made, on the basis of its books of accounts, VAT returns and other relevant record that the amount deposited by assessee was sale proceeds, the assessee had discharged his onus and the Assessing Officer ought to have proved that the cash deposited is from undisclosed source, which was not in this case. 11. Further, the findings of the Assessing Officer and the ld.CIT(A) as to the identification of customers is incorrect and baseless, since they had with them the VAT returns for the impugned Assessment Year. The law is well-settled on the proposition that statutory records are sufficient enough to explain the source of cash credit, which in this case is VAT returns. Merely stating that the assessee failed to furnish customer details does not shift the burden of proof. The onus remains on the Assessing Officer to establish that the amounts in question constitute undisclosed cash credits not offered to tax, particularly when the assessee has already produced audited financial statements as well as VAT returns, both being statutory records. 12. The provisions of Section 68 of the Act cannot be applied in respect of cash deposits which have been duly recorded in the books of account and have already been considered as income in the return of income filed by the assessee. In assessee’s case the assessee had duly recorded the sales and the same is also found in the VAT return. The existence of sales is corroborated by stock movement, accounting entries and VAT filings. Therefore, mere absence of customer-wise details cannot override documentary evidence already on record. Thus, the source of the cash deposits stands adequately explained. In fact, the coordinate bench of this Tribunal in the case of TamilNadu State Marketing Corporation Ltd. V. ACIT [ITA No.431/CHNY/2023] deleted the addition made u/s.69 of the Act since the cash deposits stood

:-6-: ITA. No.2078/Chny/2025

explained by the VAT returns, books of accounts and various other records. Relevant paragraph is extracted herein below.

“From the circular issued by the CBDT, it is very clear that, in a case where cash deposit found in business cases, the AO needs to verify the explanation offered by the assessee with regard to realization of debtors where said debtors were outstanding in the previous year or credited during the year etc. Therefore, from the circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the AO needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, if we go by analysis furnished by the assessee in respect of total sales, cash sales including the cash received in demonetized currency and cash deposits, there is negligible amount in demonetized currency. Therefore, we are of the considered view that when there is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circular/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. Simpliciter violation of certain notification issued by RBI or demonetization scheme announced by Government of India on 08.11.2016 will not entitle the Revenue to make addition u/s.69 or 69A of the Act. Because, the mandate of the provisions of Section 69 & 69A of the Act, i.e., unexplained investments and unexplained money etc., may be deemed to be the income of the assessee for the financial year relevant to assessment year concerned, in which the assessee is found to be the owner of such money, bullion, jewellery or valuable article or unexplained expenditure, if, the such expenditure or such money etc., are not recorded in the books of accounts, if any, maintained by assessee for any source of income and the assessee offers no explanation about the nature and source of such expenditure or acquisition of such money, etc., or the explanation offered by him, in the opinion of AO is not satisfactory. For violation of any RBI notification, etc., can have any civil or criminal liability and can be dealt with under any other provision of law by the concerned authority but for the purpose of bringing the amount under Income-tax, the provisions are very clear i.e., 69 & 69A of the Act. In our considered view, to bring any amount u/s. 69 or 69A of the Act, the nature and source of investment, needs to be examined. In case the assessee explains the nature and source of investment, then the question of making addition towards unexplained investment u/s. 69 of the Act does not arise. In this case, the source of deposits has not been disputed and has been created out of ordinary business sales which has been credited into books of accounts and profits has also been duly included in the return of income filed in relevant assessment year. Therefore, we are of the considered view that, additions cannot be made u/s. 69 of the Act and taxed u/s. 115BBE of the Act towards cash deposits made to bank account of demonetized cash in SBNs.” 13. In the present facts and circumstances of the case and respectfully following the decision of this Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd. (supra), we are of the considered view that the ld.CIT(A) has

:-7-: ITA. No.2078/Chny/2025

erred in confirming the addition made by the Assessing Officer and hence we set aside the order of the ld.CIT(A) and direct the Assessing Officer to delete addition made u/s.68 of the Act. 14. In this result, the appeal of the assessee is allowed.

Order pronounced in the court on 05th May, 2026 at Chennai.

Sd/- Sd/- (एस एस विश्वनेत्र रवि) (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) (S.S. VISWANETHRA RAVI) लेखा सदस्य/Accountant Member न्याविक सदस्य/Judicial Member

चेन्नई/Chennai, ददनांक/Dated, the 05th May, 2026. Devadas आदेश की प्रदिदलदि अग्रेदिि/Copy to: 1. अिीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT– NFAC. 4. दवभागीय प्रदिदनदि/DR 5. गार्ड फाईल/GF DEVADAS Digitally signed by DEVADAS GOPALAN GOPALANACHARY Date: 2026.05.11 ACHARY 14:40:23 +05'30'