NAND LAL JAUHARI,VARANASI vs. INCOME TAX OFFICER, WARD - 2(3), VARANASI

IN THE INCOME TAX APPELLATE TRIBUNAL VARANASI BENCH, VARANASI BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.50/VNS/2023 A.Y.-2017-18 Nand Lal Jauhari, vs. The Income Tax Officer, 41-42 Elexi Apartment, Naria Gandhi Ward-2(3), Varanasi Nagar, Varanasi-221005 PAN: AGNPJ1216A (Appellant) (Respondent) Assessee by: Sh. Subhash Chand, Advocate Revenue by: Sh. Sabyasachi Chakarborty, Sr. DR Date of hearing: 20.01.2026 Date of pronouncement: 15.04.2026 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the order of the ld. CIT(A), NFAC, wherein the ld. CIT(A) has dismissed the appeal of the assessee that was filed against the order of the Assessing Officer under section 143(3) for the assessment year 2017-18 on 20.12.2019. The grounds of appeal are as under:- “1. Because it was fully explained that the assessee has entered into correct for purchase of agricultural land for Rs. 6,30,00,000/- situated in District- Sagar, M.P. and had advanced Rs. 12,00,000/- through cheque on 20.11.2015 to the owners of the land and similarly has again advanced of Rs. 15,00,000/- through cash detail are as under:- Name Amount Date Kamal 200000 28/11/2015 Vishwakarma Lilabai 1000000 17/05/2015 Vishwakarma Lilabai 100000 20/11/2015 Vishwakarma Devi Prasad 200000 27/11/2015 Vishwakarma Total 1500000 1

ITA No.50/VNS/2023 Nand Lal Jauhari A.Y. 2017-18 total advanced to the tune of Rs. 27,00,000/-. Since the transaction could not be materialized, the owner of the land returned back the amount advanced to them which has been received by the assessee on 28.10.2016 as per cancellation of agreement deed dated 05.11.2016. The Ld. Assessing Officer as well the Ld. Appellate Authority i.e. National Faceless Appeal Centre Delhi (NFAC) both have erred and acted illegally in not placing reliance on this aspect of fact. 2. Because it is fully explained that the A/c No. 61342 with Kashi Gramin Bank stands in the name of Ms. Sarita and Nand Lal Jauhari. The Ld. Assessing Officer has erred and acted illegally in adding back the deposit therein in the account of assessee who is the second name holder of the account. The Ld. Appellate Authority i.e. National Faceless Appeal Centre Delhi (NFAC) has also erred and acted illegally in confirming the same. 3. Because it was fully explained that the assessee had cash balance of Rs. 27,00,000/- received back from the owner of the land after cancellation of agreement for sale deed and has a right to deposit the same upto 30.12.2016. The Ld. Assessing Officer has erred and acted illegally in adding back these amount deposited in bank account within 08.11.2016 to 30.12.2016 ignoring this aspect of fact that the assessee had cash balance of Rs. 27,00,000/- on 08.11.2016. The Ld. Appellate Authority i.e. National Faceless Appeal Centre Delhi(NFAC) has also erred and acted illegally in confirming the same. 4. Because the Ld. Assessing Officer has erred and acted illegally in adding back Rs. 24,54,000/-discarding the well evidence registered documents. The Ld. Appellate Authority i.e. National Faceless Appeal Centre Delhi (NFAC) has also erred and acted illegally in confirming the same. 5. Because the Ld. Assessing Officer has erred and acted illegally in applying the provision of section 68, 69 and 69A of the Income Tax Act, 1961 and applying the provision of section 115BBE on the amount out of clutches of demonetization. The Ld. Appellate Authority i.e. National Faceless Appeal Centre Delhi(NFAC) has also erred and acted illegally in confirming the same. 6. Because the Ld. Assessing Officer has erred and acted illegally in adding back of Rs. Rs. 4,36,535/-without any basis and on the amount which is the deposit in the bank account and already taken into account for addition u/s 69 of the Act. The Ld. Assessing Officer has erred and acted illegally in adding back of Rs. 4,36,535/- on the so-called estimated sale of Rs.1,25,00,000/- by way of applying 11% of N.P. rate.

ITA No.50/VNS/2023 Nand Lal Jauhari A.Y. 2017-18 The Ld. Appellate Authority i.e. National Faceless Appeal Centre Delhi(NFAC) has also erred and acted illegally in confirming the same. 7. Because the order u/s 143(3) of the I.T. Act, 1961 is bad both on facts and in law and not maintainable.” 2. The facts of the case are that the assessee deposited cash amounting to Rs. 1,35,88,208/- in four bank accounts during the assessment year in question. The assessee filed a return of income of on 17.08.2017 declaring a total income of Rs. 8,04,465/-. The return was filed under the provisions of section 44AD showing a turnover of Rs. 85,31,500/-. The assessee submitted before the ld. AO that he had started a new business of Agarbatti from 19.08.2019 and prior to that he was doing the work of supply of manpower. It was submitted that he had deposited Rs. 22,84,930/- as the sale proceeds of Saree of Nand Lal Jauhari HUF, PAN No. AAHHN1753J, since Nand Lal Jauhari HUF did not have any account at the time. He had also shown his turnover at Rs. 85,31,500/-. However, the ld. AO noted that even if this was taken into account, still the deposits in the account of Rs. 1,35,88,208/-, showed a net turnover of Rs. 1,13,03,278/- which was more than the turnover being declared by the assessee. The ld. AO noted that the assessee had deposited a total sum of Rs. 26,54,500/- in demonetized currency, since the assessee had submitted before the AO that he started his business in the last week of August, 2016, the AO was unwilling to believe the fact that the assessee could have cash in hand of this amount prior to 8.11.2016. After considering the submissions of the assessee, he estimated the sales of the assessee from his proprietary business at Rs. 1,25,00,000/- and added back a total of Rs. 4,36,535/- as the income of the assessee. A further addition of Rs. 24,54,000/- was also been made treating the cash deposit made during the demonetization period as unexplained. Apart from the above, he also made an addition of Rs. 14,16,961/- for short term capital gain on sale of land that was not declared by the assessee for the year under consideration. 3. Aggrieved by these additions, the assessee went before the ld. CIT(A). Before the ld. CIT(A), it was submitted that the assessee had entered into an agreement with some persons and had made payment to them as earnest money 3

ITA No.50/VNS/2023 Nand Lal Jauhari A.Y. 2017-18 for the purchase of land situated at Mauja Kanera Dev 63, Circle Sagar-1, Block Tehsil Sagar, Madhya Pradesh. The details of these advances that were made were submitted before the ld. CIT(A). It was further submitted that for some reasons, the agreement for sale could not be converted into the actual purchases and therefore, due to certain unavoidable reasons, both the parties decided to cancel the sale agreement. Accordingly, the persons with whom the sale agreement had been entered into had returned the cash of Rs. 27,00,000/- which had been deposited in the bank account. In view of the above, the assessee requested to delete the addition made on account of cash deposited in the bank account. The ld. CIT(A) considered the submissions of the assessee. He held that the assessee had taken a U-turn in respect of cash deposited by him in his bank accounts. He held that the documents that had been submitted by the assessee were not acceptable either as they were self-serving documents made by the assessee and were an afterthought. He, therefore, came to the conclusion that the cash deposits amounting to Rs. 24,54,000/- was unaccounted income and accordingly, he confirmed the addition made by the AO. With regard to the addition of Rs. 4,36,535/- made on account of profit element in the turnover quantified by the ld. AO, the ld. CIT(A) held that there was no infirmity in the same and he accordingly confirmed this addition and dismissed the appeal of the assessee.

ITA No.50/VNS/2023 Nand Lal Jauhari A.Y. 2017-18 had been cancelled was demonstrated by the notarized agreement and it was on account of the receipt of this money that the deposits have been made in the bank account on 10.11.2016, 17.11.2016 and 22.11.2016. Furthermore, it was pointed out that the cash had been deposited by Smt. Sarita Jauhari but had been added back in the hands of Nand Lal Jauhari, without giving an opportunity to the assessee. With regard to the element of profit in Saree sale, which had been added back amounting to Rs. 4,46,835/-, the ld. AR submitted that the entire basis of the addition was incorrect since the deposit could be explained by the assessee on account of the receipt on account of cancellation of sale agreement. Accordingly, he prayed that the addition deserves to be deleted. The ld. AR also drew our attention to the decision of the Coordinate Bench in the case of Shahid Akhtar (ITA No. 5/VNS/2024) wherein the ITAT had held that the CIT(A) was required to see whether the assessee had any source of income of cash, which could explain the source of the deposits in the bank account. Accordingly, he prayed that since the ld. CIT(A) had not done that, the addition made was not sustainable. On the other hand, Sh. Sabyasachi Chakarborty, Sr. DR (hereinafter 5. referred to as the ld. DR) pointed out that the assessee had been inconsistent in his stand as rendered before the AO and as rendered before the ld. CIT(A) and therefore, the ld. CIT(A) was justified in rejecting his explanation. Furthermore, he pointed out that the document evidencing the cancellation of sale and receipt of memo was not a registered document and therefore, was a self-serving document prepared by the assessee, only to explain the unexplained cash. Accordingly, he prayed that the same may be rejected.

ITA No.50/VNS/2023 Nand Lal Jauhari A.Y. 2017-18 an advance of Rs. 27,00,000/- was paid to the concerned sellers in the following manner:- i. Rs. 12,00,000/- through cheque on 20.11.2015 ii. Rs. 15,00,000/- through cash to Kamal Vishwakarma, Lilabai Vishwakarma and Devi Prasad Vishwakarma on 20.11.2015, 27.11.2015, 28.11.2015 and 17.05.2016. Thus, the total amount advanced as a result of this agreement was stated to be Rs. 27,00,000/-. The assessee has also filed a copy of a notarized agreement dated 5.11.2016 whereby transaction for the purchase of land is seen to be cancelled and it has been recorded that the sum of Rs. 27,00,000/- has been refunded back out of which Rs. 26,54,000/- have been refunded back in one thousand rupee notes and Rs. 46,000/- have been refunded through 500 rupee notes on 28.10.2016. 6.1 We have gone through the statement made by the assessee before the ld. AO. The assessee has submitted that he was in the business of supply of manpower prior to 19.08.2019 and had started a new business of selling Agarbatti after that date. There does not appear to be any contradiction in what he has stated and what he has disclosed in his returns. It is a fact that the assessee has not replied to the AO in explaining the source of the cash deposit, but from the same it cannot be inferred that he has changed his stance before the ld. CIT(A). As such the materials submitted before the ld. CIT(A) was in the nature of additional evidence, which was required to be confronted to the AO for verification before rejecting the same out of hand as self-serving documents. We note that the fact of an agreement for sale is recorded by way of a registered agreement for sale. However, the cancellation is not done by a registered document. Be that as it may, if the

ITA No.50/VNS/2023 Nand Lal Jauhari A.Y. 2017-18 fact of sale has not materialized then it is reasonable to expect that at least some portion of the money that has been advanced would be received back by the assessee on account of such cancellation. We believe that without enquiring into this aspect of whether the agreement for sale is actually been cancelled and money refunded, the explanation furnished by the assessee could not have been rejected out of hand. Accordingly, we restore the matter of addition of Rs. Rs. 24,54,000/- back to the file of the AO for reconsideration after examining the explanation of the assessee. As regards the addition of Rs. 4,46,835/- on account of profits of unexplained turnover, we observe that the question of whether any portion of the turnover was unexplained would only emerge if the deposits in the account were unexplained. Since that is still to be examined by the AO, the question of making any addition presuming suppression of turnover does not arise. Accordingly, the addition in this regard is quashed. As the matter stands restored to the file of the AO for fresh determination whether any portion of the deposits are unexplained, ground nos. 1 to 5 are allowed for statistical purposes. Ground no. 6 is allowed and ground no. 7, is also held to be allowed for statistical purposes. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 15.04.2026 in the Open Court. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15/04/2026 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR, ITAT 4. CIT, 5. The CIT(A) By order Sr. P.S.