LATA CHHANWAL ASHISH CHHANWAL (LEGAL HEIR),BUNDI vs. WARD BUNDI, BUNDI

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ITA 175/JPR/2026Status: DisposedITAT Jaipur31 August 2026AY 2017-188 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition under Section 68 was not sustainable as the assessee's audited books of account were not rejected, and the cash sales were not doubted. The AO's reliance on a notification restricting cash sales to public sector undertakings was also found to be misapplied.

What were the facts?

The assessee, a petrol pump proprietor, declared income and agricultural income for AY 2017-18. The Assessing Officer (AO) noticed significant cash deposits, particularly during the demonetization period, and treated them as unexplained cash credit under Section 68.

What were the issues?

Whether cash deposits made by a petrol pump during demonetization, with audited accounts and undisputed cash sales, can be treated as unexplained cash credit under Section 68. Whether the CIT(A) erred in passing an order on a deceased assessee.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR “SMC” BENCH, JAIPUR

Before: SMT. ANNAPURNA GUPTA & SHRI KULDIP SINGH

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR “SMC” BENCH, JAIPUR (PHYSICAL HEARING) BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No: 175/JPR/2025 Assessment Year: 2017-18

Lata Chhanwal Ward, Ashish Chhanwal (legal heir) Bundi. Vs (Respondent) Khasra No. 1198, Behro Ka bagh Village- Gudhanathawatan, Bundi. PAN: ACWPC2902P (Appellant)

Assessee Represented: Sh. Rohan Sogani, C.A. Revenue Represented: Ms. Aarti Rawat, JCIT Date of hearing : 13-08-2026 Date of pronouncement : 31-08-2026 ORDER PER : KULDIP SINGH, JUDICIAL MEMBER:-

The Appellant, Lata Chhanwal (hereinafter referred to as the ‘assessee’) by filing the present appeal, sought to set aside the impugned order dated 14.11.2025 passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] qua the assessment order for Assessment year 2017-18 on the grounds inter-alia that:-

I.T.A No. 175/JPR/2026 Page No 2 Lata Chhanwal Ashish Chhanwal (legal heir)

“1. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in passing the order, under section 250, on a dead person, even though the fact of assessee being dead, was duly intimated to him during the course of appellate proceedings. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may be please be granted by quashing the entire appellate order passed by the Id. CIT(A), being illegal and void-ab-initio

2.

In the facts and circumstances of the case and in law, the Id CIT(A) has erred in confirming the action of the Id AO, in making additions of Rs 26.66.500 under Section 68. The action of the Id. CIT(A) is illegal, unjustified arbitrary and against the facts of the case. Relief may please be granted by deleting the entire such additions.

3.

In the facts and circumstances of the case and in law, the Id. CIT(A)/NFAC has erred in confirming the action of the Id. AO in invoking the provisions of section 115BBE on additions made u/s 68. The action of the Id. CIT(A) /NFAC is illegal. unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the invocation of provisions of section 115BBE

4.

The legal heir of the assessee craves his right to add, amend or alter any of the grounds on or before the hearing.

2.

Briefly stated, facts necessary for consideration and adjudication of the issues at hand are : Assessee Late Smt. Lata Chhanwal being a proprietor of M/s Jyoti filling Station, a petrol pump operating under the dealership of M/s Essar Oil Ltd. filed the return of income for A.Y. 2017-18 declaring total income of Rs. 8,15,530/- and agricultural income of Rs. 3,60,000/-, which was subjected to scrutiny. The Assessing Officer noticed that there is a cash deposit of Rs. 91,52,026/- and Rs. 4,49,010 in State bank of India and Union Bank of India respectively. It has also come on record that substantial part of

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the cash deposit has been made during demonetization period. The Assessing Officer treated the said amount as unexplained cash credit u/s 69 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and thereby made the addition to the income of the assessee. 3. Assessee carried the matter before Ld. CIT(A) by way of filing appeal, who has partly allowed the same. Feeling aggrieved with the impugned order passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeal. 4. We have heard Ld. ARs for the appellant and Ld. DR for the Revenue and perused the record available on file. 5. Undisputedly, assessee’s proprietorship firm is running a retail petrol pump outlet. It is also not in dispute that assessee being in retail Petrol Pump business is having cash sales to the tune of Rs. 99.59% as is evident from month-wise of sales and purchase available at page 111 of the paper book. It is also not in dispute that assessee firm is maintaining audited account. Assessee has also brought on record summary of his audited accounts for the year under consideration, which is extracted for read reference as under:-

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6.

Assessing Officer while making addition of Rs. 96,,01,026/- on account of cash deposit relied upon notification dated 08.11.2016, issued by Ministry of Finance to deal with the cash sales inter alia for the purchase of Petrol, Diesel and Gas at stations operating under the authorization of public sector oil making company. For ready perusal of notification is extracted as under:- “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 I date 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 repees (hereinafter referred to as the specified bank notes), shall cease to be legal tender on and form 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.

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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 - 1. For making payments in Government hospitals for medical treatment and pharmacies in Government hospitals for buying medicines with doctor's prescription. 2. At railway ticketing counters, ticket counters of Government or public Sector Undertakings buses and airline ticketing counting at airports for purchase of ticket; 3. For purchases at consumer cooperative stores operated under authorization of Central or State Governments; 4. For purchase at milk booths operating under authorization of the Central or State Governments 5. For purchase of petrol, diesel and gas at the stations operating under the authorization of Public Sector Oil Marketing Companies; 6. For payments at crematoria and burial grounds; 7. 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; 8. 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. 2. All establishment referred to in paragraph I, shall maintain complete account of record of stock and sale of transactions made with the specified bank notes during the period between 9th November, 2016 and 11th November 2016 [F. No. 10/03/2016-Cy II] Dr. SAURABH GARG. Jt. Secy.”

7.

Assessing Officer while relying upon the notification (supra) proceeded to hold that since assessee’s petrol pump is operating under a private company M/s Essar Oil Ltd. it is not entitled for accepting cash during demonetization period. However without entering into veracity and application of notification (supra) to the assessee firm, we are of the considered view that cash deposit made by the assessee

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during demonetization period would be examined under general Income Tax Law. 8. Undisputedly, Assessing Officer has not doubted the source of the cash deposit nor he has disputed the account books of the assessee, which are duly audited. Even retail petrol pump business of the assessee is also not in dispute. At the same time, AO has categorically recorded in the assessment order that the entire evidence has been submitted by the assessee but proceeded to make the addition u/s 68 of the Act by placing reliance on the notification (supra) only. When we examine the comparative chart brought on record by the assessee in his written submissions, there is no abnormal cash sale during the period under consideration. For facility of reference comparable table is extracted as under:-

9.

We are of the considered view that when books of account of the assessee has not been rejected, which are duly audited, its cash sale to

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the tune of 99.59% is also not doubted nor sale has been doubted at any point of time, addition u/s 68 of the Act cannot be made by relying upon notification (supra). For making addition u/s 68 of the Act the Assessing Officer has to make out the case as required u/s 68 of the Act. Since the assessee has duly offered nature and source of the cash deposit with due explanation to which the Assessing Officer has not examined rather straightaway made the addition by relying upon notification (supra) that “assessee’s petrol pump being operated under private dealership namely M/s Essar Oil limited and as per notification only retail petrol pump operating under public Sector undertaking were entitled to make a cash sale during demonetization period addition made u/s 68 of the Act is not sustainable. 10. The Coordinate bench of Tribunal in case of Girish Karamshi Dedhia vs. DCIT in ITA No. 4553/Mum/2025 vide dated 10.10.2025 has dealt with identical issue and proceeded to hold that treating the cash deposit, which the assessee has “source” through cash sales as unexplained u/s 68 of the Act is not sustainable, particularly when the assessee has complete details of cash book, sale register, bank statements and got its accounts duly audited. 11. So, in view of what has been discussed above, we are of the considered view that the impugned order passed by Ld. CIT(A) is not

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sustainable, hence set aside. The AO is directed to delete the addition made u/s 68 of the Act. 12. Resultantly, the appeal filed by the assessee is hereby allowed. Order pronounced in the open court on 31-08-2026

Sd/- Sd/- (ANNAPURNA GUPTA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Jaipur Dated:- 31/08/2026. *Santosh. Copy of the order forwarded to: 1. The Appellant- 2. The Respondent- 3. CIT 4. CIT(A) 5. DR, ITAT, Jaipur. 6. Guard File By order,

Asst. Registrar

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