SHAILENDRA KUMAR CHAURASIYA,AZAMGARH vs. INCOME TAX OFFICER, WARD 3 (2), AZAMGARH

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH (SMC), VARANASI BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.57/VNS/2025 Assessment Year: 2017-18 Shailendra Kumar Chaurasiya v. Income Tax Officer Prop. Shiv Shakti Traders Ward 3(2) Jahanaganj Sadar Azamgarh Azamgargh (U.P) TAN/PAN:AHCPC7432K (Applicant) (Respondent) Applicant by: Shri Puneet Singh, C.A. Respondent by: Shri Sudipta Paul, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 24.01.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.

2.0 The brief facts of the case are that the assessee was the owner of a Proprietorship Firm in the name and style “M/s Shiv Shakti Traders”, situated at Jahanaganj Sadar, Azamgarh (Uttar Pradesh) and was engaged in the wholesale business of General Merchandise Goods. The assessee firm was being regularly assessed to Income Tax since its inception. The assessee filed his return of income for the year under consideration on 02.11.2017 declaring a total income of Rs.3,59,220/-. On the basis of information available on the Income Tax Insight Portal that the assessee had made cash deposits totaling to

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Rs.33,04,500/-, the case of the assessee was selected for scrutiny under Computer-Assisted Scrutiny Selection (CASS) to verify huge cash deposits made by the assessee in his Bank Account during the year under consideration. The Assessing Officer (AO) issued statutory notices, requiring the assessee to explain the sources of cash deposits made during the period of demonetization. Further, on perusal of the profit and loss account, the AO noticed that the assessee had made total deposits of Rs.2,60,38,470/- during the year under consideration in assessee’s Current Account, which included bearer cheque deposits and cash deposits, whereas the total sales disclosed were only at Rs.2,42,67,239/-. Considering the discrepancies in between the cash deposits and sales disclosed, the AO sought a reconciliation of excess deposits of Rs.17,71,231/- in Bank Account. In response, the assessee submitted that the excess deposits in the Bank Account was due to the fact that in the Bank Account, total sales along with VAT was deposited but in the books of account of the assessee, only net sale, i.e., excluding VAT was entered. Not being satisfied with the reply furnished by the assessee, the AO treated the excess deposits in the Bank Account than the sales disclosed by the assessee during the year under consideration, i.e., Rs.17,71,231/- as unexplained money and added the same to the total income of the assessee under

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section 69A of the Act. The AO completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.21,30,450/-.

2.1 Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee and confirmed the order of the AO.

2.2 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

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and in law in sustaining penalty u/s. 270A of the Income Tax Act, 1961 without properly appreciating the correct facts and circumstances of the case and the submissions made by the appellant. 04. BECAUSE, the Commissioner of Income Tax (Appeals), National Faceless Appeal Center (NFAC) has erred on facts and in law in wrongly sustaining Interest u/s. 234A, 234B and 234C of the Income Tax Act, 1961 without properly appreciating the correct facts and circumstances of the case and the submissions made by the appellant. 05. BECAUSE, the order is bad both on facts and in law and is not maintainable. 06. BECAUSE, the appellant craves leave to put forward further Grounds of Appeal and / or amend / alter the same before or at the time of hearing. 3.0 During the course of hearing before me, it was submitted by the Ld. Authorized Representative for the assessee (Ld. A.R.) that during the assessment proceedings, the AO observed that total deposits in the bank account (including cash and bearer cheques) were Rs.2,60,38,470/-, whereas the net turnover/sales reflected in the Profit & Loss Account was Rs.2,42,67,239/- and the differential amount of Rs.17,71,231/- was added as unexplained money under section 69A of the Act, which was sustained in appeal by the Ld. First Appellate Authority. The Ld. A.R. further submitted that the discrepancy of Rs.17,71,231/- between bank deposits and sales in the profit

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and loss account was fully explained by the VAT collected on sales. The Ld. A.R. submitted that the assessee credits gross turnover inclusive of VAT into the bank account upon realization from customers and in the books of account/profit and loss account, sales were credited net of VAT, while the VAT element was separately credited to a statutory liability account. It was submitted that the total realization deposited into the bank equals Net Sales plus the VAT collected. Inviting my attention to page 107 of the assessee’s paper book (which is the trading account of the assessee for the year under consideration with VAT and without VAT), the Ld. A.R. submitted that the cash deposits made in the bank account are from the cash available with the assessee at the relevant point of time.

3.1 The Ld. A.R. further submitted that section 69A of the Act applies only where the assessee was found to be the owner of any money, bullion, jewellery, or other valuable article not recorded in the books of account. He submitted that in the case under consideration, the turnover and corresponding banking transactions are duly routed through the disclosed business account and even if the AO had any reservations regarding the trading results or reconciliations, the entire gross deposit/collection cannot be added as income. It was submitted that at most, only the net profit element embedded in any

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unrecorded turnover could be brought to tax, as held in multiple judicial precedents. The Ld. A.R. submitted that the orders of the authorities below may be set aside and the appeal of the assessee may be allowed.

4.0 Per contra, the Ld. Sr. D.R. submitted that during the assessment proceedings, the AO had reconciled the total bank deposits with the trading results and had found a clear discrepancy, i.e., unexplained excess deposit of Rs.17,71,231/-. The Ld. Sr. D.R. further submitted that the assessee’s primary defence that the difference of Rs.17,71,231/- represents VAT collected on sales remained unsubstantiated. The Ld. Sr. D.R. also submitted that the assessee failed to reconcile the month- wise VAT collected, VAT returns filed with the State Commercial Tax Department, and the corresponding payments/credits before the lower authorities and that mere oral assertions without corroborating statutory VAT challans, assessment orders, or ledger extracts cannot displace the factual difference between bank deposits and disclosed sales. He submitted that the AO was justified in making the addition and the Ld. First Appellate Authority was justified in confirming the same and, therefore, no interference is called for in the orders of the authorities below. He prayed that the appeal of the assessee may be dismissed.

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5.0 I have heard the rival submissions and have also perused the material on record. During the course of hearing before me, the Ld. A.R. submitted that the difference of Rs.17,71,231/- between the total bank deposits (Rs.2,60,38,470/-) and the sales disclosed in the Profit & Loss Account (Rs.2,42,67,239/-) represents the VAT collected from customers and deposited into the bank account. It was contended that sales were credited in the books net of tax. The Ld. Sr. D.R. supported the orders of the lower authorities and argued that the assessee failed to furnish concrete reconciliation supported by relevant VAT returns and payment challans before the authorities below. On a careful perusal of the record, it is noted that the core controversy revolves around the reconciliation of the excess deposit of Rs.17,71,231/- in the bank account vis- à-vis disclosed turnover. The assessee's plea that this amount constitutes the VAT component collected on gross realization and credited to a statutory liability account requires factual verification with the statutory VAT returns, computation sheets, and books of account. In my opinion, neither the AO nor the Ld. First Appellate Authority appear to have thoroughly examined the quantitative reconciliation of gross sales, net sales, VAT liability, and the corresponding ledger accounts. The addition made under Section 69A of the Act directly affects the trading turnover

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and taxable income, and making a summary addition without

verifying the indirect tax returns filed with the State Commercial

Tax Department is not justified. The assessee has furnished

before me the reconciliation of trading account with VAT and

without VAT, as appearing at page 107 of the assessee’s paper

book, which is reproduced here below for ready reference:

NAME OF PURCHASE TAX TOTAL SALE TAX TOTAL GOODS Goods Taxable 81,51366.00 407568.00 85,58934.00 83,88,541.00 419,427 8,807,96.00 @5% Goods Taxable 1,52,55687.00 2,212,074.00 1,74,67761.00 1,54,51680.00 2,240,493.00 17,692,173.00 @14.5% Goods Taxabe 4,58672.00 4,58672.00 427,018.00 427,017.00 @0% 2,38,65,725.00 2,64,85,367.00 2,42,67,239.00 26,59,920.002,69,27,160.0

6.0 Considering the above facts and in the interest of justice

and fair play, the impugned order of the Ld. First Appellate

Authority is set aside, and the matter is restored to the file of the

AO for de novo adjudication. The AO shall provide a reasonable

and adequate opportunity of being heard to the assessee. The

AO shall also call for and verify the relevant statutory VAT

Returns, monthly tax payment challans, and the

audited/unaudited books of account to properly reconcile the

bank deposits of Rs.2,60,38,470/- with the reported sales of

Rs.2,42,67,239/- and re-determine the addition, if any, in

accordance with the law based on the outcome of such

reconciliation.

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7.0 In the final result, the appeal of the assessee stands allowed for statistical purposes.

Order pronounced in the open Court on 21/08/2026.

Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:21/08/2026 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order

Assistant Registrar/DDO