CHANDRA VEER SONI,JODHPUR vs. DCIT/ACIT CIRCLE, BARMER

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR

BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (A/o ITA No. 1106/Jodh/2025) (Assessment Year 2017-18)

Chandra Veer Soni DCIT/ACIT, Circle, C/o Dwarika Jewellers Pvt. Ltd., Barmer. Bhishtiyon ka Bass, Ghoron Ka Chowk, Jodhpur (Raj.) 342001 PAN No. CNMPS0592L Assessee by Shri Rajendra Jain, Advocate and Smt. Raksha Birla, CA (Physically) Revenue by Shri Ghanshyam Meena- JCIT- DR (Virtually) Date of Hearing 07.04.2026. Date of Pronouncement 29.04.2026. ORDER DR. MITHA LAL MEENA, A.M.: This appeal is filed by assessee against the order of national Faceless Appeal Centre (NFAC) Delhi [hereinafter referred to as the NFAC/CIT(A)] with respect to the assessment year 2017-18.

2 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) 1. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in upholding the validity & legality of order passed by Id AO. 2. That on the facts and in the circumstances of the case, the Id CIT(A) ought to have quashed the order as the notice issued w/s 143(2) of the Income-Tax Act, 1961 is not in the prescribed format as per CBDT instructions [F.No.225/157/2017/ITA.II] 3. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in upholding application of provisions of section 145(3) of the Act and thereby confirming rejection of the audited books of accounts as regularly maintained for business without any specific reason assigned by him. 4. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in confirming addition made under section 69A of the Income Tax Act, after rejection of books of accounts under section 145, is not justifiable in law. 5. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in upholding arbitrary observation that the appellant has not satisfactorily explained the source of cash deposits of Rs. 91,88,000/- in bank account during the demonetization period in specified bank notes, without appreciating legal & valid documentary evidences which proves nature and source of such business transactions. 6. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in sustaining addition of Rs 91,88,000/- in respect of cash deposits in bank account during the demonetization period. 7. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in upholding the application of provisions of section 69A of the Act which is contrary to provision of law and also against the law declared by Hon'ble Courts. 8. That on the facts and in the circumstances of the case, the Id CIT(A) grossly erred in recording various observation while dismissing the appeal of

3 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) appellant is not only contrary to evidences on record but also highly disregarded judicial principle laid down by Hon'ble Courts. 9. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing. 10. The petitioner prays for justice & relief 3. In ground no. 1 and 2, the assessee has challenged the validity of order on the issue of not issuing notice under Section 143(2) of the Income Tax Act, 1961 in the prescribed format as per CBDT instructions (F.No.225/157/2017/ITA.II). The Ld. Counsel argued that in this case notice issued u/s 143(2) was not issued in the specifically prescribed format and so it was not in accordance with the aforesaid instructions of the CBDT. Accordingly, he pleaded that assessment framed is invalid and void-ab-initio. In support, he placed reliance on the judgments delivered by Hon’ble ITAT Kolkata Bench in the case of Tera Unemployed Engineers Co-Operative Society Ltd. ITA No. 674/KOL/2024, A.Y. 2014-15 dated 06.05.2025 and Hon’ble ITAT Delhi bench in the case of Anita Garg ITA No. 4053/Del/2024, dated 30.07.2025.

3.1 The Ld. DR on the other hand relied on the impugned order and contended that the procedural errors such as use of formats, service of

4 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) notice etc. are covered under Section 292BB of the Act and therefore, assessee’s objection to issue of notice under Section 143(2) in a prescribed format by CBDT cannot be a ground of quashing the assessment order.

3.2 We have heard both the sides and perused the material placed on record and case laws cited before us. As per mandate the instruction issued by the CBDT, regarding the use of specific format for issue of notice under Section 143(2) of the Act is not a mandatory law and the binding precedent on the Tribunal as it may be binding on the income tax authorities. Therefore, we are not inclined to agree with the contentions of the Ld. AR that a technical error on the part of AO that a notice under Section 143(2) was not issued in a specific format prescribed by the CBDT, rendered the assessment order bad in law or void-ab-initio. Our view gets support from the similar observation given by Coordinate Bench in ITA No. 840/Jodh/2025 in case of Lal Chand Choudhary Vs. ACIT/DCIT Circle Barmer dated 09.04.2026.

3.3 In the above view, we are not inclined to agree with the contentions raised by the Ld. AR that the notice under Section 143(2) was not issued in prescribed format as per CBDT instruction, rendered

5 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) the assessment order void-ab-initio. In our view the minor technical error pointed out in the notice issued under Section 143(2) of the Act in the format prescribed by CBDT would not render the entire assessment order bad in law. Accordingly, the ground no. 1 and 2 of the assessee are rejected.

6 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) monthly basis and non-compliance of the assessee to the queries of the AO with respect to the cash sales made and the maintenance of the cash books, the AO has rejected the books of accounts under Section 145(3) of the Act.

4.1. The CIT(A) has rejected the ground raised by the assessee by observing that even though the AO has rejected the books of accounts under Section 145(3) of the Act but the AO has not made any addition in respect of business income and the AO has made addition under Section 69A of the Act, therefore, there was no need to reject the books of account under Section 145(3) of the Act when the addition is made under Section 69A of the Act.

4.2. The Ld. AR for the assessee submitted that the AO applied the provisions of Section 145(3) of the Act, by way of rejection of the audited books of accounts regularly maintained for the business without any specific reason assigned by him. The AR further submitted that the observation and findings recorded by the AO and CIT(A) are contrary to the facts and material on record and also against the provision of law as per complete details in respect of sales and purchases are available on record which were supported from bills and vouchers and were duly

7 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) examined and verified by the Ld. AO during the assessment proceedings. The AR argued that without any corroborative and supportive material brought on record the allegations made by Ld. AO that the assessee has brought back his unaccounted money in the shadow of cash sales is unsustainable in the eye of law and illegal.

4.3. The Ld. DR on the other supported the impugned order and contended that the books of accounts though rejected by the AO under Section 145(3) of the Act but there was no addition made in the head of business income so the rejection of the books of accounts is not relevant to the addition made under Section 69A of the Act. He pleaded that addition made by AO under Section 69A may be sustained.

4.4. We have heard both the sides and perused the material on record.

4.5. Admittedly, the AO has rejected the books of accounts for the reason that he has pointed out discrepancy in the maintenance of the cash books with respect of huge inconsistency in the cash sales and queries remained non-complied by the assessee, particularly the cash sales recorded during the period of demonetization. Since no addition has made by the AO under the head business income, so the issue of rejection of books of accounts is not of much relevance, however, since

8 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) assessee failed to explained the discrepancy pointed out by the AO with respect of the maintenance of the cash book, and hence the AO has sufficient ground for making addition under Section 69A of the Act. However, applicability of Section 145(3) of the Act for rejection of audited books without assigning specific reasons is not justified. Thus, ground no. 3 is allowed.

9 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) tenable and accordingly, he made addition of Rs. 91,88,000/- after giving credit of closing balance (95,00,000-3,12,000) during the demonetization period in SBN currency treating as unexplained money under Section 69A of the Act and initiated penalty under Section 271AAC of the Income Tax Act separately.

5.1. Ld. CIT(A) has confirmed the addition by observing as under:- 8.3 The facts recorded and finding of the AO in the assessment order and the submission made by the appellant has been considered. 8.3.1 The facts of the case of the appellant are that during the demonetization period, the appellant deposited cash of Rs. 95 lakhs in specified bank notes in bank account no. 61181473191 with State Bank of India. During the assessment proceedings, the AO asked the appellant to explain the source of cash deposited during the demonetization period. During the assessment proceedings, the appellant claimed that cash was deposited on cash sale of gold/silver made by the appellant. However, the AO noted that the appellant purchased gold/silver in September and the payment was made in November. The AO noted that from April to July 2016, the appellant did not make any sales. During the month of August, 2016 out of total sales of Rs.72,50,342/-, cash sale was Rs.1,23,726/- only. From September, 2016 to 07- 11-2016 there was no cash sale. On 08-11-2016 entire sale of Rs.92,83,482/- represented cash sale. Thereafter, the appellant made cash sale of Rs.1,73,455/- out of the total sale of Rs.1,41,26,409/- in January 2017 and cash sale of Rs.3,81,911/- out of total sale of Rs.15,63,110/- in March, 2017. The AO concluded that there

10 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) was no satisfactory explanation regarding source of cash deposited on 08- 11-2016 amounting to Rs. 95,00,000/-. The AO also noted that as per the cash book there was cash balance of Rs.3, 12,082/-, therefore the AO allowed benefit of cash of Rs. 3,12,082/- and thereafter made an addition of Rs. 91,88,000/- u/s 69A of the Act. 8.3.2 The appellant has reiterated that the cash was deposited out of cash sale of gold made by the appellant. The cash sale was recorded in the books of the account. The AO accepted stock of gold lying with the appellant then sales made by the appellant could not be treated as bogus sales. The appellant has relied upon various decisions in which it was held that, sales has been offered for taxation the income could not be taxed again. 8.3.3 The appellant has tried to make out of the case that the AO has considered cash sales bogus sales made by the appellant. However, the AO was concerned with the cash deposited by the appellant during the demonetization period. The AO has noted that even though the appellant had made cash sales to various persons, the appellant stated that cash sales were below Rs.2 lakhs and therefore details of PAN and other details of customers were not obtained. It is a fact that the cash was deposited by the appellant during the demonetization period. The primary onus was on the appellant to explain satisfactorily the source of cash deposited in bank account. Even though the appellant has tried to explain the source of cash sale of gold, it has not been supported by any documentary evidence. Further, the business of the appellant has not been supported by facts on record. It is a fact from April to July 2016, the appellant did not make any sales. During the month of August, 2016 out of total sales of Rs.72,50,342/-, cash sale was Rs.1,23,726/- only. From September, 2016 to 07-11-2016 there was no cash sale. On 08-11-2016 entire sale of

11 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) Rs.92,83,482/- represented cash sale. Thereafter, the appellant made cash sale of Rs.1,73,455/- out of the total sale of Rs.1,41,26,409/- in January 2017 and cash sale of Rs.3,81,911/- out of total sale of Rs.15,63,110/- in March, 2017. Thus, it is not possible for the appellant to make entire sale in cash during demonetization period. The appellant has not satisfactorily explained the source of cash deposits of Rs. 91,88,000/- in bank account during the demonetization period in specified bank notes. Considering all these facts, the addition of Rs. 91,88,000/- made by the AO u/s 69A of the Act is upheld. 5.2. The Ld. AR for the assessee submitted that the Ld. CIT(A) has grossly erred in confirming addition made under Section 69A of the Income Tax Act, 1961 after rejection of books of account under Section 145 in arbitrary manner by holding that appellant has not satisfactorily explained the source of cash deposits of Rs. 91,88,000/- in the bank account during the demonetization period in specified bank notes without appreciating legal and valid documentary evidences which proves nature of source of such business transactions. The Ld. AR contended that the Ld. CIT(A) has not appreciated the fact that cash deposit in the bank was made out of cash sales and mechanically confirmed the addition under the provisions of section 69A in contravention to the provisions of law and evidences on record in

12 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) violation of judicial precedents laid down by the Hon’ble courts. He pleaded that he addition may be deleted.

5.3 The Ld. DR on the other hand has submitted that the AO has pointed out many irregularities and in-consistencies in the cash book produced by the assessee. The Ld. DR further submitted that the assessee has failed to explained satisfactorily the source of cash deposits in his bank account during the demonetization period, though the appellant tried to explained the source of cash out of sale of gold, but it has not been supported by any documentary evidence and the business transactions were not supported by factual evidence on record as observed by the Ld. CIT(A) in the impugned order. The DR pleaded that the impugned order may be sustained.

5.4 We have heard both the sides and perusal of the record and case laws cited. It is noted that the Ld. CIT(A) has not been satisfied by the explanation furnished by the assessee as regards to the source of cash deposits of Rs. 91,88,000/- in the bank account during the demonetization period in SBN currency notes.

5.5 It is evident from the record that the assessee is failed to explain source of cash deposit in its bank account during demonetization period

13 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) with documentary evidences regarding the available stock of goods in the books of accounts as per the stock register, opening balance, closing balance and cash sale transaction with corresponding cash deposits in SBN currency with the respective bank to the satisfaction of then Departmental authorities. However, we find that the appellant has a good arguable case on merits and therefore, we consider it deem appropriate that he should get one more opportunity of being heard before the AO to explain the source of cash deposits in his bank accounts in SBN currency with the support of the documentary evidence to the satisfaction of the AO, in the interest of justice.

14 ITA No. 1106/Jodh/2025 & SA No. 02/Jodh/2026 (Assessment Year 2017-18) 8. Since the matter involved in the captioned appeal is restored back to the AO as discussed above, so the SA No. 02/Jodh/2026 is dismissed as non-maintainable.

Order pronounced on 29 /04 /2026 in the open court.

SD/- SD/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 29/04/2026. Pritesh Vaishnav PS TRUE COPY Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

BY ORDER,