NISARAHMED ARALIMATTI,BIJAPUR vs. INCOME TAX OFFICER - WARD 1, BIJAPUR

ITA 2590/BANG/2025Status: DisposedITAT Bangalore29 September 2026AY 2017-186 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 2,00,000 made by the Assessing Officer was unwarranted. The assessee had consistently maintained that the deposit represented sales proceeds and had furnished the complete cash book of Royal Traders for the period preceding demonetisation, supported by monthly and daily sales registers. The Tribunal noted that Royal Traders had a total turnover of Rs. 53,68,170 and average monthly sales of approximately Rs. 4,47,000. In these circumstances, singling out the Rs. 2,00,000 cash deposit made during the demonetisation period and treating it as unexplained was considered inappropriate. The Tribunal also found that the CIT(A) had required unusual particulars, such as the Permanent Account Number of each customer, without considering that the concern's turnover had been taxed under section 44AD. Therefore, the Tribunal reversed the orders of the lower authorities and allowed ground no. 2 of the assessee's appeal, directing the deletion of the addition. The ratio decidendi is that where a business has a substantial turnover and a history of regular cash deposits, a specific cash deposit during a period of cash crunch, if explained by business collections and supported by sales records, should not be treated as unexplained income under section 68, especially when the assessee is covered by presumptive taxation provisions like section 44AD.

What were the facts?

The assessee, Nisar Ahmed Aralimatti, filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, for assessment year 2017-18. The NFAC had upheld an assessment order passed by the Assessment Unit, Income Tax Department, under section 143(3) read with section 263 of the Income-tax Act, 1961. The dispute concerns an addition of Rs. 2,00,000 made by the Assessing Officer (AO) on account of cash deposited in the bank account of the assessee's proprietary concern, M/s Royal Traders, during the demonetisation period. The AO's initial assessment accepted the assessee's explanation, but revisionary proceedings under section 263 directed a re-examination. The assessee argued that the deposit represented business collections from retail sales. The CIT(A) confirmed the addition, finding the explanation unsatisfactory.

What were the issues?

1. Whether the addition of Rs. 2,00,000 made by the AO under section 68 of the Income-tax Act, 1961, is sustainable, considering the assessee's engagement in small retail trade covered under section 44AD and the availability of monthly sales summaries, cash flow statements, and bank statements showing business collections? (Mixed law and fact) Assessee's contentions: - Section 68 of the Act is not applicable to cash deposited in a bank account. - The assessee is engaged in small retail trade under section 44AD and is not required to maintain regular books of accounts, making section 68 inapplicable. - Monthly sales summaries, cash flow statements, and bank statements on record demonstrate that the deposits represented business collections. - The cash deposit was part of day-to-day business transactions from retail sales, regularly deposited in the normal course of business and forming part of the declared turnover. - The CIT(A) failed to exercise powers under section 250(4) to conduct necessary enquiries. - Relied on the principles of justice. Revenue's contentions: - The learned Departmental Representative supported the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 263,Section 68,Section 250,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY

PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT

1.

The assessee filed this appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, for assessment year 2017–18, which dismissed his challenge to the assessment order dated 28 March 2023 passed by the Assessment Unit, Income Tax Department (the learned AO), under section 143(3) read with section 263 of the Income-tax Ac

The order continues below.

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