RAJ KALA AGARWAL,KANPUR vs. ITO, WARD-1(1)(3), KANPUR

ITA 761/LKW/2025Status: DisposedITAT Lucknow08 October 2026AY 2017-187 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the authorities below had not properly considered the material furnished by the assessee. The assessee claimed that sales were duly recorded in the books of account and reflected in VAT returns. The Tribunal found that the AO proceeded on the presumption that cash sales were a means of introducing unaccounted money. It was incumbent upon the AO to examine the genuineness of sales by making appropriate enquiries and bringing cogent adverse material on record, such as stock position, purchases, and VAT returns. The Tribunal noted that no material was brought on record to demonstrate that the VAT returns were false or that VAT authorities had recorded any adverse findings. No independent enquiry was conducted. The Tribunal concluded that an adverse inference cannot be drawn merely on suspicion or presumption when the assessee has furnished the cash book, audited financial statements, VAT returns, and other documentary evidence. In the absence of further enquiry or cogent adverse material, the conclusion that sales were bogus was based on conjectures. Therefore, the AO was directed to delete the impugned additions. The grounds raised were partly allowed. The issue regarding Section 115BBE was not expressly decided.

What were the facts?

The assessee, Raj Kala Agarwal, filed an appeal against the order of the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2017-18. The Assessing Officer (AO) made an addition of Rs. 24,59,000/- on account of cash deposited in the assessee's savings bank account during the demonetization period (November 9, 2016, to December 30, 2016). The AO allowed a peak credit of Rs. 5,00,000/- and considered a deposit of Rs. 70,000/-, resulting in a total income of Rs. 34,66,820/- against the declared Rs. 10,07,820/-. The CIT(A) sustained the addition. The assessee's business is trading in Bardana. The case was selected for scrutiny under CASS, and the assessee initially did not comply with notices, leading the AO to proceed ex-parte.

What were the issues?

1. Whether the addition of Rs. 24,59,000/- treating cash deposits during the demonetization period as unexplained cash credits under Section 68 of the Income Tax Act, 1961, is sustainable, given the documentary evidence furnished by the assessee? - Assessee's contention: The cash deposits were explained as arising from cash-in-hand from regular business transactions, supported by audited books of accounts, cash book, and VAT returns. The bank statement does not constitute books of account, making Section 68 inapplicable. The authorities below failed to consider that cash sales, recorded in the books, were the source of these deposits. - Revenue's contention: The Assessing Officer was justified in making the addition as the assessee failed to satisfactorily explain the source of cash deposits and furnish adequate supporting evidence despite multiple opportunities. Transactions recorded in the bank account form part of the assessee's accounts, making Section 68 applicable. 2. Whether the provisions of Section 68 of the Act are applicable to deposits found in a bank statement, as it does not constitute books of account of the assessee? - Assessee's contention: Bank statements do not constitute books of account, rendering Section 68 inapplicable. This was held in the assessee's own case for AY 2012-13. - Revenue's contention: Transactions recorded in the bank account form part of the assessee's accounts, hence Section 68 is applicable. 3. Whether the addition made under Section 68 and the charging of tax as per Section 115BBE of the Act are correct, considering the applicability of the amendment w.e.f. 01.04.2017?

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE

AI-generated summary — verify with the full judgment below

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

Before: SHRI KUL BHARAT

PER KUL BHARAT, VICE PRESIDENT.: This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi dated 06.08.2025 pertaining to the assessment year 2017-18. The assessee has raised the following grounds of appeal: - “1. BECAUSE the Id. "CIT(A)" has erred in law and on facts in confirming the addition of Rs. 24,59,000/- made by the Assessing Officer u/s 68 of the Act treating cash deposits during demonetizatio

The order continues below.

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