TUKARAM GANAPAT KODARE,RATNAGIRI vs. INCOME TAX OFFICER,WARD-1, RATNAGIRI, RATNAGIRI

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ITA 1569/PUN/2026Status: DisposedITAT Pune14 October 2026AY 2017-185 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 84,500/- was not justified. The Tribunal noted that the Assessing Officer (AO) had initially accepted the assessee's explanation regarding cash deposits in a show cause notice dated 28.08.2025. The AO had acknowledged that the cash deposits were linked to a bank loan and the assessee's Katha manufacturing business, and that the assessee had provided supporting documents like bank statements, loan letters, and cash flow statements. The AO had explicitly stated that no addition on account of cash deposits was proposed at that stage. However, in a subsequent show cause notice dated 24.09.2025 and the final assessment order, the AO stated that the explanation offered by the assessee was not tenable, without bringing any new contradictory material on record. The Tribunal found this inconsistency indicative of a lack of application of mind by the AO. Since the AO had accepted the assessee's explanation on the same set of facts at one point and then rejected it without justification, the Tribunal directed the deletion of the addition of Rs. 84,500/-. The appeal of the assessee was allowed.

What were the facts?

The assessee, Tukaram Ganapat Kodare, filed an appeal against the order of the NFAC, Delhi for Assessment Year 2017-18. The original assessment order dated 10.12.2019, passed under section 144 of the Income Tax Act, 1961, had added cash deposits of Rs. 11,07,000/- as Specified Bank Notes during demonetization and taxed remaining credits at 10% (Rs. 84,500/-). The assessee appealed to the CIT(A), who set aside the order for de-novo adjudication. A subsequent assessment order dated 14.10.2025 was passed. The assessee, a small-time Katha trader, provided cash summaries, bank statements, withdrawal details, supplier payments, and cash flow statements. The Assessing Officer (AO) initially noted in a show cause notice dated 28.08.2025 that no addition was proposed on account of cash deposits, accepting the assessee's explanation regarding a bank loan and business operations. However, a later show cause notice dated 24.09.2025 indicated dissatisfaction, leading to an addition in the final assessment order.

What were the issues?

1. Whether the addition of Rs. 84,500/- on account of cash deposits is justified, considering the Assessing Officer's contradictory findings in the show cause notices and the final assessment order (turning on Section 144 r.w.s. 144B of the Income Tax Act, 1961). Assessee's contentions: The assessee argued that the AO's lack of application of mind is evident from the contradictory show cause notices. The initial show cause notice dated 28.08.2025 accepted the assessee's explanation regarding cash deposits originating from a bank loan and business activities, stating no addition was proposed. However, a subsequent show cause notice dated 24.09.2025 expressed dissatisfaction, and the final assessment order made an addition. The assessee contended that no new material was brought on record to contradict their submissions, and therefore, the addition should be deleted. Revenue's contentions: The Revenue relied on the orders of the Assessing Officer and the CIT(A).

Which sections of the Income-tax Act were involved?

Section 144,Section 144B,Section 250

AI-generated summary — verify with the full judgment below

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

Before: SHRI Dr. DIPAK P. RIPOTE & SHRI VINAY BHAMORE

For Appellant: Shri Pramod Shingte
For Respondent: Smt. Sonal L Sonkavde, Addl. CIT

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi [Ld.CIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AY 2017-18 on 02.03.2026, emanating from the Assessment Order u/s 144 r.w.s. 250 r.w.s. 144B of the Act, dated 14.10.2025.

Submission of Ld. AR :

2.

The Ld. AR filed paper book. The Ld. AR submitted that the Assessing Officer (AO) has made addition on account of cash deposits. The Ld. AR submitted that the assessee is a small time trader in Katha. He purchases from the farmers. The Ld. AR invited our attention to show cause notice dated 28.08.2025 which is at pages 1 to 10 of the paper book, wherein, the AO after going through the bank statement and documents

ITA No.1569/PUN/2026 specifically mentioned that no addition is proposed on account of cash deposits. In the said show cause notice, the AO proposed addition of Rs.84,500/- which was 10% of other credits of Rs.8,45,000/- appeared in the bank statement. However, the AO suddenly vide show cause notice dated 24.09.2025 stated that he is not satisfied. The Ld. AR submitted that this shows that lack of application of mind by the AO and addition may kindly be deleted. The Ld. AR submitted that the copies of both the show cause notices were part of the paper book from pages 1 to 17.

Submission of Ld. DR :

3.

The Ld. DR relied on the order of the Assessing Officer (AO) and the Ld. CIT(A).

Findings and Analysis :

4.

We have heard both the parties and perused the records. In this case, original assessment order was passed u/s 144 of the Act assessing the total income at Rs.12,35,791/- vide order dated 10.12.2019 for AY 2017-18. In the said order u/s 144 of the Act the cash deposits of Rs.11,07,000/- were added as those were the Specified Bank Notes during the demonetization period. The remaining credit entries were taxed at 10% which comes to Rs.84,500/-. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A) with additional evidence under Rule 46A. The Ld. CIT(A) set aside the assessment order to the AO for de-novo adjudication. In this context, the present assessment order dated 14.10.2025 has been passed by the AO.

4.1 It is an admitted fact that in the assessment order, the assessee had filed full cash summary, bank statement, details

ITA No.1569/PUN/2026

of withdrawals, amount paid to the suppliers and cash flow statements. According to the AO, the assessee has not produced purchase invoices for Katha. However, during the assessment proceedings, the assessee submitted that Katha is purchased from local farmers and villagers who never issued any invoices. However, it is an admitted fact that in the assessment order, the assessee filed details of payments. In the show cause notice issued by the AO on 28.08.2025 (pages 1 to 10 of the paper book) the AO noted as under : “The replies of the assessee and attached supporting documents have been perused and considered very carefully. The assessee stated that he carried out "Kath Manufacturing" business at household level. Bank loan in the nature of cash credit was obtained for the said business. To substantiate this say, permission from local authority to manufacture Kath, receipts of Gram Panchayat Tax for running a stall in local market for kath sales were enclosed. Letter from bank towards purpose of loan and sanctioned amount was enclosed. Bank statements of bank account were enclosed with detailed explanations towards each entry. Hence, it is crystal clear that he obtained bank loan and operated a kath manufacturing business. He withdrew cash from bank account received as a loan from bank. Later, he deposited all cash in hand in his bank account during demonetization period which was lesser than the cash withdrawn from loan accounts earlier. Cash deposits of Rs. 11,00,000/- which was earlier withdrawn from bank loan account can not be income of any person under the any provisions of Income Tax Law. The assessee further stated that he has submitted cash flow statement, letter from bank for loan sanctioned, details of cash withdrawals and payment to various suppliers, full year cash summary, bank statements and explanation to each entry along with detailed attachments. The only thing, he has not produced invoices for purchase of khair wood and firewood from local peoples. These documents were never generated at all as local villagers bring khair wood and take cash towards the same immediately. For more clarity he has submitted chart of bank accounts prepared by him whereby each entry and narration for the same can be observed and verified. This chart would make it amply clear that all transactions are genuine and there would be no reason to treat the reply as non satisfactory. In view of the above facts and circumstances of the case, the reply of the assessee with documentary evidence seems to be correct.

ITA No.1569/PUN/2026

Therefore, no addition on account of cash deposited is proposed to be made.”

4.2 Thus, the AO in the show cause notice specifically accepted the submission of the assessee and satisfied regarding the cash deposits. However, on the same facts, the AO proposed addition of cash deposits in the show cause notice dated 24.09.2025 and accordingly in the final assessment order added the amount. On the said facts, the AO merely stated that the explanation offered by the assessee is not tenable. Thus, the AO in the show cause notice dated 28.08.2025 states that explanation submitted by the assessee is acceptable however on the same set of facts in the final assessment order the AO says explanation offered by the assessee is not acceptable. After show cause notice, the AO has not brought on record any documents to contradict to the assessee’s submissions. On the same set of facts once the AO has accepted assessee’s explanation and second time not accepted the assessee’s explanation. This explains that there is no basis of addition of cash deposits of Rs.11,07,000/-. In these facts and circumstances of the case, we direct the AO to delete the addition of Rs.84,500/-. Accordingly, the appeal of the assessee is allowed.

5.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on 14th October, 2026

Sd/- Sd/- (VINAY BHAMORE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/Pune; दिन ांक/Dated : 14-10-2026 Ravi Kumar

ITA No.1569/PUN/2026

आदेशकीप्रतितितिअग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी/ The Appellant 2. प्रत्यर्थी/ The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘SMC’ Bench, Pune 5. ग र्डफ ईल / Guard file. आदेशानुसार/ BY ORDER, Digitally signed by Sunil Kumar Sunil Kumar More // True Copy // More Date: 2026.10.15 15:13:15 +05'30' Assistant Registrar आयकरअपीलीयअदिकरण, पुणे / ITAT, Pune

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