THE KUMBHARIA VIBHAG VIVIDH KARYAKARI SAHAKARI MANDALI LIMITED ,SURAT vs. ITO WARD 2(3)(4), SURAT, SURAT

The assessee has raised the following grounds of appeal: “Ground 1: Addition under section 68 Despite Valid Currency Certificate & Failure to Peruse Documentary Evidence The Ld. AO and CIT(A) erred in law and on facts by failing to appreciate the certificate from The Surat District Co-op Bank Ltd., which conclusively proved that the deposits were made in legal tender (Valid Notes) and not Specified Bank Notes (SBNs). The said documentary evidence was not understood or appreciated in its entirety, leading to an unjustified addition under section 68. Since the notes were not SBNs, the rigors of demonetization-related additions cannot be applied to the Appellant. Ground 2: Double Taxation of Business Sales The Ld. AO erred in treating cash deposits as unexplained while simultaneously accepting the sales turnover of the society. Following the jurisdictional precedent of the Honorable Gujarat High Court in CIT vs. Vishal Exports Overseas Ltd., the same amount cannot be taxed twice: once as sales and again as unexplained credit. Ground 3: Non-rejection of Books of Accounts The Ld. AO made the addition without pointing out any specific defect in the audited Books of Accounts or rejecting them under Section 145(3). As held by the Surat ITAT in Pareshbhai Natvarlal Shah vs. ITO, no addition under section 68 is sustainable if the books and turnover are accepted. Ground 4: Identity and Genuineness of Transactions The Appellant had provided the names of the members/farmers from whom the cash was collected for fertilizer. The identity, creditworthiness, and genuineness of the transactions were established, and thus the burden of proof under Section 68 was fully discharged. Ground 5: Violation of Principles of Natural Justice The Ld. CIT(A) erred in law and on facts by dismissing the appeal ex-parte without providing a meaningful opportunity of being heard. The Appellant has a meritorious case and the dismissal for non-prosecution is contrary to the spirit of Section 250(6) of the Act. Ground 6: Allow the appellant to add, alter or delete any grounds during the appeal proceedings.” 3. The assessee filed return of income for A.Y. 2017-18 on 30.10.2017 declaring total income at Rs. Nil. The case was selected for scrutiny and notice u/s.143(2) of the Income Tax Act, 1961 (in short, “the Act”) was issued on 21.09.2018, which was duly served upon the assessee. Notice u/s 142(1) of the Act was issued on 19.08.2019 and further notices u/s 142(1) of the Act were issued on several dates asking for various details. The assessee submitted the details. The Assessing Officer (in short ‘the AO’) observed that the assessee made cash deposit during demonetization period. Show cause notice dated 19.12.2019 was issued, which was replied by the assessee on 23.12.2019. The AO held that the assessee has not furnished any proof of authorization from the authority related to the guideline of the State / Central Government for taking the Specified Bank Notes (‘SBN’) notes. Thus, the AO made addition of Rs.5,95,990/- u/s 68 of the Act.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee ex parte.

The Ld. Authorized Representative (in short “the Ld. AR”) for the assessee submitted that the addition u/s 68 of the Act was not justifiable as despite value currency certificate and failure on the part of the AO to peruse the documentary evidences as well as the certificate from The Surat District Co-op. Bank Ltd. which clearly proved that the deposits were made in legal tender / valid notes and not SBN, the said documentary evidences were not considered by the CIT(A) as well as the AO. The Ld. AR further submitted that the AO erred in treating the cash deposits as unexplained while simultaneously treating the sales turnover of the society. Thus, it amounts to double taxation in respect of business sales of the assessee. The Ld. AR further submitted that the AO never rejected assessee’s books of accounts. Thus, the addition u/s 68 of the Act does not sustain. The Ld. AR further submitted that the assessee had provided the name of the members / farmers from whom the cash were collected for fertilizer and identity, creditworthiness and genuineness of these transactions were established through the details submitted by the assessee during the assessment proceedings as well as before the CIT(A). The Ld. AR submitted that there is a delay of 360 days in filing the present appeal before the Tribunal. The same may be condoned.

The Ld. Departmental Representative (in short “Ld. DR”) relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant materials available on record. There is a delay of 360 days in filing the present appeal, which is condoned. It is pertinent to note that the assessee has submitted the details of names of the members / farmers from whom the cash were collected for fertilizer during the assessment period. Besides this, the Ld. AR further contended that authorization certificate for collecting the SBN notes was also provided by The Surat District Co-op. Bank Ltd. The details given by the assessee was sufficient enough to establish that the deposits were made in legal tender and not SBN. The assessee’s contention that the books of accounts was not rejected also supports the assessee’s case and, in fact, the details were before both the authorities, upon which, the CIT(A) should have considered, but, has passed ex parte order. It will be appropriate to remand back this matter to the file of the AO for proper adjudication of the evidences after verifying the same and, accordingly, delete the addition. Needless to say, the assessee be given an opportunity of hearing by following principles of natural justice.

In result, appeal of the assessee is allowed for statistical purposes.

The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order, HEMA KISHORE Digitally signed by HEMA KISHORE JAKKA JAKKA Date: 2026.10.30 11:42:01 +05'30' Assistant Registrar/Sr.PS/PS ITAT, Surat Bench