ADJ AGRI INTERNATIONAL LLP,RAJKOT vs. THE INCOME TAX OFFICER, WARD-1(1)(1), RAJKOT, RAJKOT

The relevant material facts, as culled out from the material on record, are as follows. The case of the assessee for the Assessment Year 2018-19 was reopened under section 147 of the Income Tax Act, 1961, based on information pertaining to financial transactions in the assessee's bank accounts. The specific reason for reopening was the detection of cash deposits aggregating to Rs. 20,25,800/- in accounts with City Union Bank Limited and The Lakshmi Vilas Bank Limited, coupled with cash withdrawals aggregating to Rs. 1,00,67,000/- from an account with City Union Bank Limited during the financial year 2017- 18. Consequently, a notice under section 148 was issued on 29.03.2022 and duly served upon the assessee, directing the filing of a return of income within the stipulated time. Concurrently, to independently verify the information on record, notices under Section 133(6) of the Act were issued to City Union Bank and DBS Bank India Limited (Laxmi Vilas Bank) on 06.10.2025, requiring submission of bank statements and related information by 10.10.2025. Both banks complied and furnished the requisite bank statements on 14.10.2025 and 16.10.2025, respectively. The statements so received corroborated the initial information pertaining to cash deposits during the relevant period.Upon perusal of the bank statement of City Union Bank, it was observed that the assessee's account reflected total deposits of approximately Rs.10,41,83, 162/- during the financial year. A significant portion of these receipts originated from a single entity, Milan Seeds Corporation (India).In view of the above, a notice under Section 133(6) of the Income-tax Act, 1961 was issued to Milan Seeds Corporation (India) on 06.10.2025, requiring the following information to be furnished by 10.10.2025. (1) Ledger account of M/s. ADJ Agri International LLP in their books for F.Y. 2017-18. (2) Nature of transactions/business relationship with the assessee. (3) Copies of invoices/bills relating to transactions during F.Y. 2017-18. (4) Mode and purpose of payments made to the assessee. (5) Confirmation of account as on 31.03.2018. (6) TDS details, if any, are deducted on such payments. (7) GST details, if applicable, relating to transactions with the assessee.

In response to the notice, the Milan Seeds Corporation (India), submitted its reply, which are summarised as under: (1) Ledger Account. The ledger account of M/s. ADJ Agri International LLP for F.Y. 2017-18 was furnished. It was submitted that the payments pertained to agricultural commodities purchased in the preceding year, with the corresponding payments being made during F.Y. 2017-18.

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer, therefore, further aggrieved by the order of Ld. CIT(A), the assessee is in appeal before this Tribunal.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the Ld. CIT(A) and other materials brought on record. Learned Counsel for the assessee argued that the assessee's account reflected total deposits of approximately Rs.10,41,83,162/- during the financial year, which was treated by the assessing officer, correct, however, a small addition to the tune of Rs.20,25,800/- was made by the assessing officer, which is not justified, considering the volume of deposits made in the bank account, which was treated by the assessing officer as genuine. The learned Counsel submitted that assessee is engaged in the business of trading in agricultural commodities where cash transactions are involved. Therefore, such a small amount of Rs.20,25,800/-, should not be treated by the assessing officer, as an unexplained deposits in the bank account, considering the fact that assessing officer has himself treated genuine deposits in the bank account to the tune Rs.10,41,83,162/-. The addition of Rs.20,25,800/- made by the Assessing Officer under section 69A of the Income tax Act, 1961 treating the cash deposits, as unexplained money, without appreciating that the assessee had fully explained the nature and source of the said deposits as re- deposits of cash earlier withdrawn from the same / related bank accounts, of Rs.1,00,67,000/-, and as the assessee, is engaged in the business of trading in agricultural commodities, where customers receive and pay cash only and the amount of Rs.20,25,800/-, was deposited by the assessee out of sale of agricultural commodities and earlier withdrawn from the same / related bank accounts, of Rs.1,00,67,000/-, therefore, addition made by the assessing officer may be deleted.

On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which I have already noted in my earlier para and is not being repeated for the sake of brevity.

I have considered the submissions of both the parties. I note that Section 69A applies where the assessee is found to be the owner of money, bullion, jewellery or other valuable article, such asset is not recorded in the books, and the assessee either offers no explanation regarding its nature and source or the explanation is not satisfactory in the opinion of the Assessing Officer. Therefore, once the assessee demonstrates, through contemporaneous records, that the impugned cash deposits represent either (i) cash sales duly recorded in the books, or (ii) redeposit of identifiable earlier cash withdrawals for which cash remained available, the statutory foundation for section 69A substantially weakens and addition should not be made by the assessing officer.In the present facts, the figure of Rs.1,00,67,000/- of earlier cash withdrawals is particularly relevant because it substantially exceeds the impugned deposits of Rs.20,25,800/-. The assessee is engaged in the business of trading in agricultural commodities, wherein cash transactions are an integral part of the business. The assessee has explained that the impugned cash deposits of Rs.20,25,800/- were sourced from cash generated from business receipts and, to the extent applicable, from cash earlier withdrawn from the same/related bank accounts. During the relevant period, cash withdrawals aggregating to Rs.1,00,67,000/- were made from the same/related bank accounts. Thus, the availability of cash was substantially higher than the amount subsequently redeposited. The assessee has furnished the relevant bank statements and supporting cash-flow details to demonstrate the availability and source of the cash. It is a settled principle that an addition under section 69A cannot be sustained merely because cash has been deposited in a bank account. The statutory requirement is that the assessee must be found to be the owner of money which is not recorded in the books and for which no satisfactory explanation regarding its nature and source is furnished. Where the assessee establishes, on the basis of bank statements, books of account and cash-flow records, that the cash deposits represent earlier withdrawals or disclosed business receipts, the explanation cannot be rejected merely on suspicion or The Ahmedabad Bench of the Tribunal in Gaurav Harshadbhai Chokshi v. ITO, ITA No.552/Ahd/2026, order dated 30.09.2026, accepted the explanation of cash deposits where earlier withdrawals from the same bank account exceeded the subsequent deposits. The Tribunal held that, in the absence of material establishing that the withdrawn cash had been utilised elsewhere, the availability of cash arising from documented withdrawals could not be ignored and deleted the addition under section 69A. Therefore, based on this factual position, I delete the addition of Rs.20,25,800/-.

In the result, appeal of the assessee is allowed.