NOOR AHMED,BANGALORE vs. INCOME TAX OFFICER, WARD-7(2)(1), BANGALORE

In this appeal, the assessee has raised the following grounds:

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and is engaged in the business of wholesale and retail distribution of eggs. For the year under consideration, the assessee filed his return of income on 11/10/2018, declaring a total income of INR 13,36,240. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was noted from the available records that the assessee had deposited substantial cash in various bank accounts during the year under consideration. Accordingly, the assessee was specifically asked about the same. However, the assessee did not respond to the notices issued under section 142(1) of the Act. Therefore, a show-cause notice was issued along with the draft assessment order, providing the assessee with a final opportunity to cooperate in the assessment proceedings. In response to the show-cause notice, the assessee submitted that it is engaged in the wholesale and retail distribution of eggs, and that the majority of its sales are on a cash basis. The assessee submitted that the deposits in the bank, amounting to INR 16,69,28,150, are solely dedicated to the sale of eggs. The assessee further submitted that during the year under consideration, he has declared a total turnover of INR 2,28,50,726, whereas the deposits in the banks are only to the extent of INR 16,69,38,150. The assessee submitted that the return of income was filed on the net income basis instead of the gross income basis. It was further submitted that all the details were provided to the Chartered Accountant, who suggested filing the return along with the tax audit report on a net income basis and prepared the statement of profit and loss account based on net income. The assessee submitted that, as he was unaware of the accounting treatment, he relied solely on the Chartered Accountant. It was further submitted that the bills for purchases and sales can also be furnished, and due to the Covid 19 pandemic lockdowns, he is facing difficulty in collating the same. Accordingly, the assessee requested that time be granted in view of the lockdown. After filing the aforesaid reply, the assessee submitted sample bills for sale and requested further time to furnish the balance details. From the perusal of the details filed by the assessee, it was observed that in the original profit and loss account, sales have been declared at INR 2,28,50,726, which was well below the cash deposited by the assessee in the bank account. Further, it was noticed that the sales bills account for only INR 75.63 lakh. However, the sales are more than INR 2 crore as per the original profit and loss account and more than INR 24 crore as per the revised profit and loss account. Since, despite grant of multiple opportunities, the assessee remained non- compliant and did not furnish the requisite details, the cash deposited by the assessee amounting to INR 16,69,38,150, during the year under consideration was considered as unexplained money under section 69A of the Act and added to the total income of the assessee by the Assessing Officer (“AO”), vide order dated 11/08/2021 passed under section 143(3) read with section 144B of the Act.

The learned CIT(A), vide impugned order, after taking into consideration the additional evidence filed by the assessee and the remand report submitted by the AO, held that despite the deficiencies in the documents pointed out to the assessee during the assessment proceedings, the assessee did not provide these documents and submitted only purchase confirmations from third parties. The learned CIT(A) noted that in the remand report, the assessee’s submissions were not found acceptable as the documents furnished by the assessee did not suggest cash sales to the tune of INR 16,69,28,150. Accordingly, the learned CIT(A) dismissed the appeal filed by the assessee and upheld the addition made by the AO under section 69A of the Act on the basis that the assessee has not furnished the requisite documents to substantiate his claim of cash sales despite ample opportunity. Regarding the purchase confirmation furnished by the assessee, the learned CIT(A) held that the same does not indicate that purchases from the assessee were made in cash. Thus, the learned CIT(A) held that the cash deposits in the guise of sales remain unjustified. Being aggrieved, the assessee is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. In the present case, on account of large cash deposits in the bank account of the assessee, the return filed by the assessee was selected for scrutiny. It was noted that the assessee has deposited cash amounting to INR 16,69,38,150 into his bank account. As per the assessee, the said cash deposit is solely towards the sale of eggs, as he is the wholesale and retail distributor of eggs. It is evident from the perusal of the record that the assessee, apart from submitting sample bills for sale, could not furnish complete details. As per the assessee, since the assessment proceedings were conducted during the Covid-19 pandemic period and due to the lockdown, the assessee could not furnish the requisite details. We find that notices under section 142(1) of the Act were issued to the assessee on 11/06/2021, 14/07/2021, 23/07/2021, and 02/08/2021. Ultimately, the assessment was completed vide order passed on 11/08/2021. Therefore, it is evident that the entire assessment proceedings were conducted during the Covid 19 pandemic period, and thus it can be reasonably presumed that, due to the aforesaid reason, the assessee was prevented from furnishing the requisite details. However, it is evident from the record that during the appellate proceedings before the learned CIT(A), the assessee filed additional evidence and a remand report from the AO was sought in respect thereof. The learned CIT(A) held that the perusal of confirmations/ledger submitted by the assessee does not indicate that the purchases were made in cash.

During the hearing, the learned Authorised Representative (“learned AR”) reiterated the submissions made before the lower authorities and submitted that the entire cash deposit of INR 16,69,38,150 was on account of sales from eggs. The learned AR submitted that the assessee has a turnover ranging from INR 23.93 crore to INR 33.57 crore in the assessment years 2019-20 to 2023-24. In this regard, the assessee furnished the following details: –

Thus, the learned AR submitted that the cash deposited in the bank account is nothing but out of the sales of eggs and due to certain discrepancies, the details could not be reconciled before the lower authorities. The learned AR submitted that during the year under consideration, the assessee had total sales of INR 24,35,19,330. The learned AR submitted that, as the assessee could not reconcile his total turnover with the sales made during the year under consideration, an addition was made in his hands. The learned AR undertook that, given an opportunity, the assessee will furnish the requisite reconciliation and prove the cash deposits from sale of eggs.

Having considered the submissions and perused the material available on record, we deem it appropriate to grant one more opportunity to the assessee to substantiate his claim of cash deposits from sales of eggs. Accordingly, in the interest of justice and fair play, we restore the matter to the file of the AO for de novo adjudication, with a direction to the assessee to furnish the requisite details in support of his case. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. As the matter has been restored to the file of the AO for consideration afresh, we direct the assessee to fully cooperate in the assessment proceedings and furnish any other details as may be sought by the AO. With the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 26-Oct-2026.