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Facts
The assessee, a milk distributor, deposited Rs. 1,17,71,000/- in his bank account during the demonetization period. The Assessing Officer treated this as unexplained cash credit under Section 69A and made an addition. The CIT(A) upheld the addition.
Held
The Tribunal held that the assessee had substantiated the source of the cash deposits with documentary evidence, including bank statements and ledger accounts, showing it was from the sale of milk and used for purchasing milk. The lower authorities failed to properly examine this evidence.
Key Issues
Whether the cash deposits made during the demonetization period were unexplained cash credits or represented legitimate business income supported by evidence.
Sections Cited
69A, 143(3), 115BBE, 271AAC, 44AB
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Income Tax Appellate Tribunal, “G” BENCH MUMBAI
Before: SMT. BEENA PILLAI & SHRI GIRISH AGRAWAL
Assessment Year: 2017-18 Santosh Bhairu Bhilare Assessing Officer, 10/60 Kamathipura, Mumbai 5th Lane, Mumbai Central, Vs. Mumbai – 400008 (PAN: AIVPB3382M) (Appellant) (Respondent) Present for: Assessee : Shri Vinay Chopda, CA Revenue : Shri Arun Kanti Datta, CIT DR Date of Hearing : 01.07.2025 Date of Pronouncement : 28.08.2025 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of CIT (A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2024-25/1065661493(1), dated 14.06.2024 passed against the assessment order by WARD 20(3)(2), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 20.12.2019, for Assessment Year 2017-18.
Grounds taken by the assessee are as under: “The learned Assessing Officer is not justified in estimating the income of Rs. 1,17,71,000/- as part of the total income of the appellant for the Assessment Year 2017- 18 by treating the same as unexplained cash credit under Section 69A of the Income Tax Act, 1961. The total assessed income has been taxed under Section 115BBE of the Act at a rate of 60%, and penalty proceedings have been initiated under Section 271AAC in respect of the alleged unexplained income. The appellant has provided sufficient evidence to substantiate the source of these cash deposits, including:
Santosh Bhairu Bhilare AY 2017-18 The ledger account from Amul reflecting purchases made during the relevant financial year, and A copy of the bank statement detailing cash deposits and corresponding payments made during the period in question. It is pertinent to note that the typical commission earned on the purchase value of milk is approximately 3%, with a net commission margin of only 0.5% to 1% after accounting for business-related expenses. Given the appellant’s limited sources of income and low profit margins, I humbly request Your Lordship to take a lenient view of this matter. I am willing to provide any additional information or documents required during the appellate proceedings. Furthermore, I sincerely request that the Hon'ble Tribunal kindly condone the delay in filing this appeal before the ITAT, as the delay was due to my limited knowledge of financial and taxation matters. The appellant humbly prays that the above grounds of appeal may kindly be allowed and the addition made by the Assessing Officer and confirmed by the CIT(A) be deleted.”
3. The issue involved in the present appeal is in respect of addition made towards deposit of cash amounting to Rs.1,17,71,000/- in the bank account during the demonetization period, by applying provisions of section 69A.
Brief facts of the case are that assessee filed his return of income on 06.02.2018 reporting total income at Rs.3,99,330/-. On the basis of data analytics and information gathered during the phase of online verification under “operation clean money”, department gathered list of assesses who had deposited substantial cash in bank accounts during the demonetization period. Based on this, ld. Assessing Officer noted that assessee had deposited total cash of Rs.1,19,85,000/- in his bank account with Dattatraya Maharaja Kalambe Jaoli Sahakari Bank Ltd. (DMK Jaoli Bank), Maulana Azad Road, Near Round Temple, Mumbai with current bank account No. 002010000002350. Ld. Assessing Officer had issued notice u/s.133(6) to the said bank calling for the bank statement. Assessee was also called for the required information and details in respect of deposit of cash in his aforesaid bank account. Ld. Assessing Officer records in his assessment order that assessee 4.1. According to the ld. Assessing Officer, assessee has deposited cash in his bank account during the demonetization period, which appears in the bank statement called by him from the bank by issuing notice u/s.133(6) but such cash deposits are not recorded in the books of accounts of the assessee and not offered to tax. He also observed that nature and source of such deposits made in the bank account are not explained by the assesse. He thus, completed the assessment by holding the deposit of cash of Rs.1,17,71,000/- as un-explained money u/s.69A
Before the ld. CIT(A), it was contended that assessee had submitted profit and loss account of the business concern in the name and style of Bhilare Brothers Dairy Farm, of which assessee is the proprietor. Sales reported in the profit and loss account are at Rs.8,91,00,423/-. However, no details in respect of such sales has been furnished including tax audit report, sales register, GST return, sales bill, cash register, list of customers to whom cash sales were made, etc. Ld. CIT(A) thus, observed that assessee has not discharged his primary burden of explaining the source of cash deposits during the demonetization period. He thus, dismissed the appeal of the assessee by observing that assessee is not willing to cooperate with the appellate authority and thus, sustained the addition so made by ld. Assessing Officer. Aggrieved, assessee is in appeal before the Tribunal.
Before us, ld. Counsel for the assessee contended that assessee is a distributor for Amul milk, carrying his business in the proprietary Santosh Bhairu Bhilare AY 2017-18 concern in the name and style of Bhilare Brothers Dairy Farm. Ld. Counsel submitted that assessee has placed on record, copy of his bank statement to demonstrate the business transactions undertaken by him. Assessee maintains books of accounts which are audited under Section 44AB of the Act. The deposit of cash pertains to the milk distribution business, for which the cash is collected and then the same is paid to Gujarat Cooperative Milk Marketing Federation Ltd. (GCMM). The source of the said cash was explained as arising out of business receipts duly recorded in the books of accounts. Necessary documentary evidences, including the Bank Statement, Amul Ledger etc, were submitted.
6.1. Assessee submitted that as per the procurement policy of Gujarat Cooperative Milk Marketing Federation Ltd (Amul), he is required to make advance payments on a daily basis via bank transfer to purchase milk and other related products. Accordingly, cash generated from day- to-day cash sales is deposited into the bank account, and subsequently transferred to Amul to settle daily purchase invoices. The profit margin in this line of business is nominal, usually ranging between 1% to 1.5%, as the maximum retail price (MRP) of the products already factors in the margins of both wholesalers and retailers. Moreover, he has to incur additional administrative and operational expenses to run the business, further reducing net profits.
6.2. Assessee contended that net profit from the business, even after considering these sales, is very low of Rs.4,31,695/- and the books are audited which include: a) The ledger account of Amul, evidencing purchases made,
Ld. DR placed on record a written submission reiterating the stance taken by the authorities below. He acknowledged the nature of business but disputed on the inadequate explanation given by the assessee on the source of cash which was deposited in the bank during demonetization period. Detailed written submission has been perused.
We have heard the rival contentions and perused the material placed on record. Fact of the matter is that assessee is carrying on milk distribution business, the cash deposits in the bank account were received from sale of milk and the same has been used to make payment towards purchase of milk to Gujarat Co-operative Milk Marketing Ltd. (GCMM) by way of cheque/demand draft as reflected in the bank statement of the assessee. On the other hand, the learned Departmental Representative supported the order passed by the CIT(A) and placed reliance on the order passed by the AO and the CIT(A). On perusal of the material on record, we find that assessee furnished all the documents as filed before the CIT(A) which support the averments made by him. Cash book and bank statement of the assessee for the relevant financial year and the ledger account of purchases made from GCMM show that assessee had deposited cash from sale of milk in the bank account which was used to make payments for purchase of milk from GCMM.
8.1. In our view, by furnishing the aforesaid documents/details assessee substantiated the stand taken. However, ld. CIT(A) did not deal with documents/details furnished and failed to either carry out any Santosh Bhairu Bhilare AY 2017-18 inquiry/verification into purchase/sale of milk to controvert the averments so made or to point out any infirmity in the aforesaid documents/details.
8.2. Notification No. S. O. 3408(E) provided that specified bank notes would continue to be legal tender for purchase of milk at GCMM. Assessee provided explanation about the source and nature of cash deposited in the bank account as cash received from sale of milk in the normal course of business. Accordingly, in the facts and the circumstances of the present case, addition of Rs.1,17,71,000/- made by the ld. AO under s. 69A of the Act is deleted. Grounds raised by the assessee are allowed.
In result, appeal by the assessee is allowed. Order is pronounced in the open court on 28th August, 2025