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Facts
The assessee, a wholesaler of food grains and oil, filed a return for AY 2017-18. The AO initiated scrutiny due to large cash deposits during demonetisation and added Rs. 49,99,000/- as unexplained money under Section 69A, as the assessee failed to provide satisfactory explanation.
Held
The Tribunal noted that the assessee's cash sales consistently formed 75-80% of total sales in preceding years and that the current year's deposit was less than the deposit in the prior year. Thus, the Tribunal found the deposit not to be exorbitant or unjustified.
Key Issues
Whether the addition of Rs. 49,99,000/- as unexplained money under Section 69A of the Income Tax Act was justified given the assessee's business pattern and deposit amounts in prior periods.
Sections Cited
250, 143(1), 69A, 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 07.10.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
In this case, the Assessee being an individual engaged in the business of wholesaler food grains and oil, had filed his return of income at Rs.11,46,430/-on dated 13.12.2017, which was initially processed u/s 143(1) of the Act, however, subsequently selected for scrutiny through CASS to verify (large value cash deposit during demonetisation period). The Assessing Officer (AO) by observing that the Assessee during the demonetisation period had deposited Rs.49,99,000/- in account No.CC/365 maintained with Bassein Catholic Co-operative Bank in old currency i.e. Rs.1000/- and Rs.500/- specified from the bank show caused the Assessee, in response to which the Assessee neither complied with nor furnished any details. Thus, considering the peculiar facts and circumstances of the case, the AO by observing “that though the Assessee has maintained books of account but not audited the same and filed within the due date and also could not offer satisfactory explanation about the nature and source of these deposits and credits and therefore considering the value of cash deposits in old currency to the tune of Rs.16,99,000/- (Rs.49,99,300/- – Rs.33,00,000/- deposited on 03.11.2016) as opening cash balance as on 08.11.2016”, treated the said amount as deemed un-explained money u/s 69A of the Act and added the same to the total income of the Assessee.
The Assessee, being aggrieved, challenged the said addition before the Ld. Commissioner, however, of no avail, as the Ld. Commissioner affirmed the aforesaid addition by dismissing the appeal of the Assessee.
The Assessee, before this Court, has explained that during the A.Y. 2015-16, 2016-17, 2017-18 & 2018-19 the Assessee has made following sales/cash sales and the amounts deposited in cash are as under:
Asses Sales Cash Sales % of Cash Cash % Cash sment Year Sales to Deposits Deposit Total Sales to Total Sales 2015-16 18,43,47,003 14,97,59,423 81.24% 14,79,43,925 80.25% 2016-17 23,14,93,548 18,72,62,042 80.89% 18,53,88,043 80.08% 2017-18 25,64,07,724 19,47,46,186 75.95% 19,11,10,859 74.53% 2018-19 26,17,08,490 19,61,28,300 74.94% 18,59,21,492 71.04%
On the other hand, the Ld. D.R. refuted the claim of the Assessee.
Heard the parties and perused the material available on record. This Court has given thoughtful considerations to the peculiar facts and circumstances of the case and convinced by the claim of the Assessee that more or less the Assessee is doing transactions of cash sales to the extent of approximately 75% to 80% and during the immediately preceding year, specifically in the month of November 2015, the Assessee had deposited Rs.94,02,122/-, whereas in the November of instant assessment year, the Assessee had deposited Rs.86,05,320/- only, which is below than the amount deposited in earlier year and thus the amount deposited which is in controversy cannot be considered as exorbitant and/or unreasonable and/or unjustified and therefore this Court is unable to sustain the addition made by the AO and affirmed by the Ld. Commissioner. Consequently, the addition made by the AO is deleted.
In the result, the appeal filed by the Assessee is allowed.
Order pronounced in the open court on 28.04.2025.