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Facts
During the demonetization period, Rs.72 lacs were deposited in the assessee's bank account. The AO accepted Rs.42 lacs as sale consideration and treated the rest as unexplained, adding Rs.30 lacs to the income.
Held
The Tribunal found no logic in the AO's arbitrary selection of Rs.42 lacs as sale proceeds, especially when the assessee's turnover was significantly higher and no defects were found in the books of account.
Key Issues
Whether the addition of Rs.30 lacs as unexplained credit is justified when the AO could not point out any defects in the books of account and arbitrarily selected a portion of the bank deposit as unexplained.
Sections Cited
143(2)
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
PHYSICAL HEARING O R D E R PER RAJPAL YADAV, VP
The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 18.09.2025 passed for assessment year 2017-18.
The solitary grievance of the assessee is assessee is that ld.CIT (Appeals) has erred in confirming the addition of A.Y.2017-18 2 Rs.30 lacs which was added by the AO on account of unexplained credits available in the bank account.
The brief facts of the case are that assessee has filed its return of income electronically on 31.03.2017. The case of the assessee was selected for scrutiny assessment by issuance of a notice u/s 143(2) on 26.09.2018. The AO has observed that during the demonetization period, a sum of Rs.72 lacs has been deposited on various dates in the Punjab National Bank of the assessee. He issued a Show Cause Notice to the assessee for explaining the source of deposit. It was contended by the assessee that partnership firm is engaged in selling of rice and its turnover during the year was Rs.10,39,62,888/-. The money deposited in the bank account represent the sale consideration. Without making any analysis, ld. AO has accepted that Rs.42 lacs can be considered as representing the sale consideration and rest is to be treated as unexplained.
Appeal to the ld. CIT (Appeals) did not bring any relief to the assessee.
ITA No.1421/CHD/2025 A.Y.2017-18 3
We fail to appreciate the fatuous exercise made by the AO, as there is no logic in the assessment order as to how he can identify that out of Rs.72 lacs, only Rs.42 lacs can be considered as sale proceeds of the rice. The turnover of the assessee is more than Rs.10.39 Cr. The AO has neither pointed out any defect in the books of account nor rejected the book results. The treatment made by the AO can only be termed as a high handedness while passing the assessment order. Therefore, we allow this appeal and delete the additions.
In the result, appeal of the assessee is allowed.
Order pronounced on 16.03.2026.