SHANTILAL JAIN(HUF),BANGALORE vs. ACIT, CIRCLE-2(2)(1), BANGALORE

Along with the appeal, the assessee has filed an application seeking condonation of delay duly supported by the affidavit of Karta of the HUF. As per the assessee while filing its appeal before the learned CIT(A), the email address of previous Karta was provided, who had already expired prior to filing the appeal before the learned CIT(A). In the aforementioned application, it is further submitted that during the time of filing the appeal there was ongoing family disputes between the co-parcerners, and therefore, the consultant did not have instructions on the new Karta and he entered the earlier email address. As per the assessee, since the earlier email address was no longer in use and no new email address was updated due to inadvertence, the same lead to non- compliance with the notices issued by the learned CIT(A) during the appellate proceedings. It is further submitted that on 16/06/2025, when notice pertaining to penalty proceedings were served on the assessee, it approached the Chartered Accountant, and thereafter, it was realised that the appeal filed before the learned CIT(A) has been dismissed. Accordingly, the Chartered Accountant advised the assessee to file the appeal before the Tribunal, and necessary steps were taken thereafter in this regard. Therefore, it has been submitted that the aforesaid circumstances resulted in delay in filing the present appeal.

Having considered the submissions and perused the material available on record, we find that there was sufficient cause which prevented the assessee from filing the present appeal within the prescribed limitation period. Accordingly, we condone the delay and proceed to decide the present appeal on merits.

The learned Assessing Officer is not justified in law in making an addition a sum of Rs. 84,57,143/- under section 68 of the Act on the facts and circumstances of the case.

The learned Assessing Officer passed the assessment order in violation of principles of natural justice on the facts and circumstances of the case.

The learned Assessing officer was not justified in law and in fact in not considering the cash sales of the appellant, which was the source of the cash deposit, on the facts and circumstances of the case.

The brief facts of the case are that the assessee is a HUF, and a proprietor of Mahaveer Fashions, which was in the business of wholesale and retail trading of textile. For the year under consideration, the assessee filed its return of income on 30/10/2017, declaring a total income of INR 23,80,150. 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 observed that the assessee deposited cash amounting to INR 2,21,20,670 in its bank account out of which INR 99,21,500 was deposited during the demonetisation period. Accordingly, the assessee was asked to explain the same. In response, the assessee submitted that it has two types of amount collection criteria with regard to sale made, i.e. cash and bank. It was further submitted that as per the nature of business, the assessee collects cash from the customers for the sales made and after withholding cash for day-to-day expenses, the balance amount is generally deposited in the bank account. The assessee submitted that in the financial year 2015-16, the same trend of cash sales and cash deposit into Bank account was followed. Furthermore, the assessee submitted that in the relevant financial year, i.e. 2016-17, its turnover increased from INR 5,44,57,456 to INR 7,85,39,449, especially in the festival season in the month of June, October and December 2016. Accordingly, it was submitted that the cash deposited also increased during the year. In support of its claim, the assessee furnished copies of VAT returns and sample purchase and sale bills.

The Assessing Officer (“AO”), vide order dated 20/12/2019 passed under section 143(3) of the Act, disagreed with the submissions of the 41% and such increase in the turnover appears to be unrealistic. Accordingly, the AO allowed 30% increase in the turnover and held the remaining 11% to be unsubstantiated turnover. Accordingly, the AO made an addition of INR 84,57,143 as unexplained cash credit and taxed the same under section 68 of the Act.

Having considered the submissions of both sides and perused the material available on record, we find that the AO, during the assessment proceedings, though asked the assessee to explain the cash deposited during the demonetization period, however, made the impugned addition under section 68 of the Act only by partly accepting the turnover of the assessee to an extent of 30% out of 41%. As is evident from the record, the AO did not dispute any of the factual evidence furnished by the assessee. On the other hand, it is evident from the record that the assessee furnished copies of VAT returns and sample purchase and sales bills, during the assessment proceedings. Further, in the present appeal also the assessee has furnished the Tax Audit Report along with its financials for the year under consideration as well as preceding and succeeding years. On the basis of the aforesaid documents, it is the plea of the assessee that even though its turnover, during the year under consideration, increased by 41%, however its gross profit only increased from 7.39% to 8.04% and the net profit reduced from 3.55% to 3.17% in the year under consideration as compared to the preceding year.

Such being the facts, we do not find any merit in the impugned addition made under section 68 of the Act by ad-hoc accepting the partial turnover of the assessee. Accordingly, the impugned addition made under

In the result, the appeal by the assessee is allowed.