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Facts
The assessee, a partnership firm dealing in edible oils, deposited Rs. 50,25,000 in cash during the demonetization period. The Assessing Officer (AO) added Rs. 38,25,000 to the assessee's income as unexplained cash, disallowing it for lack of documentary proof like cash book and sales register for the cash balance as on 8.11.2016.
Held
The Tribunal noted that the assessee's books were audited and no discrepancies were found by the CA or AO. However, the assessee failed to provide adequate documentary evidence to explain the cash deposits. Consequently, the Tribunal remitted the entire issue back to the AO for fresh adjudication, granting the assessee an opportunity to present necessary documents.
Key Issues
Whether the addition of cash deposits as unexplained income by the AO, without sufficient documentary evidence from the assessee, is justified, and whether the matter should be remitted back to the AO for further examination.
Sections Cited
250, 143(2), 142(1), 69A, 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC’ BENCH: BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of ld. CIT(A)/NFAC dated 3.2.2025 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1072845971(1) passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”) for the assessment year 2017-18.
The assessee has raised the following grounds of appeal:
Sri Gururaja Traders, Bangalore Page 3 of 6 3. Brief facts of the case are that the assessee being a partnership firm filed its return of income for the assessment year 2017-18 on 31.10.2017 declaring total income of Rs.2,22,670/- under the head Profits & Gains of Business & Profession (“PGBP”). Thereafter, the return was processed by the CPC and the case was also selected for scrutiny through CASS. Accordingly, notices u/s 143(2) as well as 142(1) of the Act were e-mailed and served on the assessee electronically requesting to furnish the details. The assessee had not complied fully to the notices issued as observed by the AO. During the course of assessment proceedings, the AO noticed that assessee had made cash deposit during the demonetization period to the tune of Rs.50,25,000/- in State Bank of India bearing Account No.64129529238. The assessee submitted that the cash balance as on 8.11.2016 was Rs.53,02,225/-. However, the AO noted that the assessee had not provided any documentary proof like cash book, sales register, etc. to prove that the cash in hand as on 8.11.2016 was Rs.53,02,225/-. As the explanation offered by the assessee that the cash deposit is out of the sales during the demonetization period and savings of earlier years and also not furnished the denominations of cash deposits into the bank account, a sum of Rs.12 lakhs deposited on 10.11.2016 and 11.11.2016 immediately after the announcement of demonetization was allowed by the AO as the assessee’s cash in hand as on 8.11.2016 and the balance amount of Rs.38,25,000/- was treated as unexplained money out of the total cash deposited amounting to Rs. 50,25,000/- and added back u/s 69A of the Act as income of the assessee firm.
Aggrieved by the order of AO, the assessee firm went in appeal before the ld. CIT(A)/NFAC.
The ld. CIT(A)/NFAC dismissed the appeal of the assessee firm with the following observations:
“6. Decision: I have considered the facts of the case, written submission and case laws relied upon by the appellant as against the observations and findings of the AO in the assessment order. The submissions and contentions of the appellant are discussed and decided as under:
6.1 Grounds No.1,2,3&4: In this ground the appellant has challenged the addition worth Rs. 3825000 on account of cash deposited during demonetization period. The appellant could not explain the source of cash deposited in the bank accounts along with the evidences and hence AO made the addition.
6.1.1 Now before me in the appellate proceedings, the appellant has filed written submission. The appellant has stated that its accounts have been audited u/s 44AB of the Income Tax Act. It has been further mentioned that the cash is out of cash sales by the appellant and the same has been shown in the profit and loss account. The appellant has also relied upon the decisions of various courts and tribunals. During the course of assessment proceedings, it has been mentioned by the AO that the purchase and the sales register along with the cashbook and other evidences were not produced to explain the source of the cash. Even before me the appellate proceedings, no effort has been made by the appellant to produce the purchase and the sales register along with the bills and vouchers to explain the source of the cash. The appellant argues before me that all the cash deposits are explained, but no effort has been made to explain the source of the cash deposits before me in the appellate proceedings. The appellant has relied upon the decision of Hon'ble jurisdictional tribunal, but the above decision cannot be applied here as in that case cash receipts were treat as part of the sales. Here in the absence of any evidence and supporting details, It cannot be held that the cash deposits are part of the sales and the turnover. Hence the addition of the AO is confirmed and appeal of the appellant is dismissed. 6.1 Grounds 5 to 10: These grounds are consequential in nature.
The appeal of the appellant is dismissed.”
Again, aggrieved by the order of ld. CIT(A)/NFAC, the assessee is in appeal before us. The assessee has also filed paperbook comprising 247 pages containing therein various documents/record along with the various decisions relied upon by the assessee firm.
7. Before us, ld. A.R. of the assessee vehemently submitted that assessee Sri Gururaja Trades is a partnership firm and deals in Sri Gururaja Traders, Bangalore Page 5 of 6 Edible Oils. The books of accounts were audited by a Chartered Accountant as per the provisions of section 44AB of the Act and no discrepancies were found out either by the CA or by the AO. The AR submitted that the AO purely based on guess and surmises had disallowed the cash deposits of Rs.38,25,000/- u/s 69A of the Act by observing that the assessee has not produced the cash book as well as sales register to prove the cash in hand as on 8.11.2016 and accordingly prayed that this limited issue may be remitted to the file of AO to examine the cash book & Sales register.
Ld. D.R. on the other hand supported the orders of the authorities below.
We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee is a partnership firm and engaged in the business of purchase and sale of edible oils and also acts as an agent for the principals. The books of accounts of the assessee have been audited by a CA u/s 44AB of the Act and no deficiency had either been pointed out by the CA or by the AO. While concluding the assessment, the AO out of the total cash deposits of Rs. 50,25,000/- given credit of Rs.12 lakhs deposited on 10.11.2016 and 11.11.2016 and added the balance amount Rs.38,25,000/- u/s 69A of the Act on the ground that assessee had not provided cash book, sales register, etc. to prove the cash in hand as on 8.11.2016 was at Rs.53,02,225/-. The assessee during the course of assessment proceedings had submitted that the cash deposit of Rs.50,25,000/- in SBI was out of the sales during the demonetization period as well as earlier years’ savings. Before us, the ld. A.R. of the assessee requested that the case may be remitted to the file of AO to examine these facts and undertakes to submit the cash book, sales register as well as other documents/records to substantiate its claim. This Sri Gururaja Traders, Bangalore Page 6 of 6 being so, in the interest of justice and fair play and as requested by the ld. A.R. of the assessee, we deem it fit and proper to remit the entire issue to the file of AO to decide afresh in accordance with law. Needless to say, a reasonable opportunity of hearing must be granted to the assessee. The assessee is also directed to produce all the necessary documents/records/accounts/statements in support of its claim and should not take unnecessary adjournments. It is ordered accordingly.
In the result, appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 11th Sept, 2025