INCOME TAX OFFICER, DINDIGUL vs. KRISHNASAMY KARTHIKEYAN, DINDIGUL

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the Revenue against the order of the

Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter

referred to as “the Ld.CIT(A)”), Delhi, dated 25.08.2025 for the

Assessment Year (hereinafter referred to as "AY”) 2018-19.

Ld.CIT(A) deleting the addition without calling for Remand Report from

the AO.

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information that assessee had deposited cash including bearer-cheque in

bank account maintained with State Bank of India (SBI) to the tune of

₹1,09,80,930/- and had withdrawn cash of ₹2,83,500/-; and also that the

assessee didn’t file return of income (RoI/ITR) for the relevant

assessment year 2018-19. So, he reopened the assessment of the

assessee and issued notice u/s.148 of the Income Tax Act, 1961

(hereinafter referred to as "the Act”) Pursuant to the notice, the assessee

is noted to have filed RoI declaring ₹4,44,110/- and remitted tax. The AO asked the assessee to prove the nature and source of the cash

deposits/withdrawals from the bank account maintained with SBI. The

assessee replied that he is into the business of trading milk which he

purchases from farmers in & around Madutukulam Village and thereafter

selling the same from his retail store and claimed milk sale of

₹1,12,60,840/- and declared profit of ₹5,14,110/- and paid tax of

₹15,550/-. He also brought to the notice of the AO that he is currently

got in to a contract with M/s.Numax Foods Pvt. Ltd., for sale of Milk and

dairy products. The AO acknowledged that the assessee had filed copy of

ITR & Form 26AS, but noted that assessee neither filed the bank account

statement nor any relevant documents in support of his reply filed by

him. Therefore, the AO was of the view that the assessee couldn’t explain

the source of the cash deposits as well as the cash withdrawal, so he

ITA No.2959/Chny/2025 (AY 2018-19) Krishnasamy Karthikeyan :: 3 ::

made addition of ₹1,09,80,930/- u/s.69A of the Act [unexplained money]

and ₹2,83,500/- u/s.69C of the Act [unexplained expenditure]. Thus,

made a total addition of ₹1,17,08,540/- in place of Returned Income of

₹4,44,110/-. Aggrieved, the assessee preferred an appeal before the

Ld.CIT(A) who is noted to have issued various notices of hearing u/s.250

of the Act to the assessee and elicited response from the assessee which

fact is discernable from reading of Para No.5 of the impugned order, and

thereafter, the Ld.CIT(A) has found that the assessee is an un educated person who has studied only up to 8th standard and is engaged milk

trading business in his Madutukulam Village and is a small businessman.

The Ld.CIT(A) found that the assessee used to purchase milk from

farmers in & around his village and sell only milk & dairy products through

his retail-outlet to customers on cash basis. The Ld.CIT(A) was of the

view that the assessee didn’t file the return being an illiterate person.

Further, Ld CIT(A) noted that the assessee on receipt of notice u/s.148 of

the Act had filed his return and also the statement of accounts for the

period from 01.04.2017 to 31.03.2018, reflecting turnover of milk sales at

₹1,12,60,840/-, and declared net-profit of ₹5,14,110/- and paid tax on it,

which net profit @4.5% of the turnover from sale of milk in rural area is

reasonable. The Ld.CIT(A) has noted that the AO didn’t dispute the

assessee’s claim that he is engaged in milk trading business and it is

common knowledge that such business is carried out on cash basis, which

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assessee deposit regularly in the bank, which fact Ld.CIT(A) ascertained

from perusal of the statement of accounts which assessee produced. The

Ld.CIT(A) after perusal of relevant material, being satisfied with the

explanation of the assesse, held that the assessee was in the business of

retail milk trading; and that the source of cash deposits was from the

retail sale of milk; and that assessee has shown reasonable net-profit

from the milk business. In the back-drop of these factual finding, the Ld CIT(A) held that assessee was able to prove the nature and source of the

cash deposits as well as the withdrawals, and hence was of the view that

additions made by the AO u/s.69A/69C of the Act was unwarranted in the

given facts and circumstances of the case and directed deletion of the

same.

assessee is in the business of purchase and sale of milk and dairy

products. The assessee didn’t file ITR for the relevant year. The AO

received information that assessee had deposited cash including bearer-

cheque in bank account maintained with State Bank of India (SBI) to the

tune of ₹1,09,80,930/- and had withdrawn cash of ₹2,83,500/-. Hence

the AO re-opened the assessment by issuing notice u/s.148 of the Act.

Pursuant to it, assessee filed ITR declaring ₹4,44,110/-. The AO asked the

ITA No.2959/Chny/2025 (AY 2018-19) Krishnasamy Karthikeyan :: 5 :: assessee to prove the nature and source of the cash deposits as well as

withdrawal from the bank account maintained with SBI. And the assessee

replied that he is into the business of trading milk which he purchases

from farmers in & around Madutukulam Village and thereafter sells the

same from his retail store and declared milk sale of ₹1,12,60,840/-, from

which activity declared profit of ₹5,14,110/-. Thus the assessee explained

that nature & source of deposit/withdrawals was from his business of

trading in milk and dairy products. The AO was not satisfied with the reply

of the assessee and held that the assessee failed explain the nature &

source of the cash deposits as well as the cash withdrawal. So he made

addition of ₹1,09,80,930/- u/s.69A of the Act [unexplained money] and

₹2,83,500/- u/s.69C of the Act [unexplained expenditure]. Thus, made a

total addition of ₹1,17,08,540/- in place of Returned Income of

₹4,44,110/-. On appeal, the Ld.CIT(A) is noted to have issued various

notices u/s.250 of the Act to the assessee and elicited response from the

assessee which fact is discernable from reading of Para No.5 of the

impugned order, wherein, the Ld.CIT(A) is noted to have called for inter-

alia proof of assessee’s business, and in response, the assessee has filed

various details/documents called for by him including the statement of

accounts for the period from 01.04.2017 to 31.03.2018 and thereafter,

the Ld.CIT(A) has found that the assessee is an un educated person who has studied up to 8th standard and is a small businessman engaged in

ITA No.2959/Chny/2025 (AY 2018-19) Krishnasamy Karthikeyan :: 6 ::

milk trading business in his Madutukulam Village; and that being an

illiterate person he didn’t file his return. And the Ld CIT(A) noted that the

assessee on receipt of notice u/s.148 of the Act had filed his return and

also the statement of accounts for the period from 01.04.2017 to

31.03.2018, reflecting turnover of milk sales at ₹1,12,60,840/-, and

declared net-profit of ₹5,14,110/- and paid tax on it. The Ld.CIT(A) is

noted to have accepted that assessee is in to business of purchase & sale

of milk & dairy products through his retail-outlet on cash basis and was of

the view that net profit @4.5% of the turnover from the retail sale of milk

in rural area, is reasonable. According to the Ld.CIT(A), the AO didn’t

dispute the assessee’s claim that he was engaged in milk trading business

and having ascertained that assessee is in to business of milk trading, he

accepted that such business is cash based business and which involves

daily cash collection from retail sales and corresponding deposit into the

bank. Thus, the Ld.CIT(A) has found that the source of cash deposits in

his SBI bank account was from the retail sale of milk & dairy products.

And in respect of the withdrawal, the Ld.CIT(A) has found that the same

was from the cash deposits made in the SBI account, basis which the Ld

CIT(A) found that nature & source of cash deposit/withdrawals was from

his trade/sale realization, which explanation of assessee is noted to be

supported by relevant material produced by the assessee. Considering the

material on record, we concur with the Ld CIT(A) that nature & source of

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cash deposit/withdrawals was from his trading activity of purchase & sale

of milk & dairy products. The assessee is noted to have discharged the

burden of proof to prove the nature & source of cash deposit/withdrawals.

Based on the material on record, we find merit in the Ld CIT(A) deleting

the addition made u/s.69A of the Act, which action we uphold. Coming to

the deletion of addition u/s 69C of the Act of an amount of ₹2,83,500/- ,

the Ld.CIT(A) has found that the same was from the cash deposits made

in the SBI account, which fact couldn’t be countered by Revenue.

Moreover, it is not the case of the AO that the assessee has purchased

anything other than milk or dairy products. In such a scenario, the action

of the Ld.CIT(A) deleting addition u/s 69C of the Act of an amount of

₹2,83,500/- doesn’t call for any interference, which we concur.

or perversity in the impugned action of Ld CIT(A) warranting any

interference. Hence, we confirm the action of Ld CIT(A) and dismiss the

appeal of the Revenue.

contended that the Ld.CIT(A) ought to have called for Remand Report,

but a reading of the impugned order doesn’t show that the assessee

produced any new evidences which he hasn’t adduced before the AO.

Rather, a reading of the impugned order reveals that the Ld.CIT(A) has

ITA No.2959/Chny/2025 (AY 2018-19) Krishnasamy Karthikeyan :: 8 :: called for and has elicited information, documents, etc., which if the assessee adduced can’t attract Rule 46A of the Income Tax Rules, 1962 and therefore, such contention/ground of the Revenue is rejected. 8. In the result, appeal filed by the Revenue is dismissed.

Order pronounced on the 13th day of March, 2026, in Chennai.

Sd/- Sd/- (प�ावती .एस) (एबी टी. वक�) (PADMAVATHY. S) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 13th March, 2026. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

TUMMALA Digitally signed by TUMMALACHARL CHARLA A LAKSHMI LAKSHMI NARAYANA Date: 2026.03.16 NARAYANA 12:01:56 +05'30'