ITO, WARD-1(1)(3), DEHRADUN, DEHRADUN vs. TRISHLA STEEL PVT LTD, DEHRADUN

PER S. RIFAUR RAHMAN, AM

The Revenue has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, New Delhi [“Ld.
CIT(A)”, for short] dated 30.07.2025 for the Assessment Year 2017-18. 2. The brief facts of the case are, the assessee filed its return of income for the assessment year 2017-18 declaring total income of Rs. Nil. The case of the 2

assessee was selected for scrutiny through CASS. Accordingly, notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (in short ‘the Act’) issued and served on the assessee. In response, the assessee filed its submissions through e-portal.
3. During the proceedings, the Assessing Officer (‘AO’) observed that during the demonetization period i.e. 9th November, 2016 to 30th December, 2016, the assessee has deposited Specified Bank Notes (‘SBN’) in its bank account maintained with Punjab National Bank to the extent of Rs. 44,98,000/- on 4
occasions as detailed at page 2 of the assessment order. When the assessee was asked to submit the source of the same and it was submitted that the above said deposits are out of cash withdrawals made by the assessee prior to the date of demonetization. The dates are given at page 3 of the assessment order. After considering the submissions of the assessee, the Ld. AO observed that based on the financial statements for the year ending 31.03.2017, the assessee was not engaged in any business activity. It was observed that the revenue was received from sale of its fixed assets only. And further observed that the assessee has incurred certain expenditure under the heads audit fee and other expenses. Vide a letter dated 05.11.2019, the assessee has agreed with the facts that it is not engaged in any business activity during the relevant assessment year. It was reiterated that the cash deposits were out of cash withdrawn and accumulated
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cash for the purchase of agricultural land from various sellers as the number of owners of small parcels of land in villages are more and sale of agricultural land in cash only. It was further submitted that MOU signed with Sh. Nizam Khan for purchase of agricultural land dated 14.04.2016 and relevant copy was filed before the Assessing Officer. After considering the submissions of the assessee, the ld. AO rejected the same and observed that the assessee did not had enough cash on 08.11.2016 and came to the conclusion that the cash deposited during the demonetization period in SBN out of unaccounted / unexplained income u/s 68 of the Act and made the addition to the total income of the assessee to the extent of Rs. 44,98,000/-.
4. Further, the Ld. AO observed that the assessee has declared profit and sale of agricultural land with sale consideration of Rs. 2,13,16,178/- and claimed exemption on the above said income. The assessee was asked to submit the relevant documents. After considering the submissions of the assessee, it was claimed that the sale of agricultural land at Gram Parwal Mauza East Hope
Town, Tehsil Vikasnagar, Dehradun which was situated at a aerial distance of approximately 16 Kms from nearest municipal limit which is Herbartpur, in support of its claim, a certificate dated 27.11.2019 issued by the Tehsildar,
Vikasnagar was furnished by the assessee. After considering the above documents, the Ld. AO observed that the properties under consideration are 4

situated in area within the distance, measured aerially, not being more than 6
kilometers from the local limit of the Municipality of Dehradun and the nature of the properties was residential during the period when the property was sold.
When the assessee was confronted, he has submitted detailed submissions in this regard, after considering the same, the Ld. AO rejected the above said submissions and reproduced the Map at page 13 of the assessment order and proceeded to make the addition under the head “capital gain” to the extent of Rs. 2,13,16,178/-. Further, the assessee has claimed agricultural income earned during the year. The Ld. AO observed that the assessee has not claimed any expenditure for earning the agricultural income, it clearly shows that the assessee was not engaged in agricultural activities, accordingly, he proceeded to make the addition of Rs. 1,49,480/-.
5. Aggrieved with the above order, the assessee preferred an appeal before the NFAC, Delhi and assessee filed detailed submissions and also filed additional evidences under Rule 46A. After considering the detailed submission, ld.
CIT(A) allowed the grounds raised by the assessee with regard to cash deposits during demonetization period, ld. CIT(A) allowed the ground with the following observations:
“6.3 After going through the findings of the AO in making the addition of Rs. 44,98,000 u/s 68 of the IT Act and the submissions of the appellant with the documents filed to justify the submissions, it is seen
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that the AO has made the addition for the cash deposited during demonization period by not accepting the explanation offered by the appellant being out of cash in hand on account of cash withdrawal from the bank during the year.The AO has held that the explanation offered by the appellant company is nothing but a made-up story to cover up the unaccounted income of the appellant company which has been deposited in cash during demonization period. Further, he has also rejected the explanation of the appellant that the cash has been withdrawn for the purpose of business, since no business has been carried out or any expenditure has been made. On the other hand, the appellant company has highlighted that it had enough cash in the books and the same has been deposited on account of sudden demonization announced by the government within the window provided by the government so the cash which is validly held by any person cannot be treated as income from undisclosed sources. It is observed by the AO that the cash is deposited in long gaps whereas it is deposited in the gap of two to three days as there used to be a rush in the banks and heavy risk is involved in carrying cash at one go and it is not the case of too many small deposits or withdrawals to escape technical provisions of IT Act. The cash withdrawal pattern is not reflective of anything and does not give rise to any suspicion as the number of cash withdrawals and cash deposits in bank is also limited.
There could be no blanket period which could be judicially considered to be a reasonable time for re depositing funds in bank account.
Besides, there is no law in the country which prevents citizens to frequently withdraw and deposit their own money in bank. The cash flow has already been submitted no leaving much scope for suspicion and the assessee has deposited cash out of legitimate funds and cash in hand and there is no material on record to prove otherwise also. The assesee company has already produced books of accounts for verification and no serious defect there has been mentioned in Assessment order. It is a settled law and as per the accountancy principles where the deposits are as per cash flow statement, the same should be accepted. The he appellant has given the reasoning that it had the cash in hand on 8.11.2016 out of which the same is deposited.
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The books are duly audited and there is no adverse finding of the AO on the books, so the addition made on this account is not justified and same is deleted. As a result this ground of appeal is allowed.”

book being the certificates issued by Tehsildar, Zonal Plan issued by MDDA, the google map measurement from the IMA Chungi etc. In addition to this, the appellant relied upon the application furnished under rule 46A, the reply of the TehsildarVikas Nagar , Dehradun dated
10.2.2020made part of submissions stating that that the aerial distance from the municipality limit to the land sold is about 16 KM. Itwas also submitted that the aerial distance is more than 6 KM and the AO had wrongly taken ‘Premnagar’ as the outer limit of municipal boundary of Dehradun whereas ‘IMA chungi’ is the correct place from where municipal boundary of Dehradun can be measured. A google map screen shoot was also furnished to show the distance of 8.9 kms. Hence the appellant has argued that the sale of rural agricultural land does not fall in the definition of section 2(14). In light of no reply/ remand report received from the AO, the remand report dated 25.7.2024 of the AO obtained in respect of same evidence as relied upon by the appellant in the other group case is taken as the report of the AO in this case also on account of identical facts for the purpose of consistency. The AO in earlier remand report has not disputed the claim of the appellant with regard to the aerial distance from Dehradun Municipal boundary to the properties situated at Village Perval. Hence it is held that that the rural agricultural land sold by the appellant during the year does not fall in the definition of section 2(14). Accordingly, the AO is directed to delete the addition of Rs. 2,13,16,178 made Page 48 of 50 AABCT7938C-
TRISHLA STEEL PVT LTD A.Y. 2017-18 ITBA/NFAC/S/250/2025-
26/1079069899(1) on account of sale of agricultural land under the head Long Term Capital gain. Hence this ground of appeal is allowed.”

earlier also and no denial of this fact has been received from AO. After going through the AO’s observation and the arguments of the appellant, it is held that the observation of the AO that the income declared is less is not based on material or any enquiry and the appellant was not non- responsive on this account and, hence the addition made in assessment order on this account is deleted. It is pertinent to mention that the appellant had also requested for an opportunity of being heard through video conference in its submissions. Therefore, opportunity letter for availing VC has been provided to the appellant on 11.7.2025 but the same was not availed by the appellant”

was in the nature of 'capital asset' which attracts capital gain on sale of such land.
Ground No. 3-On facts and circumstances of the case and in law, whether the CIT (A) is justified in deleting the addition of Rs. 1,49,480/- made by the AO on account of disallowance of the exempt agricultural income claimed by the assessee without appreciating the fact that the AO has clearly held in the assessment order that the assessee has been failed to put forth the cogent supporting documentation to prove the land use as 'agricultural' and the assessee has also failed to furnish the details of the expenditure incurred for earning the alleged agriculture income.
Ground No. 4- That, the appellant craves leave to add OR amend any other more ground of appeal as stated above as and when needs for doing so may arise.”