KARTHICKEYAN SATHYA,PUDUKKOTTAI vs. ITO, WARD-1,, PUDUKKOTTAI

Heard both the parties and perused the material available on record. It is noted that the assessee is engaged in sea food business since 2012 and all sales and purchases are made in cash. For non- submissions of the evidence supporting the sales and purchases, both the authorities below held the cash deposit is remained unexplained.

The ld. AR Shri P.M. Kathir, Advocate, by referring to page 95 of the paper book submits that the opening cash balance as on 09.11.2016 of ₹.34,94,245.41 was available with the assessee and that itself shows the explanation for cash deposits in the said two bank accounts during demonetization period. On perusal of the cash book filed at pages 93 to 110 of the paper book, it is noted that opening cash balance as on 01.04.2016 is at ₹.41,67,795.21 and the said cash book is maintained on day-today basis by showing opening balance and closing balance on daily basis. Further, the details of sea food sales and purchases, ice bar expenses and wages paid for sea food business are clear from the daily transaction reflecting in cash book. Similarly, on 09.11.2016, the opening balance was at ₹.34,94,245.41, on which day, the assessee stated to have made cash deposits in bank during demonetization period. The ld. CIT(A) did not examine the cash book though it is on record, which is clear from page 13 of the impugned order. The ld. CIT(A) proceeded to confirm the said addition only on the reason that the total credit in banks were for the entire financial year are negligible credits when compared to turnover of sales and purchases at ₹.1,95,22,914/- and ₹.1,49,04,414/- respectively, but no discussion whatsoever is made by the ld. CIT(A) in this regard regarding availability of cash balance. The ld. AR submits that all transactions carried in the sea food business of the assessee towards purchases and sales are in cash and both the authorities must have given consideration. The ld. AR vehemently argued that no disallowance under sub-section (3) of section 40A of the Act shall be made with reference to sea food business under Rule 6DD(e)(iii) of Income Tax Rules. Further, the ld. AR vehemently argued that the accounts of the assessee were audited and the Assessing Officer, without rejecting the books of account, proceeded to disallow the cash deposit, which is unjustified. He submits that the assessee proved availability of cash and the addition made thereon is not warranted. He prayed to allow ground No. 4, 5 & 6 raised by the assessee.

On an examination of Rule 6DD(e)(iii) of IT Rules, we note that no disallowance under section 40A(3) of the Act shall be made, where, payment is made in cash for the purpose of fish or fish products. Thus, we find force in the arguments of the ld. AR that the assessee is entitled to carry his business in fish or fish products in cash. The observation of the ld. CIT(A) about the cash credits from 12.09.2013 to 06.10.2017 and 01.05.2016 to 31.03.2017 are negligible with reference to sales turnover and purchases. The ld. AR placed on record the chart containing turnover of sea food business of the assessee for 2015-16 to 2021-22. On perusal of the same, we find for AY 2015-16 and 2016- 17, the turnover are Rs.92,31,537/- and Rs.1,56,69,741/- respectively, shows matching turnover in the year under consideration. Further, for subsequent assessment years for AY 2018-19, 2019-20, we find the matching turnover with reference to findings of the ld. CIT(A) in page 13 of the impugned order. Therefore, the findings of the ld. CIT(A) in observing the cash credit from 2013 onwards in the two bank accounts of the assessee are negligible with reference to sea food business turnover is incorrect. Admittedly, it was explained the said turnover was accepted by the Revenue for all along from 2015-16 to 2021-22.

On perusal of the audit report placed at page 4 to 13 of the paper book, wherein, it clearly shows under Col. 11(b) that cash book was examined, we find no adverse remark offered by the ld. CIT(A). The said cash book is available during the first appellate proceedings as mentioned by the ld. CIT(A) at page 13 of the impugned order. Further, the books of accounts were audited and the ld. CIT(A) could not find any mistake. Therefore, we find force in the arguments of the ld. AR that the Assessing Officer could not have made addition under section 68 of the Act when no books of accounts were rejected with reference to the cash book by the Assessing Officer/ld. CIT(A). Therefore, we reverse the findings of the ld. CIT(A) and addition made thereon under section 68 of the Act by the Assessing Officer is deleted. Thus, ground Nos. 4, 5 & 6 are allowed.

Ground No. 7 raised by the assessee in challenging the action of the ld. CIT(A) in confirming the addition on account of unexplained agricultural income.

It is noted that the assessee furnished details of land ownership in vernacular language and placed at page 40 to 47 and true translation in English at pages 48 to 55 of the paper book. On examination of the same, it is noted that the assessee is having dry land and we land vide patta Nos. 29, 36, 37, 38, 39, 40, 42 & 4269. In support of the same, we find the certificate issued by the Village Administrative Officer, placed at pages 78 & 79 of the paper book, stating that the assessee is having patta for the land totalling to the extent of 62.82 acres, corresponding to Fasli Year 1426 (2017). We find no dispute with regard to the same by the ld. DR. Further, another extent of dry land of 1-1.00 hectares at page 61 of the paper book, wherein, according to the VAO certificate at page 63 of the paper book, clearly mentioned that the assessee earned an income of ₹.5,00,000/- on coconut farming. Further, on perusal of page 112 of paper book, which is confirmation letter dated 06.09.2025 issued by Proprietor of Manikandan Traders confirming payment of Rs.16,00,000/- via RTGS on 12.12.2016 and cash of Rs.15,644/- on 18.03.2017 for the purpose of purchase of paddy. Therefore, the findings of the ld. CIT(A) that there was no evidence at all supporting the agricultural income, in our opinion, is not justified. We find no dispute in respect of this also in this regard by the ld. DR. Admittedly, these evidences were not placed before the Assessing Officer during the course of assessment proceedings, but, however, those were submitted as additional evidence before the ld. CIT(A). The ld. CIT(A) sought for remand report from the Assessing Officer and the Assessing Officer requested not to admit the same since the assessee failed to explain the reasons as to why those were not furnished during the course of assessment proceedings. The ld. CIT(A) should have considered the VAO’s certificate for agricultural income and income from coconut farming in earning of net agricultural income of ₹.21,90,120/-.

Before us, the ld. AR filed details of income offered by the assessee for earlier AY’s 2015-16 & 2016-17 and subsequent AYs 2018-19, 2019-20, 2020-21 and 2021-22 at pages 113 to 137 of the paper book, wherein, it is noted that the assessee offered agricultural income approximately more or less compared to the agricultural income offered in the year under consideration. Therefore, we find no contrary evidence for disallowance of agricultural income in the year under consideration on record, and thus, we find the order of the ld. CIT(A) on this issue is not justified in confirming the addition made by the Assessing Officer towards unexplained agricultural income. Accordingly, we direct the Assessing Officer to allow agricultural income offered by the assessee. Thus, ground No. 7 raised by the assessee is allowed.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 12th November, 2025 at Chennai.