Loading judgment…
Facts
The assessee, engaged in silk saree trading, had an increased cash deposit in AY 2017-18 compared to AY 2016-17. The Assessing Officer (AO) made an addition for the incremental difference as unexplained cash credit. The CIT(A) confirmed the addition.
Held
The Tribunal held that the AO's presumption of unexplained money based solely on an incremental difference in cash deposits between two assessment years is ill-founded and baseless, especially when the sales turnover and cash deposits have increased. The books of accounts were audited and found to be without defects.
Key Issues
Whether an addition for unexplained cash credit can be made solely based on the incremental difference in cash deposits between two assessment years, without other evidence, when sales and deposits have increased and books are audited.
Sections Cited
147, 144B, 68, 115BBE, 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI S.S. VISWANETHRA RAVI & SHRI S. R. RAGHUNATHA
Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 16.09.2025 in the matter of an reassessment framed by Assessing Officer [AO] u/s. 147 r.w.s. 144B of the Income Tax Act, 1961 (in short “the Act”) on 27.03.2022.
:-2-: S.A.No.100/Chny/2025 & ITA. No.:2664 /Chny/2025
In the reassessment order, the AO has made an addition of Rs.40,32,500/- as unexplained cash credit u/s. 68 r.w.s 115BBE of the Act which represents the incremental difference of cash deposit between Assessment year (A.Y.) 2016-17 and A.Y.2017-18. The Ld.CIT(A) confirmed the impugned addition by observing that the assessee failed to furnish supporting documents during appellate proceedings. Aggrieved, the assessee is in further appeal before us.
The Ld.AR has submitted that the assessee is engaged in the business of silk saree trading in Kancheepuram. Generally, in this line of business, the sales are made predominantly in cash and the Assessee deposit the cash into her bank account regularly. During the subject A.Y., the Assessee was accumulating cash to open new retail shop in Chennai. However, due to announcement of demonetization the Assessee had to drop the plan of opening the new retail shop and the cash was deposited in bank account. The Ld.AR also submitted that it had incremental turnover during the subject A.Y., which fact was also recorded by the AO/the ld.CIT(A). The copy of bank statement, cash book, sales, purchases, confirmation from creditors etc., has also been placed on record to substantiate the same.
The Ld. Sr. DR supported the orders of lower authorities by submitting that the reopening is valid as it is done under the old regime prior to amendment and therefore the Madras High Court decision on TVS Credit and Supreme Court decision on Rajeev Bansal will not be applicable to the facts of the case.
:-3-: S.A.No.100/Chny/2025 & ITA. No.:2664 /Chny/2025 Further, the Ld.Sr.DR submitted that there is an abnormal turnover spike, disproportionate deposits and lack of evidence. The Ld.Sr.DR also relied on jurisdictional Tribunal decision in the case Vidhiyasekaran Pradeep Malliraj Vs ITO in ITA.No.698/Chny/2022 dated 07.02.2023 and stressed on the point that deposit of SBN during demonetization period has to be taxed as unexplained money and therefore, the Ld.Sr.DR requested to confirm the order of the lower authorities.
Having heard the rival submissions and upon perusal of case records, our adjudication would be as under. From reassessment order, it is clear that the assessee is engaged in textile business especially silk saree trading. During the subject A.Y., the assessee has shown turnover of Rs.1,66,79,636/- and its books of accounts are duly audited u/s 44AB of the Act. The assessee deposited cash in its bank account during the entire year including the demonetization period. As per Sales account (reproduced in ld.CIT(A) order page 6) 95% of the sales during the subject A.Y. was out of cash and the balance 5% was in credit card and banking channel. The ld.CIT(A) has also reproduced “Abstract of cash account” wherein cash balance is Rs.1,63,40,303/-, out of this the assessee after incurring cash expense, the assessee has deposited the balance cash into her bank account. Therefore, the sale collections / receipts were stated to be the source of the cash deposits.
The AO did not hold that SBN were deposited during demonetization period.
The sole criterion for the AO to make the addition is that there is difference of cash deposit between A.Y.2016-17 and A.Y.2017-18 and therefore the absolute
:-4-: S.A.No.100/Chny/2025 & ITA. No.:2664 /Chny/2025 difference has been added as unexplained cash credit. The AO seem to have accepted the source of cash of Rs.79,50,000/- which was in line with the deposits in A.Y.2016-17 but rejected the source of cash deposits of Rs.40,32,500/- which was deposited in excess of cash deposits made in A.Y.2016-17. Hence, the amount of Rs.40,32,500/- was added u/s 68 r.w.s.115BBE of the Act. The Ld.CIT(A) upheld the same against which the assessee is in further appeal before us.
We agree with the contention of the Ld.Sr.DR that since the reopening is under the old regime, the decision in relation to new regime will not be applicable. However, in so far as escapement of income is concerned our adjudication is as under.
The undisputed fact that emerges is that the assessee is holding cash balance of Rs.1,63,40,303/- before incurring cash expenses which is duly evidenced by its cash book. The books of the assessee have duly been audited u/s.44AB of the Act and the lower authorities have not found any defect in the same. The assessee is engaged in silk saree trading and achieved turnover of Rs.1,66,79,636/-. The AO, in an arbitrary manner, accepted part of the source and rejected the other part whereas all the deposits have same source. The only reasoning of the AO is that there is difference in the quantum of deposit between two AY’s and therefore the absolute difference is sought to be added as unexplained. In our view, the absolute difference of cash deposit between two AYs cannot be added. Merely because there is an incremental difference
:-5-: S.A.No.100/Chny/2025 & ITA. No.:2664 /Chny/2025 cannot lead to a presumption that there is an unexplained money. In fact, and as observed by the AO, in the very next AY there is a decrease in the sales turnover and consequently, the cash deposit would also be less in comparison to the subject A.Y., will that mean that the Assessee has supressed sales.
Therefore, the presumption of the AO is ill-founded and baseless. Further, the lower authorities seem to have lost sight of the fact that there is an increase in the sales during the subject A.Y. and consequently, the cash deposit has also increased. The sales turnover declared for GST and Income Tax purposes is accepted, however, some portion of the cash deposit made out of the sales cannot be treated as unexplained on presumptive basis unless the lower authorities have brought on any concrete evidence. Further, in so far as the jurisdictional Tribunal decision in the case of Vidhiyasekaran Pradeep Malliraj Vs ITO (supra) relied upon by the Ld. DR, we find it is distinguishable on facts as in that case the issue was deposit of SBN during demonetization period whereas in the present case the only ground of the AO is that there cannot be any increase in cash deposit between two A.Y. and therefore the incremental difference has been sought to be taxed as unexplained money. Per contra, the Ld.AR relied on the jurisdictional Tribunal decision in the case of Balu Vignesh in ITA.No.1605/Chny/2024 dated 05.11.2024 wherein it is held as under:
“5. The undisputed fact that emerges is that the assessee is holding cash balance of Rs.133.73 Lacs as on 08-11-2016 which is duly evidenced by its cash book. The books of the assessee have duly been audited u/s 44AB and no defect has been observed in the same. The assessee is engaged in trading activity and achieved turnover of Rs.24.77 Crores. The Ld. AO, in an arbitrary manner, accepted part of the source and rejected the other part whereas all the deposits has same source. The only reasoning is that the assessee should have deposited entire cash within a reasonable period of time which is not mandated by any law. Therefore, we delete the impugned
:-6-: S.A.No.100/Chny/2025 & ITA. No.:2664 /Chny/2025 addition and direct Ld. AO to re-compute the income of the assessee. Therefore, we delete the impugned addition and direct Ld. AO to re-compute the income of the assessee.”
In the present facts and circumstances of the case and respectfully following the order of this Tribunal, we find that in the present case the AO has accepted books of account as audited u/s.44AB of the Act and the cash deposit is partially accepted on irrational basis. Therefore, we hold that there is no unexplained cash deposit and as such there is no income escaping assessment. Hence, we delete the addition u/s.68 of the Act by allowing the grounds of appeal raised by the assessee.
In the result, the appeal stands partly allowed.
Since we have decided the main appeal, the corresponding S.A.No.100 /Chny/2025 is dismissed as infructuous.
Order pronounced in the court on 07th November, 2025 at Chennai.