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Facts
The assessee, engaged in the grocery trading business, deposited Rs. 12,99,000/- in old currency during the demonetization period. The Assessing Officer treated this amount as unexplained money under Section 69A and added it to the assessee's income.
Held
The Tribunal held that the assessee's explanation for the cash deposits was reasonable and plausible. The Tribunal noted that the assessee maintained books of account, had a substantial turnover, and the deposits were within the range of business receipts.
Key Issues
Whether cash deposits made during the demonetization period can be treated as unexplained money under Section 69A when the assessee is engaged in a cash-intensive business and maintains proper books of account.
Sections Cited
250, 147, 148, 69A, 115BBE, 44AD
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आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “ए” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE "ी लिलत कुमार, "ाियक सद" एवं "ी मनोज कुमार अ"वाल, लेखा सद" BEFORE: SHRI. LALIET KUMAR, JM & SHRI. MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ 2025 िनधा"रण वष" / Assessment Year : 2017-18 Shri Mohinder Singh बनाम The ITO 367, Giani Zail Singh Nagar, Ward-2(2) Ropar, Punjab-140001 Punjab "ायी लेखा सं./PAN NO: ABUPS5184Q अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : Shri Parikshit Aggarwal, C.A (Virtual) राज" की ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 11/03/2026 उदघोषणा की तारीख/Date of Pronouncement : 12/03/2026 आदेश/Order PER LALIET KUMAR, J.M:
This appeal has been preferred by the assessee against the order of the Ld. CIT(A)/NFAC, Delhi, dated 23.10.2025 for the Assessment Year 2017-18 passed u/s 250 of the Income Tax Act, 1961. 2. In the present appeal Assessee has raised the following grounds:
1. That on the facts, circumstances and legal position of the case, the Worthy CIT(A), in Appeal No. NFAC/2016-17/10126269 has erred in passing order dtd. 23.10.2025 in contravention of provisions of S.250 of the Income Tax Act, 1961 (hereinafter referred to as “Act”).
2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in upholding the action of Ld. AO of initiating u/s 148 and then continuing and then concluding the impugned assessment u/s 147 of the Act and hence the impugned assessment proceedings as well as the order deserves to be quashed.
3. That on the facts and in the circumstances of the case, the Worthy CIT(A) has erred in upholding the impugned addition made by Ld. AO of Rs.12,99,000/- u/s 69A by treating the cash deposits in bank during demonetization period as unexplained.
4. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO in imposing tax rate of 60% u/s 115BBE plus surcharge thereon on above addition made u/s 69A in Ground No. 3, even when if said addition is accepted academically, the same could only have been taxed at normal tax rates.
5. That on facts, circumstances and legal position of the case, the order passed by the Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been framed in extreme haste and without affording reasonable opportunity of being heard to the appellant.
6. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.
Briefly the facts of the case are that the assessee is an individual engaged in the business of trading in grocery items (retail as well as wholesale) through his proprietorship concern M/s Jawahar Singh Mohar Singh. The assessee filed his return of income declaring total income of Rs. 3,88,600/-. During the course of reassessment proceedings initiated u/s 147, the Assessing Officer noticed that the assessee had deposited cash of Rs. 20,64,000/- in his bank account during the demonetization period.
3.1 The Assessing Officer observed that out of the said deposits, an amount of Rs. 12,99,000/- represented deposits in old currency on three dates i.e. 11.11.2016, 29.11.2016 and 12.12.2016 and held that the assessee failed to satisfactorily explain the source of the said deposits. Accordingly, the Assessing Officer treated the sum of Rs. 12,99,000/- as unexplained money u/s 69A of the Act and added the same to the income of the assessee.
Against the order of the AO the assessee went in appeal before the Ld. CIT(A), however the Ld. CIT(A) confirmed the addition made by the Assessing Officer.
Against the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal.
During the course of hearing the Ld. AR submitted that the authorities below have grossly erred in treating the cash deposits as unexplained. It was contended that the assessee is engaged in grocery trading business and his turnover during the year exceeded Rs. 1.20 crore. The assessee had duly maintained books of account and had also filed the audit report along with the return of income. 6.1 It was further submitted that the Assessing Officer has incorrectly recorded in the assessment order that the assessee was not maintaining books of account and that his income was assessable under section 44AD of the Act. It was argued that such observation of the Assessing Officer is factually incorrect and contrary to the record.
6.2 The Ld. AR further submitted that a substantial portion of the cash deposits amounting to Rs. 11,02,000/- was deposited on the very first day of demonetization i.e. on 11.11.2016 in a single installment which represented the regular business cash available with the assessee. It was further explained that the subsequent deposits included a sum of Rs. 1,20,000/- deposited in new currency notes of Rs. 2000/- denomination and the remaining deposits were also duly explained as arising from regular business receipts. Therefore, it was argued that the addition made by the Assessing Officer and sustained by the Ld. CIT(A) is unjustified.
Per contra, the Ld. DR relied upon the orders of the lower authorities and submitted that the assessee could not produce adequate documentary evidence before the Assessing Officer to establish that the cash deposits represented genuine business receipts. It was therefore argued that the Ld. CIT(A) was justified in confirming the addition.
We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the assessee is engaged in the business of grocery trading, which is predominantly cash-intensive. The assessee has demonstrated that his turnover during the year exceeded Rs. 1.20 crore and that his accounts were duly audited, with the audit report filed along with the return of income. In such circumstances, the observation of the Assessing Officer that the assessee was not maintaining books of account and was covered under the presumptive provisions of section 44AD of the Act appears to be factually incorrect.
8.1 We further note that the major portion of the cash deposits, i.e. Rs. 11,02,000/-, was deposited on 11.11.2016 itself, immediately after the announcement of demonetization. Considering the nature of the assessee’s business and the scale of turnover, it cannot be considered unusual that the assessee was holding cash generated out of regular business sales, which was subsequently deposited in the bank.
8.2 It is also noted from the record that the assessee had furnished copies of the pay-in slips indicating the denominations of currency deposited and had demonstrated that the deposits made subsequently were largely in new currency notes. The deposit of Rs. 1,20,000/- was made in the new currency of Rs. 2000/- denomination, which further supports the explanation of the assessee regarding the continuation of business sales even after demonetization.
8.3 In our considered view, once the assessee is carrying on a regular business with substantial turnover and the cash deposits are within the range of business receipts, the same cannot be treated as unexplained merely on suspicion, particularly when the Assessing Officer has not rejected the books of account nor pointed out any specific defect therein.
8.4 The authorities below have primarily proceeded on the assumption that the assessee was not maintaining books of account and was governed by section 44AD, which itself is contrary to the factual position on record. Therefore, the foundation of the addition made by the Assessing Officer does not survive. 8.5 Considering the totality of facts and circumstances of the case, we are of the view that the explanation offered by the assessee regarding the source of cash deposits is reasonable and plausible and the addition made u/s 69A of the Act is not sustainable. Accordingly, the addition of Rs. 12,99,000/- made by the Assessing Officer and sustained by the Ld. CIT(A) is hereby deleted.
In the result, the appeal of the assessee is allowed.