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Facts
The assessee, engaged in wholesale trading of auto parts, deposited a significant amount of cash (Rs. 61,72,500/-) during the demonetization period. The Assessing Officer inferred this cash was unexplained and added it to the income. The CIT(A) upheld this addition.
Held
The Tribunal found merit in the assessee's contention that the lower authorities failed to properly examine the evidence and submissions. The CIT(A)'s order also contained factual inaccuracies. Therefore, the Tribunal set aside the order and restored the matter to the Assessing Officer for fresh adjudication.
Key Issues
Whether the lower authorities properly examined the evidence regarding cash deposits made during demonetization, and whether the addition sustained was justified without rejecting the books of account.
Sections Cited
250, 143(3), 145(3)
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Order PER LALIET KUMAR, J.M: This appeal by the assessee is directed against the order passed by the Ld. CIT(A)/ NFAC, Delhi, dt. 30/06/2025 passed u/s 250 of the Income Tax Act, 1961 for the assessment year 2017–18. 2. In the present appeal, Assessee has raised the following grounds:
1. 1. 1. 1. 1. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in sustaining the addition of Rs. 61,72,500/- on account of cash deposits during demonetization period.
2. That the Ld. CIT(A) has failed to appreciate the detailed submissions, which had been filed during the course of appellate proceedings and also the contention of the assessee that the cash was deposited out of the sales made by the assessee in the regular course of business, has not been considered properly.
3. That the addition as confirmed by the CIT(A) is also not in order, since the sales have been reflected in the VAT returns filed and further, the books of accounts having not been rejected u/s 145(3), no addition was liable to be made on account of cash deposits.
4. Notwithstanding the above said grounds of appeal
, since the sales have already been reflected towards the credit side, the addition of cash deposits out of the sales reflected in the books of accounts is otherwise not liable to be made since it would amount to double addition, which is not permitted as per the Judgement of Hon'ble Gujarat High Court in the case of President Industries, reported in 258 ITR 654.
5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
3. Briefly, the facts of the case are that the assessee is an individual engaged in the business of wholesale trading of auto parts. The return of income filed by the assessee was selected for scrutiny and assessment was framed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961. 3.1 During the course of assessment proceedings, the Assessing Officer observed that the assessee had deposited cash amounting to Rs. 61,72,500/- in the bank account during the demonetization period from 09.11.2016 to 30.12.2016. The Assessing Officer was of the view that the magnitude of cash deposits during this short period was disproportionately high when compared with the corresponding period of the preceding financial year. On the basis of such comparison and surrounding circumstances, the Assessing Officer inferred that the assessee was in possession of unaccounted cash which was introduced in the books of account in the guise of cash sales. Accordingly, the Assessing Officer treated the said amount as unexplained and made addition of Rs. 61,72,500/- in the hands of the assessee.
4. Aggrieved by the assessment order, the assessee carried the matter in appeal before the Ld. CIT(A). The assessee contended before the Ld. CIT(A) that the cash deposits represented cash sales made in the normal course of business and that the business of wholesale trading of auto parts largely involved cash transactions with small retailers, mechanics and workshop operators. It was also submitted that the sales were duly recorded in the books of account and reflected in the VAT returns filed with the respective authorities. The assessee further submitted that the books of account were regularly maintained and audited and no defects had been pointed out therein.
4.1 The Ld. CIT(A), however, was not convinced with the explanation furnished by the assessee. The Ld. CIT(A) observed that the assessee failed to produce sufficient documentary evidence to establish a direct nexus between the alleged cash sales and the cash deposited in the bank account. The Ld. CIT(A) also observed that the abnormal rise in cash deposits during the demonetization period raised serious doubts regarding the genuineness of the explanation offered by the assessee. Accordingly, the Ld. CIT(A) upheld the action of the Assessing Officer and confirmed the addition of Rs. 61,72,500/-.
Against the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal.
Before us, the Ld. AR submitted that the assessee had filed voluminous documentary evidence before the Assessing Officer as well as before the Ld. CIT(A). However, both the authorities below failed to properly consider and appreciate the evidence placed on record. It was further contended that the Ld. CIT(A), while deciding the appeal, had even misdirected himself on facts and had referred to incorrect figures in paragraph 5 of the appellate order, which clearly demonstrates that the evidence and submissions of the assessee were not properly examined.
6.1 The Ld. AR further submitted that the entire issue requires proper verification of the documentary evidence placed on record and therefore the matter may be restored to the file of the Assessing Officer for fresh adjudication.
Per contra, the Ld. DR relied on the order of the lower authorities.
We have heard the rival submissions and perused the material available on record. We find merit in the assessee's contention that, despite the filing of various documents before the lower authorities, they have not been properly dealt with in either the assessment or appellate order. A perusal of the order of the Ld. CIT(A) also indicates that certain factual aspects and figures have been incorrectly recorded, which prima facie suggests that the evidence and submissions of the assessee were not examined in the proper perspective.
8.1 It is indeed disheartening to note that despite the assessee placing relevant documents on record, no clear factual findings have been recorded by the authorities below with respect to such evidences. The quasi- judicial authorities are expected to carefully examine the submissions and documentary evidence placed before them, and record reasoned findings thereon.
8.2 Considering the entirety of the facts and circumstances of the case, we deem it appropriate to set aside the impugned order of the Ld. CIT(A) and restore the matter to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall consider all the evidence and documents filed by the assessee, which form part of the paper book filed before AO as well as before this Tribunal, and thereafter decide the issue afresh in accordance with law.
8.3 Needless to say, the Assessing Officer shall provide adequate opportunity of being heard to the assessee and shall strictly adhere to the principles of natural justice while deciding the matter.
8.4 We also observe that the Revenue authorities should be sensitive to the grievances raised by the assessee and must carefully examine the documents and evidences filed during the course of assessment as well as appellate proceedings before arriving at any conclusion.
In the result, the appeal of the assessee is allowed for statistical purposes.