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Facts
The assessee, an individual running a jewellery shop, filed his return for AY 2017-18. The AO examined cash deposits of Rs.73,66,000 made during demonetization. The assessee explained these deposits as out of regular cash balance from his jewellery business, declared under Section 44AD.
Held
The Tribunal held that the assessee, who declared income under Section 44AD, was not mandatorily required to maintain regular books of accounts. The month-wise cash sales and deposits demonstrated a plausible cash trail without mismatch, and the increase in sales/deposits was adequately explained by the business nature.
Key Issues
Whether cash deposits made during demonetization are unexplained income when the assessee is assessed under presumptive taxation u/s 44AD and provides a plausible cash trail.
Sections Cited
44AD, 69A, 115BBE
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & SHRI HON’BLE AMITABH SHUKLA
आदेश / O R D E R
PER MANU KUMAR GIRI (Judicial Member):
1. The captioned appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals) (NFAC), Delhi [CIT(A)] dated 20.09.2024 for Assessment Year 2017-18.
There is a delay of 53 days in filing this appeal. The assessee has filed petition along with affidavit for condonation of delay stating therein the reasons for belated filing of the appeal. On perusal of the that there is sufficient cause for belated filing of this appeal. Hence, we condone the delay in filing this appeal and proceed to dispose of the appeals on merits.
Brief facts of the case are as under:
The brief facts of the case are that the assessee is an individual and runs a jewellery shop in the name and style Mrs KSM Thangamaligai. The assessee filed his return of income for the assessment year 2017-18 on 05/02/2018 declaring a total income of Rs.11,29,440/-. The case was selected for scrutiny and during the scrutiny the assessing officer (‘AO’ in short) examined the cash deposit of Rs.73,66,000 in the bank accounts of the appellant with Axis Bank and City Union Bank during the demonetization. In response to the notices issued, the assessee submitted that the assessee is in the jewellery business, and he had declared income under section 44AD of the Act. In the absence of regular books of accounts maintained the assessee submitted that the cash deposited during the demonetization was out of the regular cash balance available with the assessee in relation to its business. However, the assessing officer for want of the statement of affairs of the assessee and cash flow statement, held the unexplained money u/s. 69A read with section 115 BBE of the Act.
4. Aggrieved, assessee preferred an appeal before the CIT(A). The ld. CIT(A) partly allowed the appeal of the assessee giving partial relief of Rs.25,00,000/- out of Rs.73,66,000/- deposited in Bank.
Now, assessee is in further appeal before us.
The ld. counsel for the assessee has filed written submissions and charts as under:
1. Cash deposits in bank: 1.1 Cash deposits in FY 2015-16 a. Total cash deposit in bank fy 2015-16 6296600 b. Total cash deposit in bank from 01.04.15 to 08.11.2015 3207100 c. Total cash deposit in bank from 09.11.15 to 31.12.2015 1115000
1.2 Cash deposits in FY 2016-17 a. Total cash deposit in bank fy 2016-17 9462000 b. Total cash deposit in bank from 01.04.16 to 08.11.2016 757500 c. Total cash deposit in bank from 09.11.16 to 31.12.2016 7366000
1.3. cash deposits comparison a. Percentage increase between 1.2(a) and 1.1(a) 50.27% b. Percentage increase between 1.2(b) and 1.1(b) 76-38% c. Percentage increase between 1.2(c) and 1.1(c) 560.63%
2. Cash sales: 2.1 Cash sales in FY 2015-16 a. Total cash sales in FY 2015-16 3073150 b. Total cash sales from 01.04.15 to 08.11.2015 2475274
2.2 Cash sales in FY 2016-17
2.3 Cash sales comparison a. Percentage increase between 2.2(a) and 2.1(a) 107.89% b. Percentage increase between 2.2(b) and 2.1(b) 1.2.18%
3. Analysis of month-wise cash sales and cash deposits from 01.04.15 to 08.11.2015
Month Opening Cash Cash Other Cash Other Closing wise cash in sales withdrawal cash deposited cash cash in hand from bank receipts in bank payments hand April 35691 462611 140000 20801 142000 246616 270487 May 270484 438017 60000 2273971 1004600 169093 1868782 June 1868782 499338 240000 20500 21500 556302 2050818 July 2050818 429363 350000 20750 1055000 694531 1101400 Aug 1101400 301797 35000 18750 5000 237170 1214777 Sept 1214777 558016 356500 14750 55000 1031665 1057378 Oct 1057378 501941 40000 19500 924000 387108 307711 Nov 307711 432461 0 3250 0 429428 313994 till 08.11.15
Analysis of month-wise cash sales and cash deposits from 01.04.16 to 08.11.2016
Month Opening Cash Cash Other Cash Other Closing wise cash in sales withdrawal cash deposited cash cash in hand from bank receipts in bank payments hand April 77274 292174 840000 272801 0 109979 1372270 May 1372270 438440 300000 212750 0 242526 2080934 June 2080934 458760 150000 229000 3000 179212 2736482 July 2736482 547114 0 116250 0 285126 3114720 Aug 3114720 376885 0 218250 0 193657 3516198 Sept 3516198 363825 400000 220500 650000 2689796 3610727 Oct 3610727 2935728 500000 14250 104500 867662 6188543 Nov 6188543 632690 700000 4500 0 126234 7399499 till 08.11.16 accounts and his income is computed under provisions of section 44AD of Income Tax Act, 1961. The ld. Counsel further submitted that assessee is running his small business alongwith his family members.
Most of the customers of the assessee are agriculturist. The assessee business is a family run business of trading in valuable jewellery and cash receipts are usually utilized towards payments of purchases and other expenses.
Per contra, the ld. DR relied upon the orders of the authorities below and pleaded for the dismissal of the appeal of the assessee.
We have heard the both parties and perused the record and given data. The ld. counsel for the assessee has filed written submissions along with supporting charts and data, which are taken on record. The same are summarised as under:
Cash Deposits in Bank Accounts 1.1. Cash Deposits During FY 2015-16 a. Total cash deposits during the financial year 2015-16 amounted to Rs.62,96,600. b. Cash deposits made between 01.04.2015 to 08.11.2015 totalled Rs.32,07,100. c. Cash deposits made between 09.11.2015 to 31.12.2015 totalled Rs.11,15,000.
1.2. Cash Deposits During FY 2016-17 a. Total cash deposits during the financial year 2016-17 amounted to Rs.94,62,000. b. Cash deposits made between 01.04.2016 to 08.11.2016 totalled Rs.7,57,500. c. Cash deposits made between 09.11.2016 to 31.12.2016 amounted to Rs.73,66,000.
1.3. Comparative Analysis of Cash Deposits a. Percentage increase in total annual deposits (FY 2016-17 vs. FY 2015-16): 50.27% b. Percentage increase in deposits during the pre-demonetisation period (01.04 to 08.11): 76.38% c. Percentage increase during the post-demonetisation window (09.11 to 31.12): 560.63%
2. Cash Sales
2.1. Cash Sales During FY 2015-16 a. Total cash sales for the financial year amounted to Rs.30,73,150. b. Sales from 01.04.2015 to 08.11.2015 stood at Rs.24,75,274.
2.2. Cash Sales During FY 2016-17 a. Total cash sales during the financial year amounted to Rs.63,88,784. b. Cash sales from 01.04.2016 to 08.11.2016 totalled Rs.57,46,996.
2.3. Comparative Analysis of Cash Sales a. Increase in total annual sales: 107.89% b. Increase during the period 01.04 to 08.11: 131.88%
3. Month-wise Analysis of Cash Sales and Cash Deposits
3.1. For the period 01.04.2015 to 08.11.2015
The month-wise summary includes details of opening cash in hand, cash sales, cash withdrawals from bank, other cash receipts, cash deposits in bank, other cash payments, and closing cash in hand. These figures are provided to substantiate the source and flow of cash during the relevant period.
Muthusamy Mudaliar Prakasam :- 7 -: 3.2. For the period 01.04.2016 to 08.11.2016 Similar details for the subsequent financial year have been furnished, reflecting higher cash sales and cash availability during the relevant assessment year.
The assessee has further submitted that no regular books of accounts have been maintained, and income is declared under the presumptive taxation as per Section 44AD of the Income Tax Act, 1961. It has been contended that the assessee is engaged in a small, family-run jewellery trading business, where most customers are agriculturists, and cash transactions are common. Cash receipts are regularly utilised towards purchase payments and business-related expenses.
Upon careful consideration of the submissions made by the ld. counsel for the assessee, along with the charts and data referred supra, and having regard to the factual matrix and the peculiar circumstances of the case, we find merit in the contentions of the assessee. It is an admitted fact that the assessee has declared income under the presumptive taxation as per the provisions of Section 44AD of the Income Tax Act, 1961. Under this presumptive taxation, the assessee is not mandatorily required to maintain regular books of accounts. The cash flow statements submitted by the assessee, demonstrate a consistent and plausible cash trail. The data indicates that the cash deposits made during the relevant periods are supported by corresponding cash sales and withdrawals, and there is no apparent mismatch or unexplained cash inflow. Further, the significant increase in cash sales and cash deposits during FY 2016–17, particularly in the months preceding and following the demonetisation announcement, is adequately explained by the assessee. The nature of the assessee’s business i.e. trading in jewellery in a rural / agricultural area inherently involves high-value cash transactions. This is not uncommon in such trades, especially in the absence of a strong digital payment infrastructure in rural areas during the relevant assessment years. The comparative data furnished also reflects a steady and proportionate pattern of growth in business activity, and the increase in cash sales is not found to be abnormal or disproportionate to the past trend.
In view of the above, and in the absence of any specific incriminating material brought on record by the Revenue to disprove the assessee’s explanation or to establish that the cash deposits represented unaccounted income, we are of the considered view that Muthusamy Mudaliar Prakasam :- 9 -: the addition made solely on the basis of cash deposits in the bank account is unsustainable. Accordingly, the addition made by the AO is directed to be deleted.
In the result, the appeal of the assessee is therefore allowed.
Order pronounced on 08th day of September, 2025 at Chennai.