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Facts
The assessee, Dadu Textile LLP, a textile garment business, filed its return but the assessment was reopened by the AO due to cash deposits. The AO made additions of Rs. 92,38,274/- for unexplained capital contributions under Section 68 and Rs. 2,43,04,783/- for unexplained cash deposits under Section 69A. The CIT(A) partly allowed the assessee's appeal by deleting both additions. The revenue is now challenging the CIT(A)'s order.
Held
The Income Tax Appellate Tribunal (ITAT) found no infirmity in the order of the CIT(A) and upheld its decision. The ITAT noted that the assessee had provided detailed explanations and supporting documents for both the capital contributions and cash deposits, which the Assessing Officer had failed to adequately dispute or consider.
Key Issues
Whether the CIT(A) was correct in deleting additions made under Section 68 for unexplained cash credited to capital accounts and under Section 69A for unexplained cash deposits in bank accounts.
Sections Cited
139, 143(1), 148, 250, 68, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH KOLKATA
Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey
Assessment Year: 2017-18 DCIT, CC-1(4), Kolkata…..……………… ……………...……….……….……Appellant vs. Dadu Textile LLP……………......………………………….......……...…..…..Respondent 16 Tara Chand Dutta Street, Near Mohammed Ali Park, Kol-700073. [PAN: AAMFD0909M] Appearances by: Shri Pankaj Pandey, Addl. CIT-Sr. DR, appeared on behalf of the appellant. Shri S. M. Surana, Advocate, appeared on behalf of the Respondent. Date of concluding the hearing : October 14, 2025 Date of pronouncing the order : November 11, 2025 ORDER
Per Pradip Kumar Choubey, Judicial Member:
This appeal filed by the revenue is directed against the order dated 19.03.2025 of the Commissioner of Income Tax (Appeals)-20, Kolkata [‘CIT(A)’] passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2017–18.
The appeal has been filed by the revenue with a delay of 72 days. The revenue has filed a petition for condonation of the delay. After considering the reasons cited in the petition for condonation of delay, we find that the reasons are valid and consequently, the delay in filing the appeal is hereby condoned and we proceed to dispose of the appeal on merits.
Brief facts of the case are that the assessee is in the business of sale of textiles garments which sale is mainly on cash basis and the Dadu Textile LLP items traded by the assessee are also liable to VAT/GST. The assessee filed its return u/s 139 of IT Act 1961 declaring total income of Rs 3,32,16,100/- on a turnover of Rs.35,20,06,955/- on 30.10.2017. The return was processed u/s 143(1) and thereafter the Assessing Officer received information that the assessee has made cash deposits of Rs. 15,58,52,279/- in its regular bank accounts. The assessment was therefore reopened by issue of notice u/s 148 dated 31.3.2021 which was served on the assessee on 1.4.2021 and the assessee duly complied with the said notice. The Assessing Officer stated that the assessee was traders in garments and may have dealt in cash purchase and sales and also incurred manufacturing expenses still held that the assessee could not explain the nature and source of the cash deposits ultimately added back Rs. 2,43,04,783/- being 20% of the cash deposits in the bank on the ground that the same remained unexplained and added back the same u/s 69A. The Assessing Officer also added back the sum of Rs. 92,38,274/- invested in the capital accounts by the partners by cash by passing an assessment order dated 31.3.2022.
Aggrieved by the said order, the assessee filed an appeal before the CIT(A) wherein the appeal of the assessee has been partly allowed by deleting two additions made by the Assessing Officer in respect of contribution made by the partners of Rs.92,38,274/- and cash deposits in bank account of Rs.2,43,04,783/- u/s 69A of the Act.
Being dissatisfied, the revenue is in appeal before us challenging the very impugned order by raising the following grounds of appeal:
The ld. AR supports the impugned order thereby submitting that the Assessing Officer failed to consider the details furnished in the course of assessment proceedings in relation to the addition of Rs.92,38,374/- such as balance sheet, audited report in form 3CB-3CD and profit and loss account and copy of acknowledgement of return of all the partners of LLP namely Mr Amit Dayal Dadu (total contribution 5,30,09,559/-), Mr Kiran Dadu (total contribution 2,94,64,000/-), Mr Lipika Dadu (total contribution 1,65,60,000/-), Mr Mohan Dayal Dadu (total contribution 4,02,26,040/-) , Mr Sumit Dadu (total contribution 1,83,82,000/-). Swati dadu (total contribution 1,00,000) and the said contribution of the said capital of the partners was explained vide a letter dated 24.2.2022 which is already on record. In respect of addition of Rs.2,43,04,783/-, the ld. AR submitted that the assessee submitted details of cash deposit made in the regular bank accounts were of Rs. 12,15,23,917/-. His submission is that the cash deposit was made out of the cash sales and receipts from sundry debtors and the assessee filed the copy of VAT and CST return for the entire period to show that the said cash sale and sale to debtors have been disclosed to the VAT /GST 3 Dadu Textile LLP and have been accepted and the assessee duly filed audited balance sheet wherein all the bank accounts were reflected as also the turnover during the year. The ld. Ld. AR also submitted that assessment year 2017-18 was the year of demonetisation and as per CBDT instructions the cash deposit during demonetisation period was subject to scrutiny and hence it was explained that cash deposit during demonetization period was only Rs.32,97,021/-. The ld. AR submitted that there is no infirmity in the order of the ld. CIT(A) 7. Upon hearing submission of the counsels of the respective parties and on perusal of the material available on record, we find that in respect of addition of Rs.92,38,374/- being the capital contribution, the assessee submitted balance sheet, audited report in form 3CB-3CD and profit and loss account and copy of acknowledgement of return of all the partners of LLP including their contributions. It is surprising to us that when the Assessing Officer has accepted their capital contribution of more than 15 crores, how can the Assessing Officer disbelieve the cash contribution made by them which was duly and fully disclosed by them in their accounts. We also find that the assessee filed detailed explanation and the Assessing Officer did not raise any query nor made any proposal in the show cause notice to make the addition whereas capital contribution by the partner was duly explained. We note that in respect of addition u/s 69A of Rs.2,43,04,783/- being the 20% of the cash deposits, the assessee duly proved the cash receipts coming out of sales and the assessee also filed the cash book wherein the entire amount of deposits in the bank was duly debited and accounted for and the same have not been disputed. We note that the Assessing Officer was satisfied with the explanation filed on examination of the cash book and other evidences furnished by the assessee. We further find that the cash deposit was made out of the cash sales and receipts from sundry debtors and the assessee filed the copy of VAT and CST return for the entire 4 Dadu Textile LLP period to show that the said cash sale and sale to debtors have been disclosed to the VAT /GST and have been accepted and the assessee duly filed audited balance sheet wherein all the bank accounts were reflected as also the turnover during the year. The assessee filed the following details which was already placed before the Assessing Officer:
“1. Copy of letter dated 24.02.2022 filed in response to notice u/s 142(1) giving full details of sales along with VAT details. Copy of ITR acknowledgment, capital a/c as on 31st March 2017 and computation of income of Amit Dayal Dadu 2. Copy of ITR acknowledgment, trading a/c, P/L a/c, balance sheet, capital a/c as on 31st March 2017 and computation of income of Kiran Dadu 3. Copy of ITR acknowledgment, trading a/c, P/L a/c, balance sheet, capital a/c as on 31st March 2017 and computation of income of Lipika Jhunjhunwala.
4. Copy of ITR acknowledgment, trading a/c, P/L a/c, balance sheet , capital a/c as on 31st March 2017 and computation of income of Mohan Dayal Dadu 5. Copy of ITR acknowledgment, trading a/c, P/L a/c, balance sheet , capital a/c as on 31st March 2017 and computation of income of Sumit Dadu 6. Copy of ITR acknowledgment, trading a/c, P/L a/c, balance sheet , capital a/c as on 31st March 2017 and computation of income of Swati Dadu” 7.1 We find that the ld. CIT(A) in his order has elaborately discussed both the issues and allowed the claim of the assessee, the relevant part of the order of the ld. CIT(A) is essential to reproduce as under:
“In ground no 4 and 5, the assessee has disputed the addition of Rs. 92,38,274/- which was the contribution made by the partners. The AO accepted the contribution mad by the partners through bank but added back the amount contributed by cash. It was submitted that in response to notice u/s 142(1) dated 18.2.2022, confirmation letters along 0with balance sheet and acknowledgment of the return filed by partners were filed before the AO. It was submitted that the identity, credit worthiness of the partners and genuinety of transaction was not disputed by the AO. It was also submitted that the partners during the year huge sum through bank which was not disputed, therefore addition cannot be made simply when they contributed some amount by cash. It was submitted that there 5 Dadu Textile LLP were 6 partners, all of whom confirmed their contribution in cash and by cheque and such contribution was recorded by them in their accounts. It was submitted that the assessee duly discharged its onus to prove the contribution. I have considered the submissions. I find that the assessee has duly submitted evidences stated above to prove their capital contribution. The AO has not disputed the identity, creditworthiness of the partners and genuinety of the transaction. It was not the case of the AO that the partners did not disclose their cash contribution in their books of accounts. Simply because the contribution was made by the partners in cash, the same cannot be a ground for making addition. The AO in the show cause notice stated that the personal balance sheet of the partners was not filed which was not the fact. Thus, the addition was not in accordance with law and is accordingly directed to be deleted. This ground of the assessee is allowed. In ground no.6 and 7 the assessee has disputed the addition of Rs. 2,43,04,783/- u/s 69A. It was submitted that books of account were submitted and duly examined by the AO It is not disputed that the amount deposited by cash was not debited in the cash book. It was submitted that the books of accounts of the assessee all cash receipts on sale of goods and all credit entries in the books have been accepted. It was submitted that when books were accepted, the cash deposit in bank was found debited in the books the provisions of sec 69A were not applicable. It was submitted that there was no basis to make ad hoc disallowance of 20% of the deposits. I have considered the submissions. I find that the assessee was specifically asked to submit details of cash deposit vide notice u/s 142(1) dated 3.12.2021. The assessee duly filed explanation on 27.1.2022 explaining the cash deposit of Rs. 12,15,23,917/- made in the regular bank accounts. The assessee submitted that that cash deposit was made out of the cash sales and receipts from sundry debtors. The assessee also filed copy of VAT and GST return to support its cash sale and sale to debtors. The turnover declared in the audited balance sheet wherein all the bank accounts were reflected as was not disputed by the Assessing Officer nor the credits in the books of accounts. It is found that the cash deposit was not made during the demonetization period but was spread during the entire year. The cash deposit during demonetization period was only Rs.32,97,021/- which is also not disputed. The assessee also filed the copy of cash book to support the explanation. The Ld AO thereafter issued a notice on 18.2.2022, from which it appears that he examined the entire cash book and raised some queries which were also explained by the assessee vide letter filed on 24.2.2022. It is also evident from the facts on record that the AO issued show cause notice dated 14/3/2022 wherein some additions were proposed but estimated addition on account of cash purchase was not proposed. This also shows that the AO was satisfied about the source of cash deposit. I also find that the books of the assessee have not been rejected nor the turnover has been disputed. On these facts, in my opinion addition cannot be sustained. The estimated ad hoc addition is therefore directed to be deleted.” 7.2 Going over the above discussion and considering the facts of the case, we find that the ld. CIT(A) has elaborately discussed everything and thereafter, passed the impugned order in favour of the assessee. We,
In the result, the appeal of the revenue is dismissed.
Kolkata, the 11th November, 2025.