KOVIDA DESIGNS,HYDERABAD vs. ITO, WARD-6(4), HYDERABAD

(निर्धारण वर्ा/Assessment Year: 2017-18) KOVIDA DESIGNS Vs. Income Tax Officer Hyderabad Ward 6(4) PAN:AAQFK5892C Hyderabad (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: C.A T. Ram Prasad रधजस् व द्वधरध/Revenue by: Dr. Sachin Kumar, Sr. DR सुिवधई की तधरीख/Date of hearing: 13/10/2025 घोर्णध की तधरीख/Pronouncement: 13/10/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by, Kovida Designs (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), (“Ld. CIT(A)") dated 15.07.2024 for the A.Y 2017- 18.

Page 2 of 7 2025, has held that a justice-oriented and liberal approach should be taken while dealing with the application filed by an appellant seeking condonation of the delay in filing of the appeal. Accordingly, applying the ratio laid down by the Hon’ble Supreme Court in Vidya Shankar Jaiswal (supra), we condone the delay of 248 days in filing the appeal before this Tribunal, subject to payment of cost of Rs.5,000/- by the assessee, which shall be deposited in the Prime Minister’s National Relief Fund within one month from the date of receipt of this order. The appeal is accordingly admitted for adjudication on merits.

6. The brief facts of the case are that the assessee is a partnership firm engaged in the business of running a designer boutique under the name and style of “Kovida Designs.” The Page 3 of 7 assessee filed its original return of income on 31.10.2017, declaring total income of Rs.11,59,610/-, disclosing gross sales of Rs.3,07,41,823/-. The case of the assessee was selected for scrutiny and a notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued. Subsequently, the assessee filed a revised return on 25.10.2018, declaring the same total income of Rs.11,59,610/-, but reducing gross sales to Rs.68,41,823/-. During assessment, the Ld. AO required the assessee to explain and substantiate the reduction in the amount of sales with bills/vouchers and supporting material. The assessee stated that certain loan receipts were inadvertently included as turnover in the original return. Not being satisfied, the Ld. AO treated the turnover of the assessee at Rs.3,07,41,823/- as per the original return, rejected the book results, and estimated profit @10% thereon at Rs.30,74,182/-. 6.1 The Ld. AO further noticed cash deposits of Rs.29,50,000/- during the year, including Rs.21 lakhs deposited during the demonetization period. Being unsatisfied with the explanation of source/nature, the Ld. AO treated Rs.21 lakhs as unexplained money under section 69A of the Act and made a separate addition. Accordingly, the Ld. AO completed the assessment under section 143(3) of the Act on 18.12.2019 determining the total income of the assessee at Rs.51,74,192/-.

7. Aggrieved with the order of the Ld. AO, the assessee filed appeal before the Ld. CIT (A). The Ld. CIT(A) was not convinced with the submissions of the assessee and accordingly, dismissed the appeal of the assessee.

8. Aggrieved with the order of the Ld. CIT (A), the assessee is in further appeal before us. The Ld. AR submitted that the only effective dispute in this appeal is the addition of Rs.21 lakhs made by the Ld. AO under section 69A of the Act, being cash deposits during demonetization. He further submitted that the Ld. AO has already taken turnover at Rs.3,07,41,823/- and estimated profit @10% thereon. He also submitted that the impugned cash of Rs.21 lakhs is already embedded in the turnover so adopted by the Ld. AO. Accordingly, as per the Ld. AR, a separate addition under section 69A of the Act would result in double taxation of the same amount in the hands of the assessee i.e. once as part of business turnover (on which profits have been estimated) and again as unexplained money under section 69A of the Act. Accordingly, the Ld. AR prayed before the Bench to delete the addition of Rs.21 lakhs.

9. Per contra, the Ld. DR contended that the assessee failed to substantiate the source of Rs.21 lakhs either before the Ld. AO or before the Ld. CIT(A) with proper contemporaneous evidence. It is not borne out from the record that the impugned cash of Rs.21 lakhs is part of the turnover of Rs.3,07,41,823/- adopted by the Ld. AO. Accordingly, the Ld. DR prayed for the remand of the issue to the file of the Ld.AO for proper verification.

10. We have carefully considered the rival submissions and perused the material available on record. The narrow controversy is whether the cash deposit of Rs.21 lakhs treated as unexplained money under section 69A of the Act, has already been considered within the turnover of Rs.3,07,41,823/- on which the Ld. AO has estimated profit @10%. If the impugned cash is already embedded in the turnover figure used for estimation, a further addition under Page 5 of 7 section 69A of the Act would amount to double addition, which is in our view is impermissible in law. Conversely, if the cash is independent of trading receipts, the Ld. AO is within his remit to examine its taxability as per the Act. Given that the present record does not conclusively establish this factual nexus, and considering the limited and objective nature of the verification required, we deem it appropriate, in the interest of justice and fair play, to set aside this issue to the file of the Ld. AO for a limited purpose to verify whether the cash deposit of Rs.21 lakhs made during the demonetization period has already been included in the turnover of Rs.3,07,41,823/- adopted for estimating business income. If the same is included in the said turnover, then the addition under section 69A of the Act of Rs.21 lakhs shall be deleted to avoid double addition. If the same is not included in the turnover, the Ld. AO may take an appropriate view in accordance with law after affording due opportunity of being heard to the assessee and by passing a speaking order confined to this issue. We clarify that this remand is strictly limited to the above verification; all other aspects as adjudicated by the lower authorities remain undisturbed.