Loading judgment…
Facts
The assessee individual had a cash deposit of Rs. 7.40 lakh in his bank account during the demonetization period. The Assessing Officer made an addition of this amount, which was confirmed by the CIT(A), as unexplained. The assessee contended that the cash was from business sales.
Held
The Tribunal held that the cash deposit was part of the total sale consideration from the assessee's business of trading in cashew seeds, mangoes, and Ayurvedic medicines. The Tribunal noted that the assessee's total cash withdrawals exceeded his total cash deposits prior to the demonetization period.
Key Issues
Whether the cash deposit of Rs. 7.40 lakh during the demonetization period can be considered as unexplained income, or if it is part of the assessee's regular business income.
Sections Cited
250, 147, 144B, 148, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
आदेश / ORDER
The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 03.06.2025 of National Faceless Appeal Centre (NFAC), Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of Assessment Order dated 22.03.2022 passed u/s.147 r.w.s144B of the Act.
The sole grievance of the assessee is against the finding of ld.CIT(A) confirming the addition of unexplained cash deposit of Rs.7.40 lakh made by Assessing Officer for A.Y. 2017-18 which was found to be deposited during the demonetization period.
At the outset, Ld. Counsel for the assessee referring to the facts of the case stated that the assessee is an individual Iqbal Abubakar Khatib and declared income of Rs.9,42,270/-. Thereafter based on the information about the cash deposit of Rs.7.40 lakh during the demonetization period in the bank account held with Vidarbha Konkan Gramin Bank, case of the assessee reopened by issuance of notice u/s.148 of the Act and then carried out the re-assessment proceedings after validly serving statutory notices. It was stated before ld. Assessing Officer that the assessee purchased Ayurvedic raw products directly from the farmers and since the villagers were accepting only cash against the supply of Ayurvedic roots/herbs assessee has to keep sufficient liquid cash in hand to make the payments to the farmers/village suppliers. But since there was no cash withdrawal prior to the cash deposit, ld. Assessing Officer had made the impugned addition. He further submitted that no relief was granted by ld.CIT(A).
Ld. Counsel for the assessee further referred to the paper book running into 124 pages and stated that the assessee is running the business regularly and also hold valid VAT registration certificate and has filed VAT returns for F.Y. 2016-17. He also submitted that gross total turnover for the year has been declared at Rs.1,27,06,029/- of which the major portion of sales is in cash and assessee has declared income u/s.44AD at Rs.10,23,596/- which is approximately 8.06% of the gross sales. He submitted that ld. Assessing Officer has accepted the remaining amount of sale consideration which have been received by the assessee during the year except for the period of demonetization when cash of Rs.7.40 lakh was received and even on this amount assessee has already declared income in the income-tax return.
On the other hand, ld. Departmental Representative supported the order of ld.CIT(A).
I have heard the rival contentions and perused the record placed before me. The only issue for my consideration is that whether ld.CIT(A) erred in confirming the action of ld. Assessing Officer making addition for unexplained cash deposit of Rs.7.40 lakh during the demonetization period. Assessee maintains the bank account with Vidarbha Konkan Gramin Bank. Cash deposits along with the withdrawals on monthly basis in this account is stated to be as under :
Month Cash deposits Cash withdrawals in A/c.No.1312 from A/c.No.1312 April 2016 9,60,000 - May 2016 13,50,000 14,97,000 June 2016 8,60,000 17,60,000 July 2016 95,000 1,40,000 August 2016 3,00,000 6,49,500 September 2016 1,00,000 8,27,000 October 2016 8,00,000 6,80,000 November 2016 -- 1,10,000 till 08.11.2016 November 2016 7,40,000 48,000 till 09.11.2016 December 2016 -- 40,000 January 2017 -- 2,10,000 February 2017 -- 1,30,000 March 2017 -- 1,00,000 Total 52,05,000 61,91,500
The above details of account withdrawals and deposits in bank account is not in dispute. Ld. Assessing Officer has not accepted the assessee’s contention observing that there is no immediate cash withdrawal. The above details of cash deposit of Rs.52,05,000/- includes the alleged cash deposit of Iqbal Abubakar Khatib Rs.7.40 lakh but the addition has been only for Rs.7.40 lakh which means that remaining amount of cash deposit of Rs.44,65,000/- has been accepted by the ld. Assessing Officer as the sale consideration received by the assessee during the year from the business of trading in Cashew seeds, Mangoes and balance used for Ayurvedic medicines. Now against the impugned cash deposits there are cash withdrawals also. Total cash withdrawals were Rs.56,63,500/- and cash deposits prior to the demonetization period are Rs.44,65,000/-. So even as per the cash withdrawals and cash deposits for the year under consideration itself, there is surplus of cash of Rs.11,98,500/- available with the assessee and the same is much more than the alleged cash deposit. Ld. Assessing Officer has also failed to consider that assessee has filed income-tax return and declared turnover of Rs.1,27,06,029/- and the sale consideration is majorly received in cash and has been deposited in the bank account and the alleged cash deposit is also part of the total sale consideration. Assessee has offered the net profit approximately 8.06% from the total sales. VAT returns have also been filed. Assessee is also registered with the GST. All these facts collectively indicate that the alleged sum of Rs.7.40 lakh is on account of cash sales from the business regularly carried out by the assessee during the year and cannot be treated as unexplained money. Even the total cash withdrawals minus cash deposits prior to the demonetization period are also sufficient to explain the alleged cash deposit. Therefore, finding of ld.CIT(A) is set aside and impugned addition of Rs.7.40 lakh is deleted. Effective grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on this 30th day of July, 2025.