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Facts
The assessee, a retail medical store, faced reassessment due to alleged cash deposits of Rs.1,87,92,700/-. While actual deposits were Rs.29,78,000, the Assessing Officer treated this as unexplained money under Section 69A. The assessee challenged the addition, asserting that the deposits were regular business receipts, forming part of its turnover, and that the reopening itself was based on incorrect initial information.
Held
The Tribunal held that the cash deposits were part of the assessee's regular business sales, adequately explained by its turnover and operations, including sales during the demonetization period. It found no basis to treat them as unexplained money under Section 69A, as the Assessing Officer failed to provide tangible material to prove otherwise. Consequently, the addition made by the AO was deemed unwarranted.
Key Issues
1. The validity of the reassessment proceedings initiated under Sections 147 and 148 of the Income Tax Act, 1961, when based on incorrect initial information. 2. Whether cash deposits found in the assessee's bank account during the relevant year constitute unexplained money liable for addition under Section 69A, despite being recorded as part of regular business sales.
Sections Cited
148, 147, 69A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-Ms. SUCHITRA KAMBLE
O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), /National Faceless Appeal Centre, Delhi, vide order dated 21.04.2025 relevant to the Assessment Year 2017-18.
The assessee has raised the following grounds of appeal:
1.1) The ITO, Ward 6(1)(1), Ahmedabad has erred in issuing the notice under section 148 without there being any reason to believe that the income of the assessee had escaped assessment just on the basis of alleged incorrect information available with the department. Asst. Year : 2017-18 - 2– 1.2) The reassessment under section 147 is void ab initio and bad in law as the same was initiated at the satisfaction/instance of the other authority is without any independent evaluation by the learned AO. 1.3) Ld. A.O. has wrongly mentioned following facts in reason for reopening and, thus, there was wrong reason to believe that the income of the assessee had escaped assessment and, thus, the reopening is bad in law. Particular As per Reason for Correct Facts Reopening Date of filing ITR 9th July, 2017 26th October, 2017 Total Income 11,64,900/- 1,60,530/- Cash Deposit 1,87,92,700/- 29,78,000/- Number of year end from Relevant More than 4 year Less than 4 year year 2.1) Notwithstanding the above said ground of appeal
, the addition of Rs. 29,78,000 on account of cash deposits is not justified at all because such amount having been recorded already in the turnover of the assessee towards credit side of Trading Account and further making the addition on account of 'cash deposits' would amount to double addition. 2.2) The confirmation of addition by the Commissioner (Appeals) in respect of cash deposits out of regular sales of the assessee as per audited books of accounts is against the facts and circumstances of the case and the learned Commissioner (Appeals) has erred in confirming the addition as made by the assessing officer only on surmises and conjectures. 2.3) That the learned Commissioner (Appeals) has failed to appreciate that due to the nature of business, where the sales of Medicine in retail and cash deposits during the year are regular feature, being out of declared sales in the audited books of accounts. 3.1) The Ld. CIT (A) has erred in confirming the Cash Deposit addition of Rs. 29,78,000/- u/s 69A by passing Ex-parte Appellate Order without adjudicating the grounds of appeal on merits of the case. 3.2) The Ld. CIT (A) has erred in confirming the addition of Rs. 29,78,000/- on the ground of non-compliance of Hearing Notices issued without appreciating the fact the Appellant was not aware of such Notices. 4) That the order passed by the Ld. CIT u/s 250 of the I.T. Act, 1961 was arbitrary, bad in law and unjust. 5) That the assessee craves leave to urge such other ground or grounds before or at the time of hearing of appeal. Asst. Year : 2017-18 - 3–
3. The assessee is a partnership firm engaged in the business of running a retail medical store. The case was reopened on the basis of information that the assessee had made cash deposits of Rs.1,87,92,700/- during the relevant year. During reassessment proceedings, it was found that the actual cash deposits amounted to Rs.29,78,000, and not Rs.1,87,92,700/-. The Assessing Officer, however, treated these cash deposits as unexplained money and made an addition of Rs.29,78,000 under section 69A of the Act.
We have heard both the parties and perused the materials available on record. It is an undisputed fact that the assessee is engaged in the retail business of medicines. The total turnover of the assessee during the year amounted to Rs.3.40 crores against purchases of Rs.3.07 crores, and it had closing stock of Rs.62.87 lakhs. The cash deposits in the bank account, totalling Rs.29,78,000, form part of the total sales of ₹3.40 crores. On examination of the bank statement, it is evident that deposits were made regularly from April to March mostly ranging from Rs.30,000/- to Rs.1,00,000/- at a time. It is further noted that higher deposits occurred during November to early December 2016, i.e., during the demonetization period, when sale of medicines against Specified Bank Notes (SBNs) was legally permitted for medical purposes. Considering the business turnover, the stock position, and the regularity of cash deposits, it is clear that the same represents routine business receipts. The reopening of assessment was based on incorrect information that the assessee had deposited Rs.1.87 crores, whereas the actual deposits were only Rs.29.78 lakhs. No independent tangible material has been brought on record by the Assessing Officer Asst. Year : 2017-18 - 4– to prove that the deposits were unexplained or represented unaccounted income. On the contrary, the deposits are duly recorded as part of regular business sales. Therefore, no addition is warranted under section 69A of the Act.
In the result, the appeal of the assessee is allowed.