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Facts
The assessee, engaged in trading gold and silver ornaments, deposited Rs. 5,51,19,000/- in bank accounts during the demonetization period (November-December 2016). The Assessing Officer treated this as unexplained money under Section 69A of the Income Tax Act and added it to the assessee's income, which was subsequently upheld by the CIT(A).
Held
The Tribunal noted that the CIT(A) rejected the assessee's detailed evidences (sales register, customer details, invoices) without proper verification. It was held that the CIT(A) should have verified these evidences by obtaining a remand report from the Assessing Officer. Therefore, the matter was remanded back to the CIT(A) for proper verification and adjudication on merits, ensuring natural justice.
Key Issues
Whether the cash deposits made during the demonetization period constitute unexplained money under Section 69A, and whether the CIT(A) erred in rejecting the assessee's supporting evidences without proper verification.
Sections Cited
250, 69A, 115BBE, 143(1), 143(2), 142(1)
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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 23-05- 2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.
The grounds of appeal are as under:- “1.1 The order passed u/s. 250 on 23.05.2025 by NFAC, Delhi (for short “CIT(A)”) for AY 2017-18 confirming addition of Rs. 51,19,000/- in respect of cash deposits in bank accounts during demonetization period as unexplained money u/s 694 r.w.s. 115BBE is wholly illegal, unlawful and against the principles of natural justice.
1.2 The Ld. (CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant. The Ld. CIT(A) has erred in observing that the appellant was required to prove the genuineness of cash sales with supporting evidence and their confirmation.
2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding cash deposits made in bank account during demonetization period as unexplained money u/s 694 r.w.s 115BBE and thereby making addition of Rs. 5,51,19,000/-.
2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) has grievously erred in upholding cash deposits made in bank account during demonetization period as unexplained money u/s 69A r.ws 115BBE and thereby making addition of Rs. 5,51,19,000/-
2.3 The averments and observations made and conclusion reached by CIT(A) to confirm the cash deposits of Rs. 5,51,19,000 made in bank account as its unaccounted money are not admitted and the same are contrary to the evidence produced before him, so that they are not binding to the appellant.
2.4 The Ld. CIT(A) ought to have held that in law and or on facts invoking the provisions of Sec 69A rws 115BBE in respect of cash deposits in bank account during demonetization period.
2.5 Without prejudice to above and in alternative, the CIT(A) has failed to appreciate that since the cash sales out of which the impugned cash deposits were made in bank account were accepted in as much as the books were not rejected and the reported sales were brought to tax, it amounted to double taxation so that the impugned addition made by AO is highly excessive and calls for reduction.
It is therefore prayed that the addition of Rs. 5,51,19,000/- made by the AO and confirmed by CIT(A) should be deleted.”
The assessee is engaged in trading activity of gold and silver ornaments as proprietorship under the name and style of new Dagina. The assessee filed return of income for assessment year 2017-18 on 30-10-2017 declaring total income of Rs. 19,06,770/-. The said return was processed u/s. 143(1) of the Act. The case was selected for complete scrutiny and notice u/s. Sureshkumar Manchandbhai Shah, A.Y. 2017-18 143(2) was issued on 13-08-2018. Notice u/s. 142(1) along with questionnaires were issued on various days. The Assessing Officer observed that the assessee had made cash deposit of Rs. 5,51,19,000/- in his bank account during the demonetization period i.e. 09th Nov 2016 to 30-12-2016. The assessee filed submissions on 22-12-2019 to the Assessing Officer and after going through the same, the Assessing Officer has not accepted the submissions which was detailed to the page nos. 7 till 12 of the assessment order. The Assessing Officer held that cash deposit in the bank account during demonetization period represented income from undisclosed sources and therefore made addition of Rs. 5,51,19,000/- as deemed income as unexplained money u/s. 69A of the Act.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The ld. A.R. submitted that the assessee had given a detailed explanation vide dated 26-12-2019 along with copies of cash purchase invoices, specimen copies of sales bills with item- wise daily copy of VAT return etc. But the Assessing Officer rejected the said explanation mainly for the reason that there was abrupt increase in cash deposits during demonetization period compared to pre demonetization as well as the pattern of cash sales, cash deposits in the earlier year show that their sales were 97.8% in demonetization of the total sales of the year. The reason of launching professional scheme was also incorporated by the department. The ld. A.R. submitted that the sale purchase of the business of the assessee were fully supported by sale purchase register, invoice, cash book, bank book with daily Sureshkumar Manchandbhai Shah, A.Y. 2017-18 stock register and VAT referred which have not been disputed or rejected by the Assessing Officer. These details were before both the authorities. The ld. A.R. further submitted the reason of abnormal increase of cash deposit in demonetization period was due to the sales promotion scheme which was introduced during festival days and onwards by the assessee. The cash sales were also supported by the invoices, names, address, contact no. and description of the articles sold and also extract from sale and purchase register which was submitted before the Assessing Officer. The sales were disclosed in VAT return which was also before the Assessing Officer. The assessee also explained with detail-wise chart of cash that there was an open balance of Rs. 5,85,59,353/- on 10-11-2016 out of which cash deposits were made on 10,11 to 12 Nov, 2016. The said opening balance was made upto of the sales made in the earlier period. The assessee has shown gross profit of 6.31% of total sales of Rs. 11.46 crore and the same was not doubted by the Assessing Officer. The Assessing Officer’s contentions that no confirmation of the purchasers were submitted was not valid as the assessee has given full address and PAN of purchase including some of the sales bills. The ld. A.R. relied upon the case of M/s. Bhanu Jewelers Art vs. ITO (ITA 2011/Ahd/2024 order dated 04-08- 2025) wherein it was held in favour of the assessee by rejecting the identical reason as advanced by the Assessing Officer. The ld. A.R. also relied upon the decision of Tribunal in case of Nishita Silk Milk Ltd. vs. ITO (ITA No. 896/Ahd/2021 dated 20- 07-2012) and ACIT vs. Harshit Garg [(2025) 176 taxman.com 243 (Lucknow Tribunal)]. The ld. A.R. also relied upon the decision of Hon’ble Delhi High Court in case of CIT vs. Kailwash Jewellery House (TA No.613/2010)
Sureshkumar Manchandbhai Shah, A.Y. 2017-18 6. The ld. D.R. submitted that the assessee has shown to them made such sales from 01-04-2016 to 08-11-2016 resulting into sale of Rs. 7,44,73,676/- of which were in cash and below Rs. 2 crore. The total sale cash sales for assessment year 2017- 18 was Rs. 7,16,43,452/- and of this sale upto 08-11-2016 is Rs. 7,44,73,676/-. The ld. D.R. submitted that the Assessing Officer has rightly held that where assessee deposited huge cash in bank account during financial year 2016-17 including demonetization period but the sources were neither explained nor such money offered for taxation. The onus is on the assessee to prove that the cash deposits made did not bear the character of income. Thus, the assessee failed to prove the explanation for cash deposit during demonetization period was normal business receipts. The ld. D.R. further submitted that no confirmation was submitted by the assessee from any of the parties. The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has submitted copies of sale register along with chart giving particulars of name, address of the purchaser and PAN of the customers including contact, description of articles sold which was simply rejected by the ld. CIT(A). The evidences should have been verified by the CIT(A) once it has been submitted before the CIT(A). The rejection of these evidences is not as per Rule 46A(2) of the Income Tax Act, 1962. Thus, in the present case, the CIT(A) should have taken into account the evidences for the remand report from the Assessing Officer regarding genuinity of the evidences, therefore it will be proper to remand this matter back to the file of the CIT(A) for proper Sureshkumar Manchandbhai Shah, A.Y. 2017-18 verification of the evidences produced before the CIT(A) and after taking cognizance of the same, adjudicate the issue on merit as per Income Tax Act. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice.
In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 17-11-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 17/11/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद