KISHANLAL HARIRAM MAHETA,KHEDA vs. THE ITO, KHEDA CIRCLE, NADIAD

The solitary issue raised by the assessee is as under: -

The assessee is into the business of cotton seeds cake and flour as retailer. The assessee filed return of income on 19.01.2018 declaring total Kishanlal Hariram Maheta Vs. ITO Assessment Year: 2017-18 Page 2 of 5 income at Rs.3,69,640/-. Notice u/s 143(2) of the Act was issued to the assessee on 24.09.2018. The Assessing Officer observed that the assessee has not filed reply and, therefore, once again the statutory notices were issued to the assessee. In response to the subsequent notices, the assessee filed details. The Assessing Officer observed that the cash deposits of Rs.7,41,000/- in the Bank of Baroda’s account pertained to assessee’s individual proprietary concern viz. Maruti Enterprise. The source of cash deposited was asked to be substantiated, for which the assessee furnished the reply and stated that out of total cash deposits of Rs.7,41,000/-, Rs.4,91,000/- had deposited in the form of old currency and balance amount of Rs.2,50,000/- had made in the form of new currency. The cash deposited amounting to Rs.4,91,000/- in the form of old currency was sourced from cash on hand and balance amount of Rs.2,50,000/- was sourced from cash sales received during that period. On verification of bank statements, the Assessing Officer observed that the assessee had deposited cash of Rs.8,000/- only on 04.11.2016. After taking cognisance of the assessee’s reply and the details, the Assessing Officer made addition of Rs.4,91,000/- 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) dismissed the appeal of the assessee.

The Ld. AR submitted that the assessee is a retailer of cotton seeds cake and flour, and the major sales of the assessee are on cash basis to various agriculturists, consumers and small businessmen working in the rural areas. The day-to-day cash generation was being used for purchases of various goods and the balance amount was kept in the hands of the assessee, including the cash on hand with employees. The average sales of Kishanlal Hariram Maheta Vs. ITO Assessment Year: 2017-18 Page 3 of 5 the assessee is of more than Rs.5,40,000/- per month as against the monthly purchase of Rs.4,80,000/-. Sales up to 18.11.2016 was Rs.44,27,960/- and the purchase was of Rs.39,54,803/-. Cash sales was of Rs.41,61,460/- and purchase by cash was Rs.31,27,439/- and the transaction by bank was Rs.8,27,364/-. Thus, the Ld. AR submitted that the assessee has sufficient cash in hand and, as per the requirement of assessee’s business exigencies, the assessee is required to have cash in hand for the purchase and sales. Therefore, the Ld. AR submitted that the Assessing Officer as well as the CIT(A) has totally ignored the details filed by the assessee.

The Ld. DR submitted that the assessee is not maintaining any books of accounts and the details of cash sales and purchase was not filed during the assessment as well as before the CIT(A). The Ld. DR relied upon the assessment order and the order of the CIT(A).

Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Assessing Officer is not questioning the assessee’s business exigencies which was categorically mentioned in paragraph No. 5.1 of the assessment order that the cash was deposited of Rs.7,41,000/- in Bank of Baroda account pertaining to assessee’s proprietary concern viz. Maruti Enterprise. Thus, the assessee is having cash in hand as per the requirement of his business and, in fact, the assessee is in the business of trading in edible oil and various food grains on retail and wholesale basis in his proprietary concern. The set up of the business has already been explained by the assessee before the Assessing Officer as well as before the CIT(A) through various details.

In the result, the appeal of the assessee is allowed.