VIJAKUMAR JAGANNATH AGARWAL,AHMEDABAD vs. INCOME TAX OFFICE, GUJ-C-1-104, CIRCLE 2(1)(1), AHMEDABAD

ORDER \nPER MAKARAND V. MAHADEOKAR, AM:\nThis appeal by the assessee is directed against the order of the\nCommissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)"] dated\n27/09/2024, for the Assessment Year (A.Y.) 2017-18, wherein the CIT(A)\nupheld the addition of Rs.30,26,460/- made by the Assessing Officer (“AO\")\nunder Section 69A of the Income Tax Act, 1961 (“the Act\").\n2.\nFollowing grounds of appeal are raised by the assessee before us:\nITA No.1985/Ahd/2024\nVijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1\nAsst. Year:\n2017-18\n2\n\"1. The order passed by the Commissioner of Income Tax (Appeal), (NFAC), Delhi\nis bad in law and contrary to the provisions of law and facts. It is submitted that the\nsame be held so now.\n2. The Commissioner of Income Tax (Appeal), (NFAC), Delhi has grossly erred in\nconfirming the addition of Rs.30,26,460/- on account of unaccounted cash deposit\nduring demonetization period by invoking the provisions of section 69A of the Act.\nThere were cash deposits during demonetization period by the Appellant of\nRs.30,26,400/- over two bank accounts (Rs.27,76,460/- in the bank account\nno.5911466143 and Rs.2,50,000/- in the bank account no.2101540013053). The\nAppellant has submitted with the arguments that Rs.27,76,640/- cash were\ngenerated from cash sales for which he duly submitted books of account, audit report,\nsales invoices, bank statements, cash book ledger and aadhaar details of the third\nparty to prove the genuineness of the transactions and have also documented in the\nbooks of account and have offered for taxation and regarding Rs.2,50,000/-, the\nAppellant stated on record that such cash monies were of the house hold savings done\nby her wife over the period of their life.\n3. In continuation with what is stated above, the Commissioner is banking on the\nview of JAO who is of the view that regarding Rs.27,76,640/-, the Appellant has not\nprovided Pan Cards and considers PAN details the only critical tool to examine the\ngenuniness and other aspects of the transactions. The AO made an addition only on\nthe basis that Pan details were not provided and have clearly dismissed in accepting\naadhaar details and the CIT(A) has backed the decision of the AO.\n4. The Appellant reserves his right to submit all the details in connection with the\naddition as fresh evidence as per Rule 46A of the Income Tax Rules, 1962 at the time\nof hearing this appeal. Being aggrieved by the dismissal of aadhaar details and\ntherefore making the addition under section 69A of the Act, the Appellant prefers to\nappeal on the accompanied grounds.\n5. The Appellant craves, leave to add, to alter, to modify, to amend or to\nwithdraw/delete any of the grounds of appeal at any time in or before the final hearing\nof appeal.\nFacts of the Case:\n2.\nThe assessee is engaged in the textile trading business and had\ndeposited Rs.27,76,460/- in the bank account of his proprietorship firm, M/s.\nRajesh Textile (Kotak Mahindra Bank), and Rs.2,50,000/- in his personal\nITA No.1985/Ahd/2024\nVijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1\nAsst. Year:\n2017-18\n3\nsavings account (Nutan Nagrik Bank) during the demonetization period\n(08.11.2016 to 30.12.2016). The case was selected for scrutiny assessment\nunder CASS. Multiple notices were issued under Sections 143(2) and 142(1)\nof the Act, but the assessee failed to comply on several occasions. The\nassessee's bank statements reflected large cash deposits during the\ndemonetization period, which were significantly higher than the usual\ndeposits in earlier years. The AO made the addition under Section 69A on the\ngrounds that the assessee failed to provide PAN details of customers who\nallegedly made cash purchases. The AO rejected the Aadhaar details\nprovided for buyers, stating that PAN was necessary to verify the identity\nand genuineness of transactions. As the assessee could not establish the\nsource of cash deposits, the deposits were treated as unexplained money\nunder Section 69A.\n3. The assessee filed an appeal before the CIT(A) arguing that the cash\ndeposits were generated from legitimate cash sales, which were duly\nrecorded in the books of accounts, the books of accounts were audited, the\namount relating to cash deposits was offered for taxation, and tax was paid.\nThe CIT(A), however, upheld the AO's decision, stating that the assessee\nfailed to provide PAN details of customers even during remand proceedings.\nThe CIT(A) also noted that Aadhaar details alone were not sufficient to verify\nthe genuineness of transactions. CIT(A) held that the assessee failed to\ndischarge his burden of proof under Section 69A of the Act, therefore the AO\nwas justified in making the addition under Section 69A of the Act.\n4.\nDuring the course of hearing before us, the Authorized Representative\n(AR) of the assessee contended that AO and CIT(A) accepted the books of\nITA No.1985/Ahd/2024\nVijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1\nAsst. Year:\n2017-18\n4\naccounts, cash ledger, and bank statements without pointing out any\ndiscrepancies therefore adding cash deposits as unexplained money results\nin double taxation, as the same amount has already been included as sales in\nthe profit & loss account. The AR further contended that the customers of\nassessee are small and therefore could not produce the PAN cards, however,\nAadhaar cards with addresses were provided, discharging the primary\nburden of proof. The assessee, by way of written submission, relied on some\njudicial precedents in his support which are:\ni.\nii.\niii.\nLakhmichand Baijnath v. CIT (1959)

35. ITR 416 (SC).\nDurga Fire Work v. ITO (ITA No. 383/Del/2024, ITAT Delhi).\nShivam Industries v. ACIT (ITA No. 1612/Del/2021, ITAT Delhi).\n4.1.\nRegarding the cash deposit of Rs.2,50,000/- the AR contended that\nsuch cash deposit in the personal savings account of the assessee held with\nNutan Nagrik Bank during the demonetization period represents household\nsavings accumulated over several years by the family members and is not\nunexplained money. The pointed out the CBDT Instruction No. 03/2017\ndated 21.02.2017, which provides a Standard Operating Procedure (SOP) for\nverification of cash deposits during demonetization. The guidelines state that\nfor individuals above 70 years of age, cash deposits up to Rs.5.0 lakh require\nno further verification if claimed to be household savings.\n5. The Departmental Representative (DR) contended that the assessee\nfailed to provide PAN details of customers even during remand proceedings,\nwhich was a key requirement for verification. The DR further contended that\nITA No.1985/Ahd/2024\nVijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1\nAsst. Year:\n2017-18\n5\nAadhaar details alone cannot be considered sufficient proof of genuineness\nof transactions.\n6. We have considered the rival submissions and material available on\nrecord. We note that the assessee has recorded the cash deposits as sales in\nthe audited books of account, and no discrepancies were found by AO or\nCIT(A). Failure to provide PAN alone cannot be the sole reason to treat the\nsales as unexplained money, particularly when Aadhaar details were\nsubmitted. The AO, even during remand proceedings, did not attempt any\nverification under Section 133(6) or other means to investigate the\ngenuineness of transactions.\n6.

1. The assessee has relied upon the following judicial precedents, which\nsupport his case. In Case of Lakhmichand Baijnath v. CIT (1959) 35 ITR 416\n(SC), the Hon'ble Supreme Court held that amounts credited in business\nbooks are presumed to be business receipts unless proven otherwise by the\nRevenue. In the present case, the Revenue has not disproved the assessee's\nexplanation or challenged the audited books of account. In case of Durga Fire\nWork v. ITO (ITA No. 383/Del/2024, ITAT Delhi), the Co-ordinate bench\nruled that cash deposits recorded in audited books cannot be treated as\nundisclosed income under Section 69A. In present case the AO accepted the\nbooks of account yet rejected the transactions solely due to the absence of\nPAN, which goes against this ruling. In case of Shivam Industries v. ACIT\n(ITA No. 1612/Del/2021, ITAT Delhi), the co-ordinate bench held that if\nbooks are audited and not rejected, Revenue cannot make an addition under\nSection 69A. In the present case the assessee's books were audited and\naccepted therefore, the addition is not justified. Considering the judicial\n Jagannath Agarwal vs. Income Tax Office, Guj-C-1\nAsst. Year:\n2017-18\n6\nprecedents and the facts of the case, we find that the AO has failed to conduct\nproper verification before making the addition.\n6.

2. In case of cash deposit of Rs.2,50,000/- assessee explained that the\ndeposit of Rs.2,50,000/- was out of household savings accumulated over\nseveral years. The AO made an addition under Section 69A of the Act,\ntreating the amount as unexplained, citing a lack of documentary evidence.\nThe CIT(A) has not dealt with this issue in his order. We have considered the\nargument of the AR and find that The quantum of deposit is small\n(Rs.2,50,000/-) and falls within the permissible exemption limit as per CBDT\nguidelines for senior citizens. The Revenue has not brought any material\nevidence to disprove the assessee's explanation. The AO made the addition\nsolely based on suspicion, without conducting an inquiry under Section\n133(6) or analyzing the assessee's past financial records.\n6.

3. Given the above findings, as regards the addition of Rs.27,76,460/-\nrepresenting cash deposits in the bank account of M/s. Rajesh Textile we\ndeem it appropriate to restore the matter to the file of the AO with the\ndirections to verify the genuineness of the parties whose Aadhaar details\nhave been provided by the assessee. Conduct independent inquiries,\nincluding issuing notices under Section 133(6) of the Act to verify the buyers,\ninstead of dismissing the transactions outright for lack of PAN details.\n6.

4. As regards the addition of Rs.2,50,000/- deposited in the assessee's\npersonal savings account, we find merit in the argument that the CBDT\nInstruction No. 03/2017 dated 21.02.2017 specifically provides for exemption\nfrom further verification for senior citizens (above 70 years) for deposits up\n Jagannath Agarwal vs. Income Tax Office, Guj-C-1\nAsst. Year:\n2017-18\n7\nto 5.0 lakh, if claimed as household savings. However, since the AO has not\nexamined the financial records, past cash withdrawals, or spending patterns\nof the assessee, we deem it appropriate to restore this issue for\nreconsideration. The AO is directed to examine past cash withdrawals,\nfinancial history, and pattern of savings to determine whether the deposit\ncould reasonably be attributed to accumulated household savings. The AO is\nalso directed to ensure that the CBDT guidelines are followed in letter and\nspirit before drawing any adverse inference against the assessee.\n7.\nIn the result, the appeal of the assessee is allowed for statistical\npurposes.\nOrder pronounced in the Open Court on 19th February, 2025 at Ahmedabad.\nSd/-\n(T.R. SENTHIL KUMAR)\nJUDICIAL MEMBER\nSd/-\n(MAKARAND V. MAHADEOKAR)\nACCOUNTANT MEMBER\nअहमदाबाद/Ahmedabad, दिनांक/Dated 19/02/2025\nटी.सी. नायर, व.नि. स. / T.C. NAIR, Sr. PS\nआदेश की प्रतिलिपि अग्रेषित/