RAIDEEP BHALLA & SONS,LUDHIANA vs. INCOME TAX OFFICER, WARD-VII (2), LUDHIANA, LUDHIANA

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ITA 869/CHANDI/2025Status: DisposedITAT Chandigarh07 November 2025AY 2017-2018Bench: SH. SANJAY GARG (Judicial Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO made the addition based on assumptions and presumptions without evidence of unexplained income. The Tribunal noted that cash sales were a small percentage of the turnover and depositing cash during demonetization was a necessity.

What were the facts?

The assessee deposited Rs.43,72,500/- from cash sales into their bank account during the demonetization period. The Assessing Officer (AO) added Rs.20,86,585/- to the assessee's income, which was confirmed by the CIT(A).

What were the issues?

Whether the addition made by the AO on account of cash deposits during demonetization is sustainable without any evidence of unexplained income.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHANDIGARH

Before: SH. SANJAY GARG

For Appellant: Shri K.J. Shalley, Advocate
For Respondent: Dr. Ranjit Kaur, Addl. CIT, Sr.DR
Hearing: 06.11.2025Pronounced: 07.11.2025

आदेश/ORDER

1.

The present appeal has been preferred by the assessee against the order dated 08.04.2025 of the Commissioner of Income Tax (Appeals) NFAC, Delhi [in short ‘the CIT (Appeals)] pertaining to 2017-18 assessment year.

ITA 869/CHD/2025 A.Y. 2017-18 2

2.

The assessee in this appeal is aggrieved by the action of the CIT (Appeals) in confirming the addition of Rs.20,86,585/- made by the Assessing Officer (in short ‘the AO’) on account of cash credits into the bank account of the assessee during demonetization period.

3.

The brief facts of the case are that the assessee had deposited the cash of Rs.43,72,500/- in its bank account out of the cash sales made prior to the announcement of the demonetization scheme. It was pleaded that because of declaration of demonetization scheme, the assessee was not able to reinvest/purchase material out of the cash received and as required by the government, the cash out of cash sales was deposited in the bank account. On being asked to explain in this respect, the assessee furnished the required details including evidence of purchase, stock-in-trade, closing stock, evidence relating to sales made on credit/banking channel as well as cash sales. The AO, considering the evidences and other details, however, could not point out any defect or discrepancy in the audited accounts submitted by the assessee and other evidences relating to the business of the assessee and sales made by the assessee during the year. He, however, was of the view that entire deposit out

ITA 869/CHD/2025 A.Y. 2017-18 3 of cash sales was not justified and that the assessee might have introduced some of his unaccounted income into the garb of cash sales. He, giving some benefit to the assessee of the cash sales and thereby, accepting the cash sales to the extent of Rs.22,85,915/-, made the addition of the remaining amount, out of the cash sales at Rs.20,86,585/-.

4.

The ld.CIT (Appeals) confirmed the additions so made by the AO.

5.

I have heard the rival contentions and gone through the record. The ld. counsel for the assessee has brought my attention to page 3 of the assessment order, wherein, the AO himself has given a chart of the cash sales made by the assessee as well as the details of the amounts deposited in the bank account. A perusal of the said chart would reveal that the assessee had made cash sales of Rs.2.85 lacs in the month of July,2016, Rs.7.93 lacs in the month of August,2016, Rs.7.47 lacs in the month of September,2016, Rs.20.78 lacs in the month of October 2016 and Rs.3.69 lacs from 01.11.2016 to 08.11.2016. Out of the said cash sales, the assessee had deposited Rs.18.90 lacs in the month of November and further an amount of Rs.24.82 lacs in the month of December, 2016.

ITA 869/CHD/2025 A.Y. 2017-18 4 The AO has not disputed the cash sales made in the month of July, 2016, Aug.,2016, September, 2016 and even October 2016 to some extent. The impugned addition has been made by the AO only on the basis of assumptions and presumptions without any evidence that the amount deposited was out of any unexplained income of the assessee. The purchases, stock-in-trade and closing stock has not been suspected by the AO. The only plea that the assessee had not deposited the cash in the bank account during the earlier period except during demonetization period, in my view, rather,goes in favour of the assessee. Since the Government had declared demonetization scheme, hence, the assessee was estopped from circulating the cash received from the cash sales for reinvestment etc. and hence, per force, the assessee was required to deposit the same into the bank account. No adverse view can be taken in this respect. Moreover, ld. counsel for the assessee has further demonstrated that the total cash sales of the assessee during the entire year were just 4.57% of its turnover of the year, which was very minor and was reasonably acceptable considering the business turnover of the assessee. In view of this, the impugned addition made by the lower authorities is not sustainable and the same is ordered to be deleted.

ITA 869/CHD/2025 A.Y. 2017-18 5

6.

In the result, appeal of the assessee stands allowed.

Order pronounced on 07th November,2025.

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