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Facts
The assessee, a proprietor of a manufacturing unit, filed a return for AY 2017-18 showing an income of Rs. 4,03,120/-. The Assessing Officer initiated reassessment proceedings under Section 147, citing cash deposits of Rs. 16,82,000/- in the assessee's bank account during the demonetization period as not commensurate with reported sales.
Held
The Tribunal held that the cash deposits were from explained sources, being cash sales and recovery from debtors, duly reflected in the books of account and VAT returns. The Assessing Officer had not rejected the audited books of account, and the addition amounted to double addition.
Key Issues
Whether the addition made on account of cash deposits in the bank was justified when the assessee's books of account, reflecting these deposits as sale proceeds, were not rejected and the addition constituted double taxation.
Sections Cited
147, 148, 144B, 143(1), 69A, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the Assessee against the order dated 28.12.2023 of CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the A.Y. 2017- 18.
2. Grounds of appeal
are as under: - 190-Chd-2024 Madan Lal, Fatehabad 2
1. That having regard to the facts and circumstances of the case, the Ld. Commissioner of Income-tax (A) erred on facts and in law in upholding initiation of assessment proceedings under section 147 of the Income Tax Act, 1961 and completing the assessment under section 147 r. w. s. 144B of the Income Tax Act, which was illegal and not tenable in law being not in accordance with the requirements of provisions of sections 147 to 151 of the Income Tax Act, 1961.
2. That having regard to the facts and circumstances of the case, Ld. Commissioner of Income-tax (A) has erred in law and on facts in confirming the addition of Rs. 16,82,000/- on account of cash deposits in bank accounts of the appellant, without properly appreciating the facts of the case on record, submission made, and evidence furnished by the assessee. 2.1 In any view of the matter and in any case, Ld. Commissioner of Income-tax(A) erred in confirming the addition of Rs. 16,82,000/- made by the Ld. Assessing Officer without rejecting the books of account duly audited containing entries relating to such cash deposits. 2.2 That having regard to the facts and circumstances of the case, Ld. Commissioner of Income-tax (A) has erred in law and on facts in confirming the addition of Rs. 16,82,000/- on account of cash deposits in 190-Chd-2024 Madan Lal, Fatehabad 3 bank accounts out of sales proceeds recorded in books of account as it amounts to double addition, once credited to profit and loss account as sales and again as unexplained cash deposits in banks.
3. That the appellant craves the leave to add, modify, amend, or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.
Brief facts of the case as per the synopsis filed by the Assessee are as under:-
1. Sh. Madan Lal is a Proprietor of M/s Ganga Pipe Industry, village Dhangar, District Fatehabad engaged in the business of manufacturing and sale of RCC pipes and trading in cement.
The assessee filed his return of income for A.Y. 2017-18 on 20.02.2018 declaring income of Rs. 4,03,120/-, which was processed u/s 143(1) vide order dated 24.02.2018.
3. The assessee has duly disclosed in the return of income in the relevant schedule that he has deposited cash of Rs.
190-Chd-2024 Madan Lal, Fatehabad 4 16,82,000/- during 09.11.2016 to 30.12.2016 in his bank account No. 20638854926 maintained with Allahabad Bank.
Subsequently, the Ld. Assessing Officer initiated reassessment proceedings u/s 147 by issuing notice u/s 148 on 28.03.2021 without having any cogent reasons. The main reason as per para-3 of reasons recorded is that - “3. Sh. Madan Lal has reported income of Rs. 4,03,120/- in his return of income during the year under consideration. The assessee has reported the sales turnover of Rs. 1,52,48,077/-. The income declared and sales turnover reported by the assessee is not commensurate with the cash deposit of Rs. 16,82,000/- made by the assessee in his bank account during the demonetization period." The above observation of the Ld. Assessing Officer is not based on any cogent reasons, unfounded and fundamentally flawed, because it cannot be inferred that cash deposit of Rs. 16,82,000/- out of sale turnover of Rs. 1,52,48,077/- was disproportionate or excessive, especially 190-Chd-2024 Madan Lal, Fatehabad 5 when the assessee has a rural based industry and the sales to the villagers are mostly in cash. Hence, reopening is invalid. [refer: CIT, Central-l v. Indo Arab Air Services [2015] 64 taxmann.com 257 (Delhi)].
The assessee has been maintaining regular books of account which have been duly audited. The assessee has furnished copy of TAR along with Balance Sheet, Trading and Profit & Loss Account, and Cash Book. The assessee is also registered dealer under Haryana Sales Tax Act and has filed copies of four quarterly VAT returns and annual VAT return for F.Y. 2016-17 along with a copy of VAT order passed by the Assessing Authority, Sales Tax Department. 6 The cash deposits in the bank were made from cash realized on cash sales made, recovery from sundry debtors and withdrawals from bank. The assessee has also furnished details of month wise cash availability and cash utilization for the F.Y. 2016-17, demonstrating that the cash of Rs. 16,82,000/- deposited in the bank account in the month of November 2016 was out of 190-Chd-2024 Madan Lal, Fatehabad 6 business receipts duly reflected in the regular books of accounts. The cash sales made have been duly reflected in VAT Returns and accepted by the Sales Tax Department.
7. It is pertinent to mention here that there was opening cash balance of Rs. 16,66,466.25 as on 01.11.2016 as appearing in the cash book. The assessee made cash deposit of Rs. 16,82,000/- in bank account on 15.11.2016 out of opening cash balance of Rs. 17,99,081.25 on that date. Thus, the cash deposit of Rs. 16,82,000/- was from explained sources out of business receipts on account of cash sales and cash realization from debtors, which was a normal feature of assessee's business. The Ld. Assessing Officer has not rejected the books of account duly audited containing entries relating to such cash deposits. Therefore, the addition made is not sustainable.
8. Further, the transactions relating to cash sales, cash recoveries from debtors and cash deposit in the bank account have been duly recorded in the regular books of account 190-Chd-2024 Madan Lal, Fatehabad 7 maintained by the assessee and, therefore, the addition of Rs. 16,82,000/-could not be made u/s 69A of the Act. Hence, the addition deserves to be deleted on this account also.
Furthermore, the addition of Rs. 16,82,000/- on account of cash deposits in the bank account amounts to double addition i.e. once on account of cash sales included in total sales credited to P&L Account and again the addition made on account of cash deposits in bank, which is not permissible.
4. During proceedings before us, the ld. Counsel for the Assessee argued the case on the line of the written submissions filed before us. From the grounds of appeal, it is seen that apart from technical / legal issue of reopening of the assessment u/s 148 of the Income Tax Act, 1961 (in short 'the Act'), the only issue on merit is with regard to the addition of Rs. 16,82,000/- on account of cash deposited in the bank account. The ld. Counsel submitted before the Bench that deposit of cash in the bank account was the sale proceeds, as 190-Chd-2024 Madan Lal, Fatehabad 8 reflected in the books of account of the Assessee, therefore, the findings given by the Assessing Officer that it was an unaccounted cash and its confirmation by the Ld. CIT(A) is unjustified.
5. Per contra, the ld. DR relied on the orders of the authorities below.
We have considered the assessment order of the Assessing Officer and the appellate order passed by the Ld. CIT(A). We have also gone through the written submissions and the paper book showing the availability of cash of Rs. 16,82,000/- in the books of account of the Assessee which was deposited in the bank account. The claim of the Assessee of availability of cash in the books of account of the Assessee could not be rebutted by the Revenue as the cash available in the books of account was the sale proceeds of products, which the Revenue has accepted. Once the availability of stock with the Assessee and its sale is accepted by the Revenue, the sale proceeds cannot be denied / 190-Chd-2024 Madan Lal, Fatehabad 9 rejected. The ld. Counsel for the Assessee filed various case laws on this issue.
We have also considered the different case laws on this issue and we have also considered the written submissions and arguments of the Ld. counsel of the Assessee. We find that the cash deposited in the bank account seems to be available in the books of the Assessee as sale proceeds, therefore, in our considered view the addition of the sale proceeds received as cash is not justified. Accordingly, Assessee’s appeal on this issue is allowed. Since we have allowed the Assessee’s appeal on merit, therefore, we are not giving any findings on the legal / technical issue which become just academic in nature.
In the result, Assessee’s appeal stands allowed.
Order pronounced on 13.10.2025.