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Facts
The appellant, a DTH recharge coupon distributor, filed an ROI disclosing Rs. 4,07,550 for AY 2017-18. The AO completed the assessment at Rs. 6,53,550, making an addition of Rs. 2,46,000 for unexplained cash deposits made during demonetization. The CIT(A) upheld this addition, citing the appellant's failure to maintain books of account.
Held
The Tribunal noted that the Income-tax Act does not mandate maintaining books of account for this assessee. Finding it plausible that the cash deposits were from business receipts, the Tribunal concluded that the AO was not justified in making the addition and directed its deletion.
Key Issues
Whether the AO was justified in treating cash deposits of Rs. 2,46,000 during the demonetization period as unexplained money, given the appellant's explanation of business proceeds and the lack of a mandatory requirement to maintain books of account.
Sections Cited
143(3)
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Income Tax Appellate Tribunal, “SMC” BENCH, COCHIN
Before: Shri Inturi Rama Rao
Asst.Year 2017-2018 Saithu Muhammed The Income Tax Officer Puliyamparambu House v. Ward 5 Panayur Athicode, Chittur Palakkad. Palakkad – 678 552. PAN : CYJPS1568N. (Appellant) (Respondent) Appellant by : Sri.Padmanathan K.V, Advocate Respondent by : Smt.Leena Lal, Senior AR Date of Date of Hearing : 13.03.2025 Pronouncement : 08.04.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Assessment Centre / Commissioner of Income- tax (Appeals) [“CIT(A)” for short] dated 31.01.2025 for the assessment year 2017-2018.
Brief facts of the case are that the appellant is an individual, engaged in the business of distributor of DTH recharge coupon of Airtel, in the name and style of S.M.Communication. The return of income for the assessment year 2017-2018 was filed on 31.12.2018 disclosing an income of Rs.4,07,550. Against the said return of income, the assessment was completed by the Assessing Officer (“the AO”) vide order dated 16.12.2019 passed u/s.143(3) of the Income-tax Act, 1961 (“the Act”) at a total income of Rs.6,53,550. While doing so, the AO . Saithu Muhammed. made an addition of cash deposit in specific bank notes made during the demonetization period as unexplained money of the assessee, rejecting the explanation of appellant that the said deposits were made out of the proceeds collected from various retail dealers of recharge coupon, etc., out of total cash deposits of Rs.3,71,500 by holding that the appellant has failed to produce documentary evidences in support of the explanation.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order, confirmed the action of the AO by observing that the appellant has failed to maintain books of account, so the explanation of the appellant in support of the source of cash deposits was not acceptable.
Being aggrieved, the appellant is in appeal before the Tribunal, in the present appeal.
I heard the rival submissions and perused the material available on record. The only issue that arises for my consideration is whether the AO is justified in making the cash deposits of Rs.2,46,000 in specified bank notes during the demonetization period, as unexplained money of the appellant. From the reading of the assessment order, it is apparent that the appellant made total cash deposits of Rs.3,71,500 during the demonetization period. However, the AO treated the cash deposit of Rs.1,25,500 made on 11.11.2016 as explained, but the balance amount was brought to tax, rejecting the explanation of the appellant that the said cash deposits were made out of the sale proceeds received from the distributors. The CIT(A) also confirmed the addition by observing that . Saithu Muhammed. since the appellant failed to maintain books of account the explanation offered cannot be accepted. In my considered opinion, the material on record clearly indicates that the appellant filed the return of income disclosing an income of Rs.4,07,550 from the business of dealing in mobile and recharge coupon. The provisions of the Income-tax Act does not mandate an assessee to maintain the books of account compulsorily. When the appellant had returned income from the business of dealing with recharge coupon, etc., in the absence of any material to the contrary, the AO ought to have accepted the explanation offered by the assessee. Since it is plausible that the appellant could have made the cash deposit out of the sale proceeds of the business receipts, the AO is not justified in making the addition of Rs.2,46,000, on this count. Accordingly, I direct the AO to delete the addition.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 08th day of April, 2025.