SHRI MAHENDRAKUMAR DAMODARBHAI SAINI,BANASKANTHA vs. THE ITO, WARD-2, PALANPUR

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre dated 27/08/2021 arising in the matter of assessment order passed under s. 250 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18.

The only issue raised by the assessee is that the Ld. CIT(A) erred in confirming the order of the AO by sustaining the addition of Rs. 12,86,000/- under the provision of section 69A of the Act.

The facts in brief are that the assessee in the present case is an individual and claimed to be engaged in the trading activity of potatoes besides being an Agriculturalist. The assessee has deposited a sum of Rs. 12,86,000 only in cash during the demonetization period. On question by the AO about the source of cash deposit in the bank account, the assessee vide letter dated 19/11/2019 filed the balance sheet, profit and loss account and other relevant details. The assessee has also claimed to have taken pledge loan and crop loan from Dena bank.

However, the AO found that the assessee has not filed any documentary evidence to justify that he is an agriculturist as he was not showing any agriculture income. Thus, the AO treated the deposits of cash of Rs.12,86,000/- as unexplained cash u/s 69A of the Act, and added the same to the total income of the assessee.

Aggrieved assessee preferred an appeal to the Ld. CIT(A).

The assessee before the Ld. CIT(A), submitted that he has filed necessary details to justify the cash deposits in the bank account. These details including the following documents: a. Cash book-page no.19 to 45 b. Bank book-page no,46 to 48 c. Bank statements-page no.49 to 74 d. Stock register-page No.75 to 78 e. Purchase register –page no,79 f. Sales register-page no.80 to 81 g. Financial statements-page no.82 to 86 h. Computation of income and ITR-page No.87 Your honour may kindly appreciate that the cash was deposited in bank from sales made during the year and said sales was duly credited to profit and loss account. It is submitted that once the sales is credited to profit and loss account and cash deposited in bank is explained with reference to said sales addition of same cannot be made u/s.68 of the Act.

However, the Ld. CIT(A), disregarded the contention of the assessee by observing as under: I have carefully considered the action of the Assessing Officer and the submission of the appellant. I find that the Assessing Officer has given enough opportunities to the appellant who did not even file his return of income before issue of notice u/s.142(1). I also find that the Assessing Officer has considered all the replies filed by the appellant. The assessee’s claim that he an agriculturalist has been rejected by the Assessing Officer after due consideration. In my considered opinion the Assessing Officer has logically concluded that the appellant has not been able to explain the source of cash deposits in the bank during the demonetization period. In view of the above, I do not find any infirmity in the order of the Assessing Officer and find no reason to interfere with the same.

Being aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

The Ld. AR before us filed a paper book running from pages 1 to 87 and contended that the assessee has furnished necessary details in the form of profit and loss account, balance sheet, bank book and cash book to justify the source of deposit made in the bank. As per the Ld. AR, there was opening stock of potatoes as on 01/04/2016 which was sold in the year under consideration and out of sale proceeds cash was deposited in the bank account of the assessee. According to the Ld. AR, all these details were filed before the authorities below but no defect of whatsoever was pointed out by the AO. However, both the authorities below have treated the cash deposit as unexplained cash deposit only on the reasoning that the assessee has not filed proof of being agriculturist whereas the assessee has not shown the trading of potatoes as income from agricultural source.

On the other hand, the Ld. DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. Indeed, it is the onus upon the assessee to justify the source of cash deposits in the bank account. The assessee has discharged his onus by submitting that the cash was deposited out of the sale proceed of the potatoes. We have perused the order of the authorities below. The contention raised by the assessee has nowhere been doubted by any of the authorities that the assessee was not engaged in the trading activity of potatoes. Thus, in such situation, a presumption can be drawn that the cash was deposited in the bank account out of sale proceeds of potatoes and therefore no addition is warranted. Accordingly, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made by him.

In the result, the appeal file by the assessee is allowed.