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Facts
The assessee, engaged in the retail business of Ice-Cream & Cold Drinks, deposited Rs.5,50,000/- in a bank account during F.Y.2016-17. The Assessing Officer initiated reassessment proceedings under Section 148 and added the amount as unexplained cash credit under Section 68, which was sustained by the CIT(A). The assessee claimed the deposit was from business income and existing cash balance.
Held
The Tribunal found that the assessee had provided sufficient evidence, including bank statements and a cash flow statement, demonstrating the availability of cash balance from business income to explain the deposits. Therefore, the order of the CIT(A) sustaining the addition under Section 68 was set aside, and the Assessing Officer was directed to delete the addition.
Key Issues
Whether the addition of cash credit under Section 68 of the Income Tax Act, 1961, was justified when the assessee provided evidence of cash balance from business income to explain the deposits.
Sections Cited
147, 144, 250, 68, 44AD, 148, 143(2), 142(1), 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, NAGPUR
Before: SHRI PAVAN KUMAR GADALE
The assessee has filed the appeal against the order dated 28/05/2025 passed by the CIT(A)/National Faceless Appeal Centre(NFAC) Delhi, u/sec 147 r.w.s144 and u/sec 250 of the Income Tax Act, 1961 (for short "the Act") for the A.Y. 2017–18. The assessee has raised the following grounds of appeal:– ”1. On the facts and in the circumstances of the case the addition of Rs.5,50,000/-as unexplained cash credit u/s 68 is bad in law.
2. On facts and in the circumstances of the case the learned AO erred in invoking the provisions of section 68 when the assessee has declared income u/s 44AD.
2 Kishore BhagwandasNagdeo ITA no.395/NAG./2025
3. On the facts and the circumstances of the case the learned CIT(A) erred in sustaining the addition of Rs.5,50,000/- as unexplained Cash Credits u/s 68 of the Income Tax Act, 1961.
On the facts and the circumstances of the case the learned CIT(A) erred in not accepting the fact that the cash deposit of Rs.5,50,000/- was out of the sale proceeds and cash balance of Rs.9,14,634/- as on 08.11.2016.
5. The assessee craves leave to add, alter or amend the grounds of appeal
at the time of hearing.”
2. The Brief facts of the case are that, the assessee is engaged in the retail business of Ice–Cream & Cold Drinks. The assessee has filed the return of income on 30/03/2018 disclosing a total income of Rs.3,29,480/–. The Assessing Officer has received information that the assessee has made cash deposits aggregating to Rs.5,50,000/– in the account maintained with Bhartiya Sindhu Sahakar Pat Sanstha Maryadit, Washim Branch during the F.Y.2016-17. The assesseing officer has reason to believe that the income has escaped assessment and has issued notice u/sec 148 of the Act. In compliance, the assessee has filed the return of income on 23/04/2021 disclosing a total income of Rs.3,29,480/–. Subsequently, notice u/sec 143(2) and U/sec142(1) of the At are issued by the Assessing Officer and the assessee has filed the reply along with copy of bank statement on 14/07/2021 and sources of cash deposits of Rs.5,50,000/– in the loan account. And such deposits are out of cash balance available in the business of the assessee. Whereas, the Assessing Officer was not satisfied with the explanations and made addition of cash deposits of Rs.5,50,000/- as unexplained cash credits u/sec 68 of the Act and assessed the total income at 3 Kishore BhagwandasNagdeo ITA no.395/NAG./2025 Rs.8,79,480/– and passed the order u/sec147 r.w.s144B of the Act dated 11-03-2022.Aggrieved by the order, the assessee has filed appeal before the CIT(A).
In appellate proceedings, the CIT(A) has considered the grounds of appeal, statement of facts, findings of the Assessing Officerand submissions of the assessee but has confirmed the action of the Assessing Officer and dismissed the appeal of the assessee. Aggrieved by the order of the CIT(A), the assessee has filed appeal before the Hon’ble Tribunal.
4. At the time of hearing, the ld. A.R. has submitted that the CIT(A) erred in sustaining the addition of cash deposits u/sec68 of the Act though the assessee has explained that the assessee is engaged in the in retail business of ice creams and cool drinks and the assessee has deposited cash in the bank account out of the business income earned over the period and the assessee has explained the availability of cash balance before the authorities. The ld. A.R. substantiated the submissions with the factual Paper Book and judicial decisions and prayed for allowing the appeal. Per–contra, the Ld.D.R. supported the order of the CIT(A).
Heard the rival submissions and perused the material on record. The sole grievance of the assessee is that the CIT(A) has sustained the addition u/sec68 of the Act thought the assessee has substantiated with 4 Kishore BhagwandasNagdeo ITA no.395/NAG./2025 evidences in respect of availability of cash balance before making the deposits in the bank account. The Ld.AR highlighted on the bank statements of the assessee, were the assessee has made withdrawals from the bank accounts in the F.Y.2016-17 and also the cash collections from the Ice–Cream and cool drink retail business at Page 43 to 71 of the paper book. Further the Ld.AR emphasized on cash flow statement of F.Y.2016-17 placed at Page–73 of the Paper Book explaining the availability of cash balance on 8/11/2016 of Rs.9,14,634/- and Out of such cash balance, the assessee has deposited cash in the loan account maintained with Bhartiya Sindhu Sahakar Pat Sanstha Maryadit, Washim Branch. Therefore considering the facts, circumstances, submissions of the Ld.A.R and the availability of cash as per cash flow statement and the source is explained with material evidence. Accordingly the order of the CIT(A) is set aside and direct the Assessing Officer to delete the addition u/sec68 of the Act. And the grounds of appeal filed by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed. Order pronounced on /10/2025 as per rule 34(5) of the ITAT Rules 1963.