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Facts
The assessee, a partnership firm engaged in jewelry business, declared income of Rs. 27,76,260/- for AY 2017-18. The AO added Rs. 82,40,000/- under section 69A of the Act due to unexplained cash deposits during demonetization. The CIT(A) deleted this addition.
Held
The Tribunal held that while the assessee did not sufficiently prove the source of the cash deposit, the AO could not have summarily rejected the explanation linking the deposits to regular business sales. Therefore, a lumpsum addition of Rs. 5 lakhs was deemed appropriate.
Key Issues
Whether the AO was justified in adding the entire amount of cash deposit without considering the assessee's explanation and linking it to business sales.
Sections Cited
69A, 143(3)
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Income Tax Appellate Tribunal, DELHI BENCH, ‘E’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA
ORDER PER AMITABH SHUKLA, AM,
This appeal filed by the Revenue is against order dated 24.10.2024 of National Faceless Appeal Centre/learned Commissioner of Income Tax(Appeals), [hereinafter referred to as ‘ld. CIT(A)] arising out of assessment order dated 25.12.2019 passed under section 143(3) of the Income Tax Act, 1961 pertaining to Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
Brief facts of the case are that the assessee M/s. New Shakti Abhushan Bhandar is a partnership firm engaged in the business of trading, manufacturing (on job work basis) of gold and other ornaments (Jewelers). The assessee for the year under consideration e-filed its Return of Income on 29.10.2017 declaring income of Rs.27,76,260/-. The return was selected for assessment through CASS. The ld. AO noted that there was a cash deposit of Rs.2,21,36,500/- in its bank account during demonetization period. Unsatisfied with the explanation given by the assessee, the ld. AO proceeded to add an amount of Rs.82,40,000/- under section 69A of the Act. The ld. CIT(A) deleted the impugned addition. The Revenue is contesting the impugned relief accorded by the ld. CIT(A).
The ld. Sr. DR, Ankush Kalra, Sr. DR supported the order of the ld. Assessing Officer.
We have heard rival submissions in the light of material placed on record. The ld. Counsel for the assessee has invited our attention to the assessee’s paper book running into pages 224 containing copy of written submission filed before ld. CIT(A), extract of his books of account, reconciliation of sales and purchases, financial statements and cash deposits etc. The ld. Counsel placed reliance upon its VAT returns to buttress the point that the cash has direct linkages with the sale of the assessee. The Revenue could hardly dispute that the arguments of the assessee in all these supporting documents were specifically rebutted in the assessment proceedings. The fact however
Page 2 of 4 remaining, that the assessee has not proved the source of cash deposit despite the fact that it is stated to be engaged in sale of jewellery items. Be that as it may, we are of the considered view that the learned AO could not have summarily rejected the assessee’s foregoing explanation, reconciling on its cash deposits to regular business sales, it is deemed appropriate that lumpsum addition of only Rs.5 lakhs in the given facts would be just and proper with a rider that the same shall not be treated as precedent. Necessary computation shall follow as per law.
In the result, the appeal of the assessee is party allowed.
Order pronounced in the open court on 19th January, 2026.