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Facts
The assessee, Smt. Sipra Gupta, a proprietor of M/s Ramesh Enterprises (FMCG products), deposited ₹1,21,63,000/- in cash during the demonetization period (09.11.2016 to 31.12.2016). The AO reopened the assessment for AY 2017-18 under Section 147/148, finding her explanation for the cash deposits (from cash in hand and sales) unsatisfactory, and made an addition under Section 68. The CIT(A) quashed the reopening and deleted the addition.
Held
The Tribunal condoned the delay in the assessee's cross-objection. It set aside the CIT(A)'s order and upheld the reopening of assessment, finding sufficient material for the AO's 'reason to believe'. However, regarding the merits of the addition, the Tribunal found that the cash deposits were accounted for as cash sales and accepted by the AO. Adding them again under Section 68 or 69A would lead to double taxation, which is not permissible, thus upholding the CIT(A)'s deletion of the addition on merits. The appeals of the Revenue and the assessee's Cross Objection were partly allowed.
Key Issues
The key legal issues were the validity of the reopening of assessment under Sections 147/148 and whether cash deposits made during demonetization from cash sales could be treated as unexplained cash credit under Section 68 or unexplained money under Section 69A, leading to double taxation.
Sections Cited
147, 148, 143(3), 68, 69A, 80, 80TTA, 234A, 234B
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Income Tax Appellate Tribunal, “PATNA” BENCH, PATNA
Before: SHRI DUVVURU RL REDDY, VP & SHRI RAJESH KUMAR, AM
O R D E R Per Rajesh Kumar, AM:
The appeal of the Revenue and the CO of the assessee are arising against the order of the Commissioner of Income-tax (Appeals), Patna-3 (hereinafter referred to as the “Ld. CIT(A)”] dated 25.01.2023 for the AY 2017-18.
At the outset, we note that the Cross Objection of the assessee is barred by limitation by 85 days. At the time of hearing the counsel of
The first issue raised by the Revenue is against the order of learned CIT (A) quashing the notice u/s 148 of the Act.
3.1. The facts in brief are that the learned AO reopened the case u/s 147 of the Act by issuing notice u/s 148 of the Act on 12.10.2017, after obtaining approval of competent authority. The case of the assessee was reopened for the reason that the assessee has deposited a huge amount of ₹1,12,30,000/- in her bank account of Allahabad Bank, Patna. It was further noted by the learned AO that the cash was deposited during the period of 09.11.2016 to 31.11.2016.However during the assessment proceedings the AO noted that in fact cash of Rs, 1,21,63,000/- was deposited into bank and accordingly added the same to the income of the assessee in the assessment framed u/s 143(3)/147 of the Act dated 13.12.2018.
3.2. In the appellate proceedings, the learned CIT (A) recorded a very cryptic finding by observing and holding as under: - “I have considered the reasons recorded by the AD which has been reproduced in foregoing paragraph I have also considered the written submission made by the Ld. Als There is no dispute that the cash of Rs. 1,12,30,000/- has been deposited in bank account of the appellant. There is also no dispute that the source of the cash have been explained in online submission to the AO. It was submitted that source of cash deposit during the demonetization period from 09.11.2016 to 30.12.2016 was the cash in hand as on 08.11.2016 of Rs. 38.01 lakh and the cash sales as per cash invoices Rs. 83.26 lack aggregating to Rs. 1,21,63,000/- crore, out of which Rs. 1,12,30.000/- was deposited after 08.11.2016. There is no dispute that the assessee is in business of sale of FMCG products As per the audit report and ITR, the turnover for AY 2017-18 was Rs
So far as the deletion of addition on merit is concerned, the Revenue has challenged the deletion made by the learned CIT (A) of ₹1,21,63,000/- as made by the learned AO on account of cash deposited during the demonetization period.
4.1. The facts in brief are that the assessee is a proprietor of M/s Ramesh Enterprises which deals in FMCG products like tea, perfume and Oil etc. The learned AO noted that the assessee deposited of ₹1,12,30,000/- on several occasions from 09.11.2016 to 31.12.2016, which was stated to be deposited cash out of accumulated cash in hand and the same represented to be accumulated out of cash sales 4.2. The learned CIT (A) in the appellate proceedings allowed the appeal of the assessee again passing a very cryptic order as under: - “Ground No. 3 to 8: For that, addition of Rs.12163000 under section 68 is lead in law in absence of any reasonable opportunity of being heard. The whole assessment is in violation of natural law and justice and void ab initio. For that Ld. A.O. has failed to appreciate the stand taken initially by the appellant that the entire deposit in the bank account in between 09.11.2016 amounting to Rs.11230000 to 30.12.2016 to 30.12.2016 amounting to Rs.11230000 is fully covered out of cash in hand as on 08.11.2016 as per books and sales proceeds from 09.11.2016 to 31.12.20216 especially when the sales are supported by cash invoices and disclosed to the Income Tax Department and Sales Tax Department under VAT. The addition is based on suspicion and surmises and surmises and has no leg to stand in the eye of law. For that that Ld. A.O. has erred in disallowing the exemption of Rs.150000 claimed under section 80 by the appellant on account of accrued interest on NSC payment of LIP and Investment in NSC on suspicion and surmises without giving proper opportunity of being heard. For that the Ld. A.O. has similarly erred in disallowing deduction under section 80TTA at Rs.263 whereas in fact he has accepted the bank interest as income from other Sources. For that the charming of interest under section 234A is bad in law as original return as well as return filed under section 148 is well within time. The consequential relief under section 234B may be allowed in case of quantum relief. For that whole order is bad in fact as well as in law and suitable to be allowed in full. As I have I have already quashed the assumption of jurisdiction u/s 147, these grounds are only of academic interest, hence no opinion is expressed on these grounds”
7. After hearing the rival contentions and perusing the material on record including the decisions cited before us, we observe that the assessee has shown to have done trading in sarees in Kolkata. We also note that all the transactions of sale and purchases were made in cash and the assessee has also maintained the books of account and recorded the transactions as regards purchase and sales therein. This is undisputed that the cash deposited in to the bank account of assessee was out of cash books and a finding to that effect has been given by the AO as well. We also note that the AO has not rejected the books of account and even sale was not doubted. Therefore the action of the AO by adding the cash sales u/s 69A amounted to double addition which is not permissible under the Act. First by way of accepting the sales and secondly by way of making further addition towards cash sales u/s 69A of theAct. The case of assessee finds support from the decision of Co-ordinate Bench in the case of ITO vs. Joydeb Kundu (supra) wherein the Hon’ble Bench has held as under: “8. We have carefully gone through the material available on record and considering the rival submission made by the parties, in the present case both the authorities below accepted the fact that the amount received by assessee are nothing but sale proceeds in the course of business of the assessee. The 4.5. In the result, the appeal of the Revenue is dismissed.
CO No.1/PAT/2023 5. The issue raised in assessee’s Cross Objection in ground nos.1 to 3 is in support of the learned CIT (A) order, where reopening has been upheld by us. Since, we have reversed the order of learned CIT (A) in the above Para on this issue by holding that the reopening has been validly made and therefore, the ground no. 1 to 3 are in the cross objection are dismissed.
The issue raised in ground no. 5 is not pressed at the time hearing, hence, dismissed.
In the Result, the appeals of the Revenue and CO of the assessee are partly allowed.
Order pronounced in the open court on 09.12.2025.