SRI RANGA AGENCY,ERODE vs. ITO, WARD-1(3), ERODE

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ITA 2900/CHNY/2025Status: DisposedITAT Chennai04 March 2026AY 2017-18Bench: SHRI ABY T. VARKEY (Judicial Member), SHRI S.R.RAGHUNATHA (Accountant Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the assessee's accounts were audited and the SBN deposits were recorded in the books and VAT returns. The AO did not reject the books of accounts and accepted the returned income from turnover. The Tribunal relied on judicial precedents and held that adding the SBN deposit amount as unexplained would amount to double addition.

What were the facts?

The assessee, engaged in oil trading, filed its ITR admitting total income. The AO noted significant cash deposits during demonetization, including Specified Bank Notes (SBNs), and asked the assessee to prove their nature and source. The assessee claimed these were sales realization from its turnover.

What were the issues?

Whether the addition of ₹30,49,500/- as unexplained income under Section 69A of the Income Tax Act, 1961, is justified when the amount was deposited as SBNs during demonetization and claimed as sales realization, with audited books of accounts not being rejected by the AO.

Which sections of the Income-tax Act were involved?

Section 69A,Section 44AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI S.R.RAGHUNATHA

Hearing: 29.01.2026Pronounced: 04.03.2026

आदेश / O R D E R

PER ABY T. VARKEY, JM:

1.

1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Chennai/Delhi, dated 10.09.2025 for the Assessment Year (hereinafter referred to as "AY”) 2017-18.

2.

The main grievance of the assessee is against the action of the Ld.CIT(A) confirming the addition of ₹30,49,500/- u/s.69A of the Income Tax Act, 1961 (hereinafter referred to as "the Act”).

3.

The brief facts of the case are that the assessee is a firm engaged in the business of whole sale retail of oil trading in the name of M/s.Sri Ranga Agency and filed its ITR on 10.11.2017 admitting total income at ₹1,80,090/- which ITR was selected for scrutiny. Pursuant to the notices issued by the AO, the assessee is noted to have filed copy of the ITR/return of income (RoI), P&L a/c, computation of total income, balance-sheet, list of customers & suppliers. The AO noted from the bank accounts of the assessee that during the year, the assessee has made cash deposit to the tune of ₹55,49,500/-, out of which deposited cash during demonetization period of ₹36,49,500/- which included Specified Bank Notes (SBNs) deposited of ₹30,49,500/-. The AO asked the assessee to prove the nature and source of the SBNs deposited to the tune of ₹30,49,500/-. The AO on examination of the cash book was of the view that the assessee has created entries after 28.10.2016 and he directed the assessee to file the name, address, PAN of the customers from whom the assessee has received SBNs, which notices according to the AO has not been answered by the assessee. Therefore, he added ₹30,49,500/- u/s.69A of the Act.

4.

Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to dismiss the same.

5.

Aggrieved, the assessee is in appeal before this Tribunal.

6.

We have heard both the parties and perused the material available on record, we note that the assessee firm is in the business of retail trading of edible oil. When the AO asked the assessee to prove the nature and source of ₹30,49,500/- which was deposited as SBNs during demonetization period, the assessee submitted the same was sales realization which was part of the turnover for the relevant year of ₹2.67 Crs and to corroborate the same has filed the relevant documents.

1.

(i) Cash book & day book for AY 2016 found placed at Page No.14-466 of the Paper Book. (ii) VAT return for AY 2016-17 found placed at Page No.467-579 of the Paper Book. (iii) Quarter-wise cash flow statement found placed at Page No.585-595 of the Paper Book. (iv) written submissions filed before the First Appellate Authority dated 13.11.2022 found placed at Page No.580-584 of the Paper Book. (v) ITR along with TAR for AY 2017-18 found placed at Page No.616-624

7.

The assessee’s accounts is noted to be duly audited u/s.44AB of the Act. The assessee’s assertion that the SBNs collected has been duly recorded in the books of accounts of the assessee and reported in the VAT return filed with the concerned authorities has not been disproved.

Further it is noted that the AO has neither rejected the books of accounts of the assessee nor had he pointed out any discrepancy or defect in the audited books. Therefore, the Ld.AR rightly submitted that in the absence of rejection of books, the business receipts shown in the audited books of accounts, can’t be tinkered with. The assessee rightly submitted that the (AY 2017-18) Sri Ranga Reddy :: 4 ::

SBNs could be legally deposited in the banks, up to 30.12.2016; and further brought to our notice that many of the customers of the assessee had made the payments during the demonetization period, and the assessee had no other alternative but to collect the same or he couldn’t have recovered the outstanding balances from such debtors. According to the assessee, due to the business exigencies, the assessee was compelled to receive SBNs which were deposited in the bank. The assessee is noted to have relied on several decisions of this Tribunal, wherein in on similar facts, the Tribunal has accepted the nature and source of SBNs and deleted the additions made as unexplained. When the AO asked the assessee to prove the nature and source of ₹30,49,500/- which was deposited as SBNs during demonetization period, the assessee is noted to have asserted based on relevant material that it was sales realization which was part of the turnover for the relevant year of ₹2.67 Crs; and the AO is noted to have accepted the returned income from the turnover; and accepted the audited books; hence, any separate addition of Rs 30,49,500/- should be preceded by a finding that assessee has any other source of income other than what is shown in its book which assessee has suppressed/undisclosed. No material is found to have been relied by AO to draw adverse view against assessee to saddle addition u/s 69A of the Act. Moreover, when the AO having accepted the returned income from the turnover shown by the assessee, separate addition as unexplained u/s (AY 2017-18) Sri Ranga Reddy :: 5 ::

69 A of the Act would tantamount to double addition, which is not permissible as held by the Hon’ble Gujarat High Court in the case of CIT v. Vishal Exports Overseas Ltd., (Tax Appeal No.2471 of 2009) [Gujarat High Court] and also the decision of the Hon’ble Delhi High Court in the case of CIT v. Kailash Jewellry House [Appeal No.613/2010] (Delhi High Court) (refer decision of ITAT Indore Bench in the case of DEWAS SOYA LTD, UJJAIN in ITA No 336/Jnd/2012). Hence, we are inclined to allow the appeal of assessee and direct deletion of addition of Rs 30,49,500/- u/s 69 A of the Act.

8.

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

Order pronounced on the 04th day of March, 2026, in Chennai.

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