VENKATARAMAN GIRIDHARAN,KANCHEEPURAM vs. ITO, WARD-2,, KANCHEEPURAM

The present appeal along with the stay application has been preferred by the assessee against the order dated 23.09.2025 passed by the Learned Additional/Joint Commissioner of Income Tax (Appeals)-2, Vadodara [hereinafter referred to as “the Ld.JCIT(A)”], arising out of the assessment order dated 05.12.2019 passed u/s.143(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] by the Income Tax Officer, Ward-3, Kancheepuram

The assessee has raised the following grounds of appeal: -

Without further prejudice, the Appellant prays that directions be given to grant all such relief arising from the grounds of appeal

The brief facts of the case, as borne out from the records, are that the assessee is an individual carrying on business of running a rice mill and wholesale purchase and sale of paddy and rice in the proprietary concern under the trade name M/s.Sri Sathyanarayana Modern Rice Mill. For the A.Y.2017-18, the assessee filed his return of income on 23.07.2017 declaring a total income of Rs.6,45,010/-.

The case was selected for scrutiny under CASS for examination of bank accounts and cash deposits. Accordingly, notice u/s.143(2) of the Act was issued on 09.08.2018, followed by a notice u/s.142(1) of the Act on 14.05.2019. During the course of assessment proceedings, the AO noticed substantial cash deposits in the assessee’s bank account during the demonetization period. The AO therefore issued a show cause notice dated 28.11.2019, proposing to treat cash deposits aggregating to Rs. 20,00,000/- as unexplained. The AO recorded

Aggrieved of the order passed by the Ld.JCIT(A) in confirming the addition made by the AO, the assessee is in appeal before this Tribunal.

The Ld.AR appearing on behalf of the assessee submitted that the sole issue arising in the present appeal pertains to the confirmation of addition of Rs.20,00,000/- made by the AO by treating the cash deposits made in the assessee’s bank account during the demonetization period as unexplained. It was submitted that the assessee is engaged in the business of wholesale trading in paddy and rice and is maintaining regular books of account, which are duly audited u/s.44AB of the Act.

The Ld.AR further contended that during the period from 31.10.2016 to 08.11.2016, the assessee effected sales aggregating to Rs.27,30,830/-, and the said business receipts resulted in a closing cash balance as on 08.11.2016, which was subsequently deposited into the bank account during the demonetization period. It was argued that the corresponding sales have been duly recorded and disclosed in the Profit & Loss Account and the same have also been accepted by the AO. The Ld. AR submitted that once the sales have :-4-: S.A. No.111/Chny/2025 & ITA. No:3199/Chny/2025 been accepted and the books of account have not been rejected, the cash deposits representing such recorded sales receipts cannot be treated as unexplained money. Accordingly, the Ld. AR prayed that the addition made by the AO and sustained by the Ld. JCIT(A) be deleted.

Per contra, the Ld.DR, appearing on behalf of the Revenue, submitted that the assessee has failed to satisfactorily explain the genuineness and source of the cash deposits made during the demonetization period. The Ld.DR, placing reliance on the assessment order as well as the order of the learned first appellate authority, contended that the AO has rightly made the impugned addition, which has been duly confirmed by the Ld.JCIT(A). It was thus submitted that no interference is warranted in the findings of the lower authorities. Accordingly, the Ld.DR prayed for dismissal of the appeal filed by the assessee.

We have carefully considered the rival submissions advanced by the parties and perused the material available on record, including the paper book filed by the assessee as well as the judicial precedents relied upon.

At the outset, it is an admitted position that the assessee is engaged in the business of wholesale rice trade. It is further noted that during the course of remand proceedings, the AO caused a field enquiry/inspection, pursuant to which it was found that the assessee is operating a Rice Mill. The said enquiry revealed that the assessee purchases paddy and rice from agriculturists, undertakes processing and packing thereof into bags, and thereafter effects sales to wholesalers and retailers. Thus, the nature and conduct of business carried on by the assessee stands duly verified and is not under dispute.

From a perusal of the cash book, it is evident that the assessee was maintaining a cash balance of Rs.65,95,388/- as on 08.11.2016, i.e., immediately prior to the demonetization period. The assessee has explained that the aforesaid cash balance represented accumulation out of regular sales

Significantly, the AO has neither rejected the books of account maintained by the assessee nor has he disputed the sales reflected therein by making any corresponding reduction from the declared turnover. In such circumstances, once the cash balance as per books has been accepted, the subsequent cash deposits made during the demonetization period, being out of such recorded cash balance, cannot be treated as unexplained. Any addition merely on the basis of cash deposits, without disturbing the underlying sales/turnover already accepted, would amount to taxing the same receipts twice, which is impermissible and unsustainable in law.

We further find that the assessee has discharged the onus cast upon it by furnishing relevant documentary evidences such as sales invoices, cash book, confirmations from buyers, and audited financial statements, thereby establishing the genuineness of the cash deposits made during the demonetization period. In the absence of any cogent material brought on record by the Revenue to controvert the documentary evidences or to establish that the cash deposits represented income from undisclosed sources, no addition can be sustained merely on surmises and conjectures.

In view of the aforesaid facts and circumstances, we are of the considered opinion that no case is made out for sustaining the impugned addition. Accordingly, the addition of Rs.20,00,000/- made by the AO and confirmed by the Ld.JCIT(A) towards alleged unexplained cash deposits is :-6-: S.A. No.111/Chny/2025 & ITA. No:3199/Chny/2025 hereby deleted. Consequently, the grounds of appeal raised by the assessee are allowed.

Since we have already allowed the main appeal, the stay application filed by the assessee has become infructuous and is dismissed accordingly.

In the result, the appeal of the assessee is allowed and the stay application is dismissed as infructuous.