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Facts
During a survey, excess stock valued at Rs. 7,88,943/- was found, and a cash deposit of Rs. 40,00,000/- was made in the assessee's savings account, claimed to be from cash sales. The Assessing Officer (AO) added both amounts to the assessee's income.
Held
The Tribunal held that the addition of Rs. 40,00,000/- was unjustified because the AO had accepted the assessee's books of account and net profit, making the addition a double taxation. However, the addition of Rs. 7,88,943/- for excess stock was upheld as the assessee's revised explanation contradicted their statement made during the survey.
Key Issues
Whether the addition of cash deposits sourced from recorded sales is permissible without rejecting books of account, and if the explanation for excess stock found during survey is acceptable despite contradictions.
Sections Cited
133A, 143(3), 69A, 68
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Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad
Before: Shri Ravish Sood & Shri Madhusudan Sawdia
(िनधा�रण वष�/Assessment Year: 2019-20) Shri Golchha Uttam Kumar Vs. Deputy Commissioner of Hyderabad Income Tax, Central PAN:ADEPG7946G Circle 3(2) Hyderabad (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri S. Rama Rao, Advocate राज� व �ारा/Revenue by:: Ms. Helen Ruby Jesindha, Sr.DR सुनवाई की तारीख/Date of hearing: 18/12/2025 घोषणा की तारीख/Pronouncement: 07/01/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:
This appeal is filed by Shri Golchha Uttam Kumar (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“Ld. CIT(A)”) dated 08.03.2025 for the A.Y. 2019-20. 2. The assessee has raised the following grounds of appeal:
1. The order passed by the Learned Commissioner of Income Tax (Appeals) is arbitrary and incorrect both on facts and in law.
2. The C.I.T. (Appeals) erred in upholding the addition of Rs. 7,88,943/- made by the Assessing Officer on the allegation that there is difference in the value of stock found at the time of the survey.
3. The C.I.T. (Appeals) ought to have appreciated that the appellant had effected sales during the day and prior to the time of the survey, and such sales were not recorded in the books of account when the survey party conducted the stock verification. The appellant had duly submitted an explanation along with a reconciliation statement regarding the alleged stock difference, which ought to have been accepted. Accordingly, the appeal should have been allowed.
4. Regarding the deposit of Rs. 40 lakhs into the appellant’s savings bank account, it was duly explained by the appellant that the said amount was already recorded in the books of account. Therefore, the provisions of Section 69A of the Income Tax Act have no application to the facts of the case.
5. The C.I.T. (Appeals) should have accepted that the sales were effected after the survey, and that the said sales were recorded in the books of account. The appellant had the requisite stock on hand for effecting the sales, and the sale consideration was duly recorded in the profit and loss account. There was no basis for the addition made by the Assessing Officer under Section 69A. and the CIT(A) equally is not justified in confirming the addition.
6. The C.I.T. (Appeals) should have acknowledged that the deposit was made after the survey, the corresponding sales were made post-survey, the relevant entries were passed thereafter, and the appellant provided a satisfactory explanation before the Assessing Officer. Hence, the addition of Rs. 40 lakhs should have been deleted.
7. Any other ground/grounds that may be urged at the time of hearing”.
The brief facts of the case are that the assessee is an individual engaged in the business of semi-wholesale and retail trading. A survey under section 133A of the Income Tax Act, 1961 (“the Act”) was conducted in the case of the assessee on 25.03.2019. Subsequently, the assessee filed his return of income for the Assessment Year 2019–20 on 29.10.2019, declaring a total
Page 2 of 10 income of Rs.89,92,700/-. The case of the assessee was selected for compulsory scrutiny and accordingly notice under section 143(2) of the Act dated 29.09.2020 was issued by the Learned Assessing Officer (“Ld. AO”). During the course of scrutiny assessment proceedings, the Ld. AO noticed that cash amounting to Rs.40,00,000/- was deposited in the savings bank account of the assessee. On being called upon to explain the source of such cash deposits, the assessee submitted that the cash was received out of cash sales. The Ld. AO did not accept the explanation of the assessee and treated the cash deposit of Rs.40,00,000/- as unexplained cash credit. Further, during the course of survey, excess stock valued at Rs.7,88,943/- was found. The assessee, in his statement recorded during survey, explained that the variation was due to inaccurate physical stock counting by the staff. In the absence of supporting evidence, the Ld. AO treated the excess stock as unexplained investment and added the same to the income of the assessee. Accordingly, the Ld. AO completed the assessment under section 143(3) of the Act dated 27.09.2021 making additions of Rs.40,00,000/- on account of unexplained cash credit and Rs.7,88,943/- on account of unexplained investment in stock, thereby assessing the total income of the assessee at Rs.1,37,81,643/-.
Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed both the additions made by the Ld. AO and dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT (A), the assessee is in further appeal before the Tribunal. At the outset, the Learned
Page 3 of 10 Authorized Representative (“Ld. AR”) submitted that only two issues arise for consideration in the present appeal: (a) Addition of Rs.40,00,000/- made by the Ld. AO treating the cash deposits in the bank account as unexplained cash credit; and (b) Addition of Rs.7,88,943/- made by the Ld. AO on account of excess stock found during survey.
With regard to the addition of Rs.40,00,000/-, the Ld. AR submitted that the cash was deposited in the savings bank account out of cash sales made on 27.03.2019. He invited our attention to the cash book for the period from 01.03.2019 to 31.03.2019 placed at page nos. 40 to 47 of the paper book and submitted that the cash sales were duly recorded in the books of account. The Ld. AR further invited our attention to the returns filed under the GST Act placed at page nos. 9 to 18 of the paper book to demonstrate that all sales were duly reported and accepted by the GST authorities. He also referred to the stock statement for the period from 24.03.2019 to 31.03.2019 placed at page nos. 22 to 29 of the paper book and submitted that the corresponding reduction in stock was duly reflected in the stock statement. It was further submitted that the savings bank account in which the cash was deposited is reflected in the audited financial statements of the assessee (page no. 6 of the paper book), the books of account were not rejected by the Ld. AO, and the net profit declared by the assessee was accepted. According to the Ld. AR, once the cash sales are recorded in the books and the profit element thereof has already been offered to tax, making a separate addition of the same cash deposit as unexplained cash credit results in double addition, which is impermissible in law. In support of this contention, reliance was placed on the decision of Page 4 of 10 the Coordinate Bench of the Tribunal in the case of Rahul Cold Storage vs. ITO in for the Assessment Year 2017–18 dated 29.11.2022.
With regard to the addition of Rs.7,88,943/- on account of excess stock, the Ld. AR submitted that on the date of survey, certain goods sold on the same day could not be dispatched to customers and therefore were physically available at the premises. According to him, the excess stock was not unexplained but was relatable to accounted sales. He submitted that there was no discrepancy in the books of account and prayed for deletion of the addition.
Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the authorities below. With regard to the addition of Rs.40,00,000/-, the Ld. DR submitted that the entire cash sales of Rs.40,00,000/- were claimed to have been made on a single day, i.e., 27.03.2019, and there were no other cash sales during the remaining part of the month. She further submitted that the cash was deposited in a savings bank account and not in a current account, which casts doubt on the explanation offered by the assessee. Accordingly, she submitted that the Ld. AO was justified in making the addition.
With regard to the addition of Rs.7,88,943/- on account of excess stock, the Ld. DR invited our attention to question No.16 of the statement recorded during survey, placed at page no. 51 of the paper book, wherein the assessee, in response to a specific query, stated that the variation in stock was due to incorrect physical stock counting by the staff. She submitted that if the excess stock was actually due to non-dispatch of goods
Page 5 of 10 against accounted sales, the assessee would have stated so during survey itself. The Ld. DR further submitted that the assessee has not produced any documentary evidence in support of the revised explanation either before the Ld. AO, the Ld. CIT(A), or before the Tribunal. Therefore, the explanation offered at this stage is an afterthought and deserves to be rejected. She accordingly prayed for sustaining both the additions.
We have considered the rival submissions and perused the material available on record including the case law relied upon. As far as the addition of Rs.40,00,000/- on account of cash deposits is concerned, we find that the Ld. AO has accepted the books of account of the assessee and has not rejected the same. The net profit declared by the assessee has also been accepted. It is not in dispute that the cash sales are recorded in the books of account and are reflected in the GST returns filed by the assessee. The corresponding stock movement is also recorded in the stock register. The Ld. AO has not pointed out any defect either in the books of account, stock records, or GST returns. Once the cash sales are duly recorded in the books and the profit element thereof has already been subjected to tax, the cash deposited in the bank account out of such recorded sales cannot be treated as unexplained cash credit without rejecting the books of account. Any such addition would amount to taxing the same income twice, which is not permissible in law. In this regard, we have gone through the para nos. 12 to 13 of the order of the Coordinate Bench of the Tribunal in the case of Rahul Cold Storage vs. ITO (supra), which is to the following effect:
On perusal of the above, we find that the Tribunal has held that when the Ld. AO accepts the book results, he cannot make a separate addition in respect of cash deposits arising from recorded sales without rejecting the books of account. Respectfully
Page 8 of 10 following the said decision, we direct the Ld. AO to delete the addition of Rs.40,00,000/-.
As regards the addition of Rs.7,88,943/- on account of excess stock, we have gone through the answer of the assessee to the question No.16 of the statement recorded during the survey, placed at page no.51 of the paper book, which is to the following effect:
Q. 16 As per physical verification the closing stock was found to be Rs.2,75,42,120/- whereas as per the books of account the closing stock as on 25.03.2019 is Rs.2,67,53,177.97 (excluding GST). Explain the reasons for variation . “Ans.The variation of Rs.7,88,943/- may be on account of inaccurate physical stock counting by our staff.”
On perusal of the above, we find that during the course of survey, the assessee himself explained the stock difference as being due to incorrect physical stock counting by the staff. The explanation now advanced that the excess stock was due to non- dispatch of goods against accounted sales is contrary to the statement given during survey. We further find that the assessee has failed to substantiate the revised explanation with any documentary evidence, either before the authorities below or before us. In the absence of any cogent evidence to rebut the statement recorded during survey, the subsequent explanation cannot be accepted merely on the basis of oral submissions. Accordingly, we find no infirmity in the addition of Rs.7,88,943/- made by the Ld. AO on account of unexplained investment in stock, and the same is upheld.
In the result, the appeal filed by the assessee is partly allowed.