Loading judgment…
Facts
The assessee, an individual in the milk purchase and sale business, did not file a regular return for AY 2017-18. A notice u/s 148 was issued for an alleged cash deposit of Rs. 28,79,000, leading the AO to make an addition of the same amount, which was confirmed by the CIT(A). The assessee contended that the cash deposits originated from bearer cheques received from selling milk, which were subsequently deposited into an FD loan account to pay farmers.
Held
The Tribunal found merit in the assessee's explanation, recognizing the cash deposits as part of regular business operations and noting the assessee had declared income under section 44AD. Estimating the turnover at Rs. 46,00,000 and the corresponding 8% net profit under section 44AD at Rs. 3,68,000, the Tribunal sustained an addition of Rs. 66,470 (difference between estimated profit and declared income) and deleted the remaining addition of Rs. 28,12,530.
Key Issues
Whether cash deposits made by the assessee were unexplained income or derived from regular business operations, and whether the addition made by the AO for unexplained cash was justified, given the assessee's declaration of income under presumptive taxation.
Sections Cited
Section 250, Section 147, Section 144B, Section 139, Section 148, Section 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: Dr. MANISH BORAD
Assessee by : Shri Dadarao Dandge Revenue by : Shri Vishwajit Shinde, JCIT Date of hearing : 22.01.2026 Date of : 16.02.2026 pronouncement आदेश/ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER :- This appeal at the instance of the assessee is directed against the order of Ld. CIT(A) NFAC, Delhi dated 14.10.2025 framed u/s 250 of the Income Tax Act, 1961 for A.Y. 2017-18 which is arising out of assessment order passed u/s 147 r.w.s. 144B of the Act dated 11.02.2025.
Assessee has raised following grounds of appeal:-
1. That the Learned Commissioner of Income Tax (Appeals) has erred in law and on facts by dismissing the appeal ex-parte on the ground of non-appearance of the appellant's authorized representative, without appreciating that the non-response was due to bona fide reasons beyond the control of the appellant.
2. Without Prejudice to any other grounds, That the Learned CIT(A) ought to have granted an opportunity to the appellant to present their case on merits, especially when the non-appearance was not attributable to any negligence or malafide intent on the part of the appellant.
Without Prejudice to any other grounds, That the Learned Commissioner of Income Tax (Appeals) has erred in law and on facts by dismissing the appeal ex- parte without considering the evidences, documents, and submissions that were duly filed along with the Form 35 appeal and. were part of the appellate record.
4. Without Prejudice to any other grounds. That the Learned CIT(A) was duty- bound to consider all materials available on record and could not have sustained the assessment mechanically without examination of the evidences already furnished.
5. Without Prejudice to any other grounds, That the Learned CIT(A) has erred in dismissing the appeal without adjudicating the issues on merits, contrary to the principles of natural justice.
Without Prejudice to any other grounds, that the dismissal of the appeal solely for non-appearance is unjustified when the appellant had complied with all procedural requirements and the issues raised require proper adjudication on merits.
7. Without Prejudice to any other grounds, that the appellant prays that the Hon'ble ITAT kindly restore the matter back to the file of the Learned Assessing officer/CIT(A) for adjudication on merits after granting an adequate opportunity of hearing to the appellant.
8. Without Prejudice to any other grounds, the failure to comply with the proceedings before the Assessing Officer and the CIT(A) was solely due to the inadvertent negligence and oversight of the appellant's/authorized representative. The appellant was under the bona fide belief that the counsel was diligently handling the matter and submitting the requisite replies. There was no deliberate intention on the part of the appellant to disregard the proceedings.
9. Without Prejudice to any other grounds, the appellant has maintained proper books of accounts and supporting documents, which substantiate the declared income. The additions made by the Assessing Officer were arbitrary and without considering the factual details of the case. The appellant is now fully prepared to provide all necessary documents, explanations, and evidence to substantiate their case. 10. The Appellant craves leave to add / alter any of the grounds of appeal before or at the time of hearing. Relief Sought: Dissatisfied with the ex-parte orders of the Assessing Officer and the Learned CIT(A), the appellant has preferred the present appeal before the Hon'ble ITAT. The appellant seeks a fresh opportunity to present their case on merits, as the non-compliance was not due to any malafide intent but was a result of the negligence of the counsel.
Brief facts of the case are that the assessee is an individual and engaged in the business of purchase and sale of milk. Regular return of income for A.Y. 2017-18 has not been filed by the assessee u/s 139 of the Act. Subsequently based on the information about the alleged cash deposit of Rs. 28,79,000/-, notice u/s 148 of the Act issued by Ld. Assessing Officer (AO). In response assessee filed return of income on declaring income of Rs. 2,41,390/- In the course of assessment proceedings assessee furnished various details submitting that the assessee purchased the milk from various small milk suppliers and sell the milk to Chandshah Baba Sahkari Doodh Utpadak Sanstha, Hasnapur (CBSDUS). Assessee has also submitted that against the sale of the milk assessee received bearer Cheques from M/s CBSDUS and after withdrawing the cash amount the assessee used to deposit the cash amount in Pravara Bank Savings Account and F.D. Loan Account and thereafter payments are made to the respective farmers selling milk to the assessee. Assessee also submitted various supporting documents including Milk sale bills, ADCC Bank statement of Chandshah Baba Sahkari Doodh Utpadak Sanstha, Hasnapur and Pravara Sahakari Bank Savings Account and F.D. Loan Account statements. He also submitted that on the total turnover of Rs. 37,69,109/- from milk sales, assessee has declared income u/s 44AD of the Act. However Ld. AO was not satisfied and he concluded the assessment proceedings making addition of Rs. 28,79,000/- and assessed the income at Rs. 31,20,390/-
Aggrieved assessee preferred appeal before Ld. CIT(A) but failed to succeed.
Now the assessee is in appeal before this Tribunal.
6. Ld. Counsel for the assessee vehemently argued referring to the Paper Book running into 100 pages and submitted that all the details and evidence in support of the claim that assessee is running the business of purchase and sale of milk stands placed before Ld. CIT(A) but the same has not been considered. Ld. Counsel for the assessee stated that assessee is a small individual residing in a rural village in Sangamner Taluka and also assessee is not well aware about
the income tax laws. However in reply notice u/s 148 of the Act, assessee has filed his return of income declaring turnover of milk sold during the year and declared the income under presumptive taxation scheme u/s 44AD of the Act.
On the other hand Ld. Departmental Representative (DR) supported the orders of the Ld. CIT(A) as well as Ld. AO.
I have heard the rival contentions and perused the record placed before me. The grievance of the assessee is against the addition of Rs. 28,79,000/- made by Ld. AO for the unexplained cash deposit and the said addition atands confirmed by Ld. CIT(A) also. Before me Ld. Counsel for the assessee has referred to various documentary evidence placed in the Paper Book in order to prove that the assessee is engaged in the business of sale of milk and purchase the milk from local farmers and sells it to CBSDUS. I have gone through those records and note that the assessee is carrying out business under the sole proprietorship concern M/s Bhuteshwar Dudh Sanklan Kendra. Assessee is collecting the milk from the farmers and selling it to CBSDUS. Against the bills raised for sale of goods assessee receives the payment from CBSDUS and the quantity alongwith rate and cheque details are appearing on each of the invoices which are placed in the Paper Book from page No. 76 to 90. I further find that the transactions between the assessee and CBSDUS are being carried out from the first week of April 16’ which means that regular business activity was already being carried out prior to declaration of demonetization scheme. I also note that CBSDUS is maintaining its Bank Account with the Central ADC Co Bank and that against the bills raised by the assessee in which the quantity of milk is running between 13,000 to 14,000 liters and the rate of per litre milk is running between 18 to 22 Rs. The assessee normally receives the payment two
times in the month and the payments are received through bearer cheque and the assessee’s name is appearing in the Bank Statement of CBSDUS. I further note that the assessee after withdrawing the cash against the bearer cheque normally deposits them in his Bank Account held with Pravara Sahakari Bank Limited which is FD loan account and all transactions of making payments to the farmers is carried out through this Bank Account. In the individual Bank account there are hardly few transactions and there is no cash deposit during the demonetization scheme in this bank account. Thus on examination of the facts of the case I find merits in the contentions of Ld. Counsel for the assessee and hold that the assessee is carrying out the business activity of the business of milk purchases from farmers and sales regularly to CBSDUS through bearer cheques and said cash received from encashment of such bearer cheque has been deposited in the FD loan account for incurring expenses as well as making payment to the farmers.
I further note that the assessee has already offered the income u/s 44AD @8% on the turnover of Rs. 37,69,109/- which is more than the alleged cash deposit. However in the Bank Statement of assessee held with Pravara Sahakari Bank Limited (FD loan account) total credits during the year are 49,60,678/- and the credit in the individual saving account is Rs. 4,01,851/- which indicates that the receipts during the year are more than the turnover declared in the Income Tax Return and further considering certain cash deposits out of cash withdrawal during the year, the turnover during the year is estimated at Rs. 46,00,000/- and 8% net profit as per the provision of sec. 44AD of the Act comes to Rs. 3,68,000/- as against the 3,01,529/- declared by the assessee. I accordingly set aside the impugned finding and sustain the addition at Rs. 66,470/- and delete the remaining addition of Rs. 28,12,530/-
In the result, appeal of the assessee is partly allowed as per terms indicated above
Order pronounced on this 16th day of February, 2026.