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Facts
The assessee deposited Rs. 47,16,000 in a bank account during the demonetization period, claiming it as cash sales from October 2016. The AO treated the entire amount as unexplained cash deposit under Section 69A. The first appellate authority (CIT(A)) dismissed the assessee's appeal, upholding the AO's addition.
Held
The Tribunal found that while the claimed cash sales of Rs. 39,88,590 in October 2016 were inflated and not genuinely explained, the entire deposit could not be treated as unexplained. Considering previous cash sales trends, Rs. 10,00,000 was estimated for genuine cash sales and Rs. 5,00,000 for personal savings, totaling Rs. 15,00,000 as explained. The remaining Rs. 32,16,000 was confirmed as unexplained.
Key Issues
Whether the cash deposit made during the demonetization period, claimed as cash sales, was explained or constituted an unexplained cash deposit under Section 69A of the Income Tax Act.
Sections Cited
143(3), 250, 69A, 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI TR SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
1. This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 18.06.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding u/s 143(3) of the Income Tax Act.
There was a delay of 135 days in filing this appeal. The assessee has filed a condonation application explaining the reason for delay. It has been stated that the appellate order was communicated on e-mail id and the matter was entrusted by the assessee to his chartered accountant, Manish N. Amin Vs. ITO, AY- 2017-18 2 who was handling the tax matters, for filing the appeal. However, due to default of the chartered accountant the matter was not handled timely and there was delay in filing of the appeal. It was submitted that the delay was unintentional, bona fide and due to negligence of the concerned chartered accountant. Considering the explanation of the assessee, the delay in filing of the appeal is condoned.
The brief facts of the case are that the assessee had filed his return of income for A.Y. 2017-18 on 13.10.2017 declaring total income of Rs.5,37,900/-. The case was selected for complete scrutiny under CASS. In the course of assessment, the AO noticed that the assessee had made cash deposit of Rs.47,16,000/- in his bank account with HDFC during demonetisation period. The assessee had explained that this cash deposit mainly represented cash sales of Rs.39,88,590/- made in the month of October 2016. The AO, however, was not convinced with the explanation of the assessee and treated the entire cash deposit of Rs. 47,16,000/- as unexplained. The assessment was completed u/s. 143(3) on 14.12.2019 at total income of Rs.52,53,900/-.
Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th
Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
Ground No. 1- Condonation of Delay
1. The appellant respectfully submits that the delay in filing the present appeal is due to non-communication of the order passed u/s 250 dated 18-06-2025 by my CA to Advocate for filing of 2nd Appeal, and therefore the delay is bona fide, unintentional and beyond the control of the appellant. The appellant prays that the delay may kindly be condoned in the interest of justice Ground No. 2 Addition u/s 69A 2. The learned CIT(A) erred in law and on facts in confirming the addition of 47,16,000/- u/s 69A by treating the cash deposited during the demonetisation period as unexplained, without appreciating that the said cash represented duly recorded cash sales made in the normal course of business. Ground No. 3-Books of Accounts Not Rejected 3. The learned CIT(A) failed to appreciate that the books of accounts were duly audited, regularly maintained, and never rejected by the Assessing Officer, and therefore no addition could be sustained merely on suspicion or conjectures Ground No. 4-Stock and Sales Accepted 4. The learned CIT(A) erred in confirming the addition despite the fact that the appellant had sufficient opening stock, maintained item-wise quantitative stock registers, and the sales were supported by invoices and reflected in the books, establishing a direct nexus between sales and cash deposits. Ground No. 5-No Adverse Finding on Sales 5. The learned CIT(A) failed to appreciate that there was no finding that the sales were bogus, fictitious, or outside the books, and therefore the source of cash stood fully explained, making the invocation of section 69A wholly unsustainable.
Ground No. 6- Violation of Principles of Natural Justice 6 The impugned order is bad in law as the appellate proceedings were concluded without effective opportunity of hearing, and the final order itself was not communicated to the appellant, resulting in grave prejudice Ground No. 7 Mechanical Confirmation Manish N. Amin Vs. ITO, AY- 2017-18 4 7. The learned CIT(A) has mechanically affirmed the assessment order without dealing with the detailed submissions, documentary evidence, stock records and judicial precedents relied upon by the appellant. Ground No. 8 Without Prejudice 8. Without prejudice, the addition sustained is excessive, arbitrary and contrary to settled judicial principles applicable to demonetisation related cash sales cases. Ground No. 9 General 9. The appellant craves leave to add, alter, amend or withdraw any of the above grounds at or before the time of hearing.
Shri Rupesh R. Shah, the Ld. AR of the assessee submitted that the assessee is engaged in business of trading of diamond, gold and silver jewelleries etc. in the proprietorship concern M/s Bhaktavatsal Jewellers. He submitted that the AO did not dispute the cash sales of Rs. 39,88,590/- made in the month of October, 2016 which was duly reflected in the audited books of accounts. Further the books of account were also not rejected u/s. 145(3) of the Act. According to the Ld. AR, the objection of the AO was that the assessee did not furnish Aadhar or PAN details of the customers who had made cash purchases and only on this basis the cash deposit was held as unexplained. He submitted that the cash sales were duly supported with bills, vouchers, stock movement and was duly reflected in the books of account. The Ld. AR contended that since the sales of the assessee were not disputed, the AO was not correct in treating the cash deposit in the bank account as unexplained.
Per Contra, Shri Prateek Sharma, the Ld. SR-DR submitted that the assessee did not show any cash sales in the months of April to July 016, in December 016 and also in the months of February and March 017. The cash sales shown in the month of August’16 was Rs.1,26,319/- only Manish N. Am
in Vs. ITO, AY- 2017-18 5 whereas in the month of September it was Rs.3,27,498/-. Against this trend of cash sales in other months, the assessee had disclosed cash sales of Rs. 39,88,590/- in the month of October’16 and the reason for this abrupt increase in cash sales in October’16 was not explained. The Ld. Sr.-DR submitted that considering the trend of cash sales in the other months, the AO had rightly held that the assessee had inflated cash sales in the month of October’16 in order to justify the cash deposit of Rs.47,16,000/- made in the bank account on 11.11.2016. He further submitted that the cash sales were not verifiable as the name of the buyer, address and contact detail was not appearing in the cash memos. He, therefore, strongly supported the order of the AO and the Ld. CIT(A).
We have carefully considered the rival submissions. All the grounds taken by the assessee pertain to addition of Rs.47,16,00/- on account of unexplained cash deposit in the bank account. A copy of the bank statement of the assessee has been brought on record in the paper-book. It is found that apart from cash deposit of Rs. 47,16,000/- in the bank account on 11.11.2016 there were only two other cash deposits during the entire financial year 2016-17, being Rs. 20,000/- on 02.06.2016 and Rs. 40,000/- on 04.03.2017. At the same time, there is no cash withdrawal made from the bank account of the assessee. From the details of month wise cash sales filed before the AO, it is found that there were no cash sales at all in the month of April, May, June, July, December’16 and in February and March 2017. The cash sales shown by the assessee in the other months were as under:
It is thus evident from the above chart that cash sales was not a regular feature of the business model of the assessee. Considering the fact that the cash sales shown in the other months was nominal, the assessee did not explain the reason for abnormally high cash sale of Rs.39,88,590/- in the month of October’16. Merely because the sales were disclosed in the books of account and that the books of accounts were audited, this does not establish the genuineness of the cash sales. The auditor doesn’t verify the correctness or genuineness of transactions. Therefore, merely because the books were audited, doesn’t establish that the sales were genuine. The assessee had also contended that on the date of demonetisation many customers had rushed to the shop and made purchases in cash, which was ultimately deposited in the bank account on 11th Novmber’16. Even this explanation of the assessee is found to be fallacious, as the demonetization was announced on 08.11.2016 and the Manish N. Amin Vs. ITO, AY- 2017-18 7 cash sales disclosed by the assessee in the month of November’16 was Rs.66,748/- only. This does not explain the abnormal cash sales disclosed by the assessee in the preceding month i.e. in October’16. As rightly observed by Ld. CIT(A), no contemporaneous documentation such as event promotion, price discount, festival offer etc. was brought on record to corroborate the sudden surge in cash sales in the month of October’16. In the absence of any evidence to justify the abnormal surge in cash sales in the month of Octoiber’16, the AO had rightly held that the cash sales for this month were artificially inflated to justify the cash deposit made during demonetization period.
Merely because the assessee has produced the cash bills and the memos for the cash sales, this does not establish the genuineness of the cash sales. The assessee has filed an application under Rule 19 of ITAT Rules for producing additional evidences in the form of Aadhar/identity confirmation of certain buyers and also affidavit/confirmation of the buyers. It is found that the assessee has merely attached certain Aadhar and PAN Nos. without linking them with the actual sale bills and no confirmation of any of the parties is found enclosed with the application. Further considering the generic nature of cash memos in which the name of the buyer, their address and contact no. was not appearing, these additional evidences could not have been linked with the sale details. These documents are bereft of any evidentiary value and, therefore, the request of the assessee to admit the additional evidences is rejected. Considering the trend of cash sales disclosed by the assessee in the other months of the year, the AO had rightly rejected the genuineness of cash sales of Rs.39,88,590/- shown by the assessee in the month of October’16. Having rejected the explanation of the assessee, the AO was Manish N. Amin Vs. ITO, AY- 2017-18 8 also correct in holding that the source of cash deposit in the bank account was unexplained.
At the same time, the AO was not correct in treating the entire cash deposit of Rs. 47,16,000/- in the bank account made on 11.11.2016 as unexplained, even if the cash sales of Rs.39,88,590/- in Oct.’16 was treated as not genuine. The assessee had shown cash sales of Rs. 1,26,319/- in August’16 and Rs. 3,27,498/- in the month of September’16, which was not disputed. Considering the trend of cash sales in the earlier months, there would have been some cash sales in the month of Oct’16 as well; and it will be reasonable to estimate total cash sales of the assessee to the extent of Rs. 10,00,000/- till the date of demonetisation. In addition, the cash deposit of Rs. 5,00,000/- on account of past personal savings of the assessee and his family members may also be treated as explained. Accordingly, the cash deposit to the extent of Rs. 15,00,000/- is held as explained on account of cash sales prior to demonetization and the past savings. Therefore, the assessee is allowed relief to the extent of Rs. 15,00,000/- and the addition on account of unexplained cash deposit is confirmed to the extent of Rs. 32,16,000/-.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 10/03/2026 at Ahmedabad.