VIRENDRA KUMAR MANDOT,, SADAR BAZAR SAILANA RATLAM vs. INCOME TAX OFFICER, ITO-1, RATLAM, RATLAM

आदेश/ O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by order of first appeal dated 07.04.2025 passed by learned Commissioner of Income-Tax (Appeals)-National Faceless Appeal Centre, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 22.08.2021 passed by learned National Faceless Assessment Centre, Delhi [“AO”] u/s 147 r.w.s. 143(3) & 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal on following grounds:

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 2. The background facts leading to present appeal are as under:

(i) The assessee-individual filed his return of income of AY 2017-18 u/s

139 declaring a total income of Rs. 3,51,320/- which was assessed.

Subsequently, the AO re-opened assessee’s case u/s 147 through

notice dated 30.12.2019 u/s 148 to examine the issue of cash

deposited in bank a/cs during demonetization. The assessee made

cash deposits of Rs. 28,07,500/- in three banks, viz. (i) State Bank of

India, (ii) Central Bank of India, and (iii) Bank of Baroda. In response

to notice, the assessee re-filed return on 04.01.2020 repeating the

original income. Thereafter, the AO issued notices u/s 143(2)/142(1).

The AO issued notice dated 03.02.2021 (the extract of notice is re-

produced on Page 2 of assessment-order) asking assessee to furnish

details/documents of business activity; sources with supporting

documents of cash deposits of Rs. 28,07,500/- made in three banks;

statements of bank accounts; explanation of huge cash kept by

assessee; ledger a/cs of purchases, sales, interest, expenses, etc. The

assessee, however, did not respond. The AO issued follow-up notices

dated 12.02.2021 and 04.03.2021 which also remained uncomplied.

Ultimately, the AO issued one more notice dated 25.03.2021 granting

final opportunity to assessee and in response to this notice, the

assessee filed a reply on 31.03.2021 giving certain details/documents

of business activity, copy of bank a/c extract, monthwise sales and

purchases of financial year 2015-16 & 2016-17, ledger of interest a/c,

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 ledger of bank interest and cash account monthwise (as noted by AO

in bottom lines / upper most lines of Page 2 / 3 of assessment-order).

The AO, however, found that the assessee had not furnished the

entire details called for. He noted that the assessee had not furnished

the copies of a/cs with (i) Bank of Baroda and (ii) State Bank of India

and the sources of cash deposits of Rs. 28,07,500/-. Therefore, the AO

issued one more notice dated 27.07.2021 to assessee asking certain

details and documents (the extract of notice is re-produced on Page 3

of assessment-order) and followed the same by another show-cause

notice dated 11.08.2021 but these notices also remained uncomplied.

Ultimately, the AO concluded that the assessee did not furnish

complete/corroborated details of sources of impugned deposits made

in bank a/c. Accordingly, he completed assessment treating the

deposits an unexplained cash credit u/s 68 and thereby making an

addition of Rs. 28,07,500/-.

(ii) Aggrieved, the assessee carried matter in first-appeal and made a

detailed submission which is re-produced by CIT(A) in Para 6 of

impugned order of first-appeal. The assessee filed bank statements of

all three banks to CIT(A) and the CIT(A) forwarded same to AO for

remand proceedings. The AO submitted remand-report to CIT(A) in

which he reported to have sent enquiry-letters to all three banks u/s

133(6) for providing details of “demonetized currency notes” deposited

by assessee. However, in response to AO’s letter, one of the banks, viz.

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 Central Bank of India only responded, the assessee has filed reply-

letter sent by Central Bank of India at Page 125 in Paper-Book.

Ultimately, the CIT(A) passed impugned order granting an adhoc relief

of Rs. 5,00,000/- and upholding the remaining addition of Rs.

23,07,500/-.

(iii) Still aggrieved, the assessee has come in next appeal before us.

assessee has raised as many as 7 grounds (with sub-grounds in some of the

grounds). In these grounds, the assessee has raised the issue of illegality of

assessment-order passed by AO as well as the merit of the impugned

addition u/s 68. However, during hearing before us, Ld. AR for assessee

made a categorical assertion that the assessee is not pressing the issue of

illegality of assessment, the assessee wants limited adjudication of the merit

of addition. Ld. DR for revenue is not opposing this submission of Ld. AR.

Therefore, taking into account the assertion made by Ld. AR, we reject

the grounds raised by assessee challenging the legality of assessment-

order.

addition of Rs. 23,07,500/- sustained by CIT(A) out of the total addition of

Rs. 28,07,500/- made by AO.

passed by AO:

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 “2. In view of the above, it is evident that despite giving several opportunities, the assessee miserably failed to furnish the complete details and also failed to explain the sources of cash deposits along with supporting documentary evidence and also failed to explain to have huge cash in hand as on 31.03.2017 comparing to immediate preceding year. The Show cause notice was issued to the assessee on 11.08.2021 asking him to furnish his objections/reply in respect of proposed additions. The assessee was asked to furnish the reply of show cause notice on or before 17.08.2021 but the assessee did not respond to the show cause notice issued to him. In absence of complete details furnished by the assessee, the scrutiny proceedings is proposed to be finalised u/s 143(3) r.w.s. 147 r.w.s. 144B of the IT. Act, 1961 having bearing the following issues: 3.1 Unexplained Cash Credit u/s 68: The assessee is a proprietor of concern Vinod Traders engaged in the wholesale business of grocery items. On examination of details available/gathered on record, it is noticed that during the F.Y. 2016-17 relevant to A.Y. 2017-18, the assessee has made cash deposits to the tune of Rs. 28,07,500/- in his bank accounts maintained with Central Bank of India, State Bank of India and Bank of Baroda. In process of finalisation of assessment proceedings, the assessee was asked to furnish the explanation of the sources of said cash deposits along with collaborative supporting document. The assessee failed to furnish the complete details. Further the assessee was asked to furnish the reason of having huge cash in hand as on 31.03.2017 in comparison to the previous year cash in hand as on 31.03.2018. The assessee once again failed to explain the reason called for. In absence of any concrete evidence and details of sources of cash deposits with supporting documents, the sources of cash deposits to the tune of Rs. 28,07,500 remained unexplained. Hence, the amount of Rs. 28,07,500/- deposited in the bank accounts of the assessee during the F.Y. 2016-17 relevant to A.Y. 2017-18 is treated as unexplained cash credit u/s 68 of the I.T. Act, 1961 in the hands of the assessee for the AY 2017-18 and the same is taxed as per the provisions of section 115BBE of the I.T. Act, 1961.” [emphasis supplied] 6. Now, we re-produce the relevant portion of impugned order passed by

CIT(A):

“1. Decision :- 7.1 The appellant is a proprietor of grocery stores and declared total income of Rs 3,51,320/-. The appellant had deposited cash of Rs.28,07,500/- during demonetization period in SBNs in SBI, Central Bank of India and Bank of Baroda Bank accounts. As the appellant did not offer satisfactory explanation towards the source of cash deposit, the AO treated the entire cash deposit of Rs.28,07,500/- as unexplained cash credit and brought to

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 tax u/s. 68 of the Act. Aggrieved by the said addition, the appellant is in appeal and has raised 3 grounds, which are adjudicated as under: 8. Ground No. 1 & 2 are relating to addition of Rs. 28,07,500/- u/s. 68 of the Act. The facts of the case are that the appellant is a proprietor of grocery stores and declared total income of Rs 3,51,320/-. The appellant had deposited cash of Rs. 28,07,500/- during demonetization period in SBNs in SBI, Central Bank of India and Bank of Baroda Bank accounts. As the appellant did not offer satisfactory explanation towards the source of cash deposit, the AO treated the entire cash deposit of Rs.28,07,500/- as unexplained cash credit and brought to tax u/s, 68 of the Act. The contention of the appellant in raising these grounds is that the AO has not considered cash sales which have been taken in the P&L account and the addition made by the AO has resulted in double addition. 8.1 There have been lot of judicial pronouncements on the issue of cash deposits during demonetization period. In all the said decisions, it has been held that if the cash in hand as on the date of demonetization was sufficient to take care of the deposits of SBNs (specified bank notes / demonetized notes), such deposits could not be taxed again. Thus, after demonetization was announced, except few agencies like hospitals, petrol stations were allowed to accept SBNs and they had to be only deposited in the bank account. The appellant has proved through the daily cash summery that he had cash in hand of Rs. 28,07,500/-. If the appellant has accepted SBNs after demonetization was announced as sale proceeds, the same is illegal which cannot be treated as part of the sale proceeds. The appellant has not given any details of cash in hand as on the date of demonetization. Considering his turnover, the AO is directed to accept the cash in hand at the estimated figure of Rs. 5,00,000/-. The balance amount of cash deposit even though claimed to be out of sale proceeds, has to be treated as unexplained cash credit as the appellant was not expected to accept the SBNs even as sale proceeds after demonetization was announced. Thus, addition of Rs. 23,07,500/- (Rs 28,07,500/- (-) Rs. 5,00,000/-) is sustained. The appellant gets relief of Rs.5,00,000/-, Ground No 1 & 2 are treated to have been partly allowed.” [emphasis supplied] 7. Before us, learned Representatives of both sides made vehement

submissions and raised respective contentions against or in favour of orders

of lower authorities. The Ld. AR for assessee has also filed a Paper-Book and

Written-Synopsis. The Synopsis filed by Ld. AR is scanned and re-produced

below:

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rival submissions and carefully perused the orders of lower authorities as

well as the documents filed in Paper-Book. After a careful consideration, we

find that during assessment-proceedings, although the assessee filed certain

details/documents to AO but those documents, as mentioned by AO, were

not complete documents to substantiate the sources of deposits made in

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 bank a/cs. Therefore, the AO treated the deposits in bank a/c as

unexplained cash credit u/s 68 and made addition with this conclusion: “In

process of finalisation of assessment proceedings, the assessee was asked to

furnish the explanation of the sources of said cash deposits alongwith

collaborative supporting document. The assessee failed to furnish the

complete details…… In absence of any concrete evidence and details of

sources of cash deposits with supporting documents, the sources of cash

deposits to the tune of Rs. 28,07,500/- remained unexplained.” The Ld. DR

for revenue has placed a very strong reliance on this conclusion made by AO

and contended that there was a failure on the part of assessee to

substantiate the sources of deposits. He contented very forcefully that when

the precise reason of taking assessee’s case under the proceeding of section

147 was to examine the cash deposits made by assessee in bank a/cs

during demonetization period, the assessee had a strong obligation to

explain the sources of deposits with clinching evidences but the assessee

has not done so. To demonstrate failure of assessee, Ld. DR took one

example. He carried us to the Cash-Book of assessee available at Pages 83-

94 of Paper-Book and showed that on 13.11.2016, the assessee has shown

aggregate receipts of about Rs. 3,15,000/- from 20 parties (these receipts

are also claimed to have been utilized for making deposits) but there was no

attempt by assessee to explain those receipts to AO. Furthermore, the

assessee has not filed any evidence of sales to AO although the assessee’s

precise claim is such that the sales made during demonetization period was

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 the source of impugned deposits. We are in complete agreement with these

submissions made by Ld. DR in open court.

it was so before CIT(A) also] that once the sales declared by assessee has

been accepted/taxed by AO, the AO cannot re-tax the cash deposits made

by assessee in bank a/c by utilizing the proceeds of sales since it amounts

to double taxation. But, as noted in preceding para, the Ld. DR has

successfully shown that on 13.11.2016, the assessee has recorded aggregate

receipts of about Rs. 3,15,000/- from 20 parties. There is no evidence from

assessee to show that these entries of receipts are relatable to “sales” made

during demonetization period. Hence, the theoretical claim of double

taxation raised by assessee apparently fails at least for the source of Rs.

3,15,000/-. Furthermore, the application of section 68 by AO is very much

correct when there was no explanation from assessee qua the nature and

source of such receipts.

facts and circumstances of the case, we are of the considered opinion that

the issue relating to the addition of Rs. 23,07,500/- sustained by the Ld.

CIT(A) cannot be said to have been adjudicated in a complete and conclusive

manner. While the assessee admittedly failed to fully substantiate the

sources of cash deposits during assessment proceedings, it is equally

evident that certain material, including bank statements and responses

received during remand proceedings, remained either partly examined or

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Virendra Kumar Mandot ITA No. 382/Ind/2025 – AY 2017-18 inconclusively dealt with by the lower authorities. The ad-hoc estimation of cash in hand by the Ld. CIT(A), without correlating the same with verifiable records, further re-inforces the need for a fresh examination. Therefore, in the interest of substantial justice, we deem it appropriate to restore the issue of addition to the file of the AO for de-novo adjudication. The AO shall examine the issue afresh in accordance with law after affording necessary opportunities to assessee. We also direct the assessee to fully cooperate and furnish all relevant evidences in support of the sources of impugned cash deposits to AO. The AO shall also consider entire submission of assessee including the judicial decisions, if any, the assessee may choose to file and thereafter pass a well-reasoned order. The issue of merit of addition is accordingly allowed for statistical purpose.

Order pronounced in open court on 22/01/2026

Sd/- Sd/-

(PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore

िदनांक/Dated : 22/01/2026

Patel/Sr. PS

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Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPYSenior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

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