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Facts
The assessee, engaged in trading agricultural commodities, was subjected to an assessment order for AY 2017-18. The Assessing Officer (AO) made additions based on observed cash deposits during demonetization and funds in a bank account allegedly not belonging to the assessee. The assessee claimed that proper books of account were maintained and the cash deposits were business receipts, and the bank account belonged to a third party.
Held
The Tribunal noted that the CIT(A) declined to admit additional evidence. Considering the nature of the dispute and the evidence, the Tribunal felt a fresh factual verification was warranted. The Tribunal decided to set aside the appellate order and restore the matter to the AO for fresh adjudication.
Key Issues
Reconsideration of additions made under section 69A for cash deposits and a disputed bank account, as well as the disallowance of deduction under section 80C and denial of cost of construction for long-term capital gains.
Sections Cited
69A, 143(3), 145(3), 80C, 46A
AI-generated summary — verify with the full judgment below
Assessment Year : 2017-18 Shyam Sundar Inani Vs. The ITO C/o Rajendra Jain Advocate, Ward, Phalodi 106, Akshay Deep Complex, Rajasthan 5th B Road, Sardarpura, Jodhpur PAN NO: AAGPI4093K Appellant Respondent Assessee by : Shri Rajendra Jain, Advocate Revenue by : Shri Karni Dan, Addl. CIT(Sr. D.R) Date of Hearing : 19/05/2025 Date of Pronouncement : 02/06/2025 आदेश/Order PER LALIET KUMAR, J.M: This appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 04.07.2024, pertaining to the Assessment Year 2017–18, arising out of the assessment order passed under section 143(3) of the Income-tax Act, 1961 by the Income Tax Officer, Ward-Phalodi.
Though multiple grounds have been raised in the appeal, the core issues pertain to:
Addition of Rs.1,11,25,000/- under section 69A on account of cash deposits during the demonetisation period; 2. Addition of Rs.30,25,000/- in respect of a bank account allegedly not belonging to the assessee; 3. Disallowance of deduction under Chapter VI-A;
4. Estimation of income without rejection of books of account; and 5. Denial of cost of construction in computation of long-term capital gain. 3. The brief facts of the case are that the assessee is engaged in the trading of agricultural commodities like jeera and other seeds. During the assessment proceedings, the AO observed cash deposits in the assessee’s bank account aggregating Rs.1,11,25,000/- during the demonetisation period. The assessee explained that the cash was part of regular business receipts arising out of cash sales, particularly during the festive season (notably Diwali).
3.1. The assessee contended that proper books of account were maintained and duly audited. Supporting records such as the cash book, sales registers, VAT returns, and financial statements were submitted to the AO. It was submitted that the AO neither pointed out any defect in the books of account nor rejected them under section 145(3), and yet proceeded to make an addition under section 69A, which amounted to double taxation of recorded sales.
3.2. With regard to the addition of Rs.30,25,000/-, the assessee submitted that the relevant bank account was not owned by him and belonged to a third party. KYC documents and account particulars demonstrated that the account holder was someone else. It was contended that the AO mechanically attributed the account to the assessee without proper verification.
3.3. On other issues, the AR submitted that: a) Deduction under section 80C for LIC premium of Rs.38,320/- was disallowed despite submission of relevant documents; b) The AO erred in computing long-term capital gains without granting credit for cost of construction incurred from business income in earlier years; c) The trading results having been accepted, no separate addition under section 69A was sustainable. Reliance was placed on judicial precedents to support the submissions. 3.4 In response, the Ld. Departmental Representative (DR) supported the orders of the lower authorities and submitted that the assessee failed to submit complete and satisfactory details despite multiple opportunities. The AO issued several query letters and show-cause notices, but the assessee did not provide corroborative evidence to explain the source of the cash deposits. It was further submitted that the CIT(A) rightly declined to admit additional evidence in view of non-compliance with Rule 46A.
We have heard the rival submissions and carefully perused the records. From the assessment and appellate records, it emerges that the assessee had submitted a letter dated 05.12.2019 enclosing the cash book and basic financial statements. However, the AO noted a lack of supporting documents and therefore treated the cash deposits as unexplained under section 69A.
The CIT(A) declined to admit additional evidence, such as sale bills, stock registers, and related documents, on the ground that no application was made under Rule 46A. However, considering the nature of the dispute and the evidence now being relied upon, we are of the view that the matter warrants a fresh factual verification.
5.1. In our considered opinion, in the interest of justice, the following issues require reconsideration by the AO:
I. Addition of Rs.1,11,25,000/- under section 69A in respect of cash deposits; II. Addition of Rs.30,25,000/- related to the bank account allegedly not belonging to the assessee; III. Consideration of cost of construction while computing long- term capital gain; IV. Allowability of deduction under section 80C amounting to Rs.38,320/-.
5.2. Accordingly, we set aside the impugned appellate order to the extent mentioned above and restore the matter to the file of the Assessing Officer for fresh adjudication after affording a reasonable opportunity of being heard to the assessee. The assessee is directed to fully cooperate and furnish all necessary documentary evidence in support of his claim. The AO shall decide the matter in accordance with law, without being influenced by any earlier findings.
In the result, the appeal is allowed for statistical purposes.
(Order pronounced in the open Court on 02/06/2025 )