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Facts
The assessee, engaged in the Kirana business, declared a turnover of ₹1,54,31,222/- for AY 2017-18. The Assessing Officer (AO) doubted a cash deposit of ₹25,00,000/- made during the demonetization period, treating it as unexplained money. The assessee contended that the cash was withdrawn from their capital account, sourced from opening cash balance and cash sales.
Held
The Tribunal noted that the assessee's books of account were audited and supported by vouchers. The capital account showed a substantial opening balance, and there were consistent withdrawals by the proprietor. The gross turnover and gross profit had significantly increased, with a majority of sales being in cash, which was not disputed by the revenue. The Tribunal found that the cash withdrawn was utilized for the deposit.
Key Issues
Whether the cash deposits made during the demonetization period were adequately explained by the assessee as sourced from their business and capital withdrawals.
Sections Cited
69, 250, 143(3)
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Income Tax Appellate Tribunal, NAGPUR “SMC” BENCH : NAGPUR
Before: DR. MANISH BORAD
This appeal at the instance of the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/ NFAC, Delhi [“CIT(A)”], dated 11/09/2025 passed u/s. 250 of the Income Tax Act, 1961 (for short, 'the Act') which is arising out of assessment order dated 26.12.2019 passed u/s. 143(3) of the Act by ITO, Ward-3, Amrawati, for the Assessment Year 2017-18 (A.Y.)
The grievance of the assessee revolves around the addition of ₹ 25,00,000/- made by the Ld.Assessing Officer (AO) invoking section 69 of the Act and the same being affirmed by the Ld. CIT(A).
2 ITA.No.622/NAG/2025 (Anil Pandurangji Kharpe) 3. At the outset, learned counsel for the assessee submitted that assessee is carrying on business of Kirana goods for the last 15 years. The turnover during the year is disclosed at ₹1,54,31,222/-. Ld.AO has doubted the cash deposit made during the demonetization period, but failed to take into consideration that the assessee has withdrawn the cash from its capital account during the year and that the source of cash is opening balance of cash in hand and cash sales affected during the year. He also submitted that books of accounts are regularly maintained and duly audited supported by bills and vouchers. He, therefore, prayed for deletion of impugned addition.
On the other hand, Ld. Departmental Representative (DR) supported the order of Ld. CIT(A).
I have heard rival contentions and perused the records placed before me. I observe that assessee is an individual and return of income for A.Y. 2017-18 has been e-filed on 29.12.2017 declaring income of ₹ 5,66,540/-. The assessee carries on the business of Kirana in the name of Shrikant Provisions and tax audit report stands e-filed along with audited financial statement. Net profit rate of 4.40% has been declared. I note that the assessee deposited cash of ₹25,00,000/- on 12.11.2016 which the Ld.AO treated as unexplained money. Cash deposit of ₹ 2,00,000/-, a day prior
3 ITA.No.622/NAG/2025 (Anil Pandurangji Kharpe) i.e. 10.11.2016 has been accepted by the Assessing Officer. I also note that assessee has furnished details in paper book running into 56 pages and at page No. 41, the capital account of the proprietor is furnished wherein the opening balance on 01.04.2016 is at ₹15,02,725.96 ps. Thereafter, from 29th April till 4th November, 2016, there have been consistent withdrawals by the proprietor which he is legally permissible to do so, in case of sale proprietorship concern. I also note that the gross turnover of the assessee in the preceding F.Y. 2015- 16 was ₹ 60,49,283/- and the same raised to ₹1,54,31,222/- during the year under consideration showing increase of 154%. Gross profit of the assessee also increased from ₹8,37,046/- to 15,62,969/-. Ld.AO has not doubted the book results i.e. purchase and sales. It is also an admitted fact that majority of the sales of the assessee are in cash. The assessee has withdrawn the available cash in hand through his capital account and thereafter has deposited the alleged sum. All these facts clearly indicate that the source of alleged cash is from the sales not disputed by the Revenue authorities and that the cash withdrawn by the proprietor during the year has been utilized for depositing the alleged sum.
I, therefore, under the given facts and circumstances, find that the assessee has successfully explained the source of alleged cash deposits during the demonetization period. Finding of the Ld.CIT(A) is reversed and the addition of 4 ITA.No.622/NAG/2025 (Anil Pandurangji Kharpe) ₹25,00,000/- stands deleted. Effective grounds of appeal raised by the assessee are allowed.
In the result, appeal of the Assessee is allowed.