DEPUTY COMMISSIONER OF INCOME TAX, CITY CENTRE, GWALIOR vs. SHEELADEVI NARWARIYA, GWALIOR ROAD MEHAGAON

In the instant case also the assessee was maintaining complete stock tally, the sales were recorded in the regular books of account and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified. [Para 10.5]

The Assessing Officer made the addition on the basis of the statement of 'N', the then part time accountant of the assessee but no opportunity to cross examine to rebut the statement made by 'N' was allowed to the assessee and moreover nothing was brought on record to substantiate that cash obtained by the assessee from the sales which reduced the stock of the assessee was utilized elsewhere and that the cash sales made during the month of October 2016 were in the line of the cash sales in earlier years and was equal to the sales in the Month of July 2016, therefore, the addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified. (Para 10.7)

Further, sales made by the assessee to cover the cash deposited in the bank post-demonetization, was sufficient source of the cash deposited i.e., the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified. [Para 10.9]

Furthermore, the opening stock, purchases & sales and closing stock, declared by the assessee has not been doubted, the sales were made by the assessee out of the opening stock and purchases and the resultant closing stock has been accepted, the sales had not been disturbed either by the Assessing Officer or by the sales tax/VAT Department and even there was no difference in the quantum figures of the stock at the time of search on 12-4-2017, therefore, the sales made by the assessee out of the existing stock were sufficient to explain the deposit of cash (obtained from realization of the sales) in the bank account and cannot be treated as undisclosed Income of the assessee. [Para 10.11] The cash deposited post-demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the Assessing Officer, 7 | P a g e there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of the sales. So, respectfully following the orders by the various High Courts and the Co-ordinate Benches of the Tribunal, it is viewed that the impugned addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified, accordingly the same is deleted. (Para 10.13)..."

The AO has taken the figure of cash sales during the demonetisation only and have not taken cash sales made during the month of November and December 2016. The submission made by the appellant has been found correct. Therefore, the addition of Rs. 1,84,71,745/-made by the AO u/s 69A is deleted.”

Order pronounced in the open court on 08.12.2025.