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Facts
The assessee, engaged in trading tiles, did not file an income tax return for AY 2016-17. A survey revealed a cash deposit of Rs. 57,85,000/-. The Assessing Officer reopened the case and added the entire deposit as unexplained income. The CIT(A) partially allowed the appeal, treating 10% of the deposits as unexplained.
Held
The Tribunal observed that the assessee's business was authenticated by documents, and the cash deposits were periodic and linked to tile vendors. Given the average profit percentage of 8% in line with Section 44AD, the CIT(A) erred in sustaining an addition on an ad-hoc basis.
Key Issues
Whether the CIT(A) erred in sustaining the addition of 10% of cash deposits as unexplained income, when the assessee's business was authenticated and the deposits were linked to business transactions.
Sections Cited
133A, 147, 148, 143(2), 142(1), 69A, 44AD, 250, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
ORDER PER : SUNIL KUMAR SINGH, JUDICIAL MEMBER:
These two appeals have been preferred by assessee against the impugned orders dated 11.06.2025 and 10.06.2025 passed in Appeal No. NFAC/2015-16/10148032 and NFAC/2016-17/10148041 by the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi u/s. 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment years 2016-17 and 2017-18 respectively, wherein the ld. CIT(Appeals) has partly allowed assessee’s appeals, treating 10% of unexplained cash deposits as against 100% treated by the Assessing Officer.
Facts and issues involved in both these appeals are common, hence, these appeals are being decided by the common order for the sake of convenience and brevity. The facts only of are being narrated as under:
ITA No. 418/Agr/2025 (A.Y. 2016-17):
Briefly stated, the facts are that the assessee is engaged in trading of tiles and running a proprietorship concern in the name and style of M/s. Jai Ji Traders. Assessee did not file return of income for the assessment year 2016-17. As per the information available with the department, a survey action u/s. 133A was conducted on J&K Bank Srinagar. During the survey proceedings, it was found that the assessee has deposited a cash of Rs.57,85,000/- during the financial year 2015-
The Assessing Officer had reason to believe that the income chargeable to tax has escaped assessment for the year under consideration. Case was reopened u/s. 147 and notice u/s. 148 of the Act was issued and served upon the assessee. Assessee filed return of income on 17.02.2022 in response thereof, declaring total income at Rs.5,14,280/-. Statutory notices u/s. 143(2) and 142(1) of the Act were issued and served upon the assessee. Assessee submitted his reply to 2 | P a g e later notice. Assessee has opted section 44AD of the Act and declared his net profit of Rs.5,34,274/- @ 8% on gross receipts of Rs.66,78,450/-.
Learned Assessing Officer, after considering assessee’s submissions, rejected the return filed by assessee after due date and added the alleged cash deposit of Rs.57,85,000/- as unexplained cash deposit u/s. 69A of the Act.
Aggrieved, assessee preferred first appeal before Ld. CIT(Appeals), who found that the period for filing the return in response to section 148 of the Act fell between 15.03.2020 to 28.02.2022, which was condoned by Hon’ble Supreme Court, vide order dated 10.01.2022 [2022] 134 taxmann.com 307(SC). The return was accordingly treated as valid by the first appellate authority. This apart, learned CIT(Appeals) also verified the bank statement and observed that the cash deposit was not made in the single instance but periodically and also found that with the credits, there were debits, many of which were based on the description of the transaction appearing in the bank statement, which were also found to the first appellate authority to be made towards tile vendors. Learned CIT(Appeals), after considering various documents such as CTO registration certificate, purchase and sale bills etc., found assessee’s trading of tiles business as authenticated one. However, for want of one to one co-relation as to whether the cash deposits were 3 | P a g e emanated from assessee’s business in trading in tiles or not, he treated 10% of cash deposits as unexplained money u/s. 69A of the Act as against addition of entire cash deposits made by the Assessing Officer.
Appellant assessee has preferred this second appeal on the following grounds :
“1. That the assessment order as well as the order of Ld. CIT (A) are both against the facts of the case and are untenable under the law. The Id. CIT (A) has grossly erred in sustaining the disallowance of 10% of the cash deposit made during the year under the consideration. Thus the Ld. CIT (A) was not justified in sustaining the disallowance made of Rs.5,78,500/-out of total disallowance made at Rs.57,85,000/- by the Assessing Officer.
2. That the CIT (A) should have deleted the whole addition made by the Assessing Officer and was not justified in sustaining the addition at the rate of 10% of the total deposit made in the bank. Alternatively, the addition made is very high and excessive.
3. That the Exparte order passed u/s.144 by the Assessing Officer was not called for as there was no proper service of notice as required by the law. …………………………..”
Perused the record. None for assessee. Heard Ld. Sr. DR for revenue.
We find that the ld. CIT(Appeals) at para 5 of the impugned order, has reproduced appellant’s comparative table for AYs. 2016-17, 2017- 18, 2019-20, 2020-21 & 2021-22, showing turnover and net profit, wherein profit percentage has been shown at 8%, 8%, 9%, 8% and 7% respectively, whose average profit percentage comes to 8%, which is also in accordance with mandate of section 44AD of the Act. Learned
4 | P a g e CIT(Appeals) has sustained the addition only on adhoc basis. The intention of legislature is very clear u/s. 44AD that the assessee was not required to maintain books of account. Therefore, the Assessing Officer is directed to compute the income after considering 8% of the gross receipts as profit of the assessee. The assessee’s appeal is liable to be allowed in part.
ITA No. 419/Agr/2025 (A.Y. 2017-18):
Facts and issue involved in this appeal are similar to except the difference in figures and dates etc. Therefore, our finding arrived at in shall mutatis mutandis apply to this case also. This appeal also deserves to be partly allowed in terms of our finding recorded hereinabove.
In the result, both the assessee’s appeals are partly allowed.
Order pronounced in the open court on 26.11.2025.