SHASHI KUMAR MEHTA,SONIPAT vs. ITO WARD 4, SONIPAT

PER NAVEEN CHANDRA, AM :-

This appeal by the assessee is directed against the order of the ld.
CIT(A)/NFAC, Delhi dated 07.03.2024 pertaining to A.Y 2017-18. 2. The assessee has raised the following grounds of appeal:

ITA No. 2135/DEL/2024 [A.Y 2017-18]
“1. On the facts and circumstances of the case, the order passed by the Hon'ble National Faceless Appeal Centre (NFAC) is bad, both in the eye of law and on the facts.
2. (i) On the facts and circumstances of the case, the Hon'ble
NFAC has erred both on facts and in law in confirming the addition of Rs.80,82,763/- made by Ld Assessing Officer (AO) on account of cash deposited in the bank account.
(ii) That the addition has been confirmed arbitrarily rejecting the explanation and evidences brought on record by the assessee.
3. (i) On the facts and circumstances of the case, the Hon'ble
NFAC has erred both on facts and in law in confirming the addition of Rs. 17,71,879/- made by Ld AO on account of sundry creditors appearing in the balance sheet in assessee's own name.
(ii) That the above addition has been confirmed rejecting the contention of the assessee that due to an inadvertent error the creditor was shown in assessee's own name instead of crediting the same to the capital account of the assessee at the time of conversion of partnership firm into proprietorship concern.
(iii) That in any case the error does not result in any tax incidence.
4. The applicant craves leave to add, amend, or alter any of the grounds of appeal.”

ITA No. 2135/DEL/2024 [A.Y 2017-18]
assessment through CASS and accordingly, statutory notices u/s 143(2) of the Act were issued along with a questionnaire. In response to the notices issued, the assessee filed reply which were examined on test check basis.
4. During the assessment proceedings, the Assessing Officer noticed that the assessee has shown business income amounting to Rs. 4,545/- in his ITR filed for the AY 2017-18 on a huge turnover amounting to Rs.
6 crore including Rs. 81 lakhs cash deposited during the demonetization period and the assessee has not got his accounts audited. Assessee has shown himself as sundry creditor at Rs. 17,71,879/- in his books of account furnished during assessment proceedings.
5. The Assessing Officer further noticed that the assessee has deposited in bank cash of Rs. 81 lakhs and on the other hand he has cash in hand for Rs. 80,82,763/-. The Assessing Officer further observed that assessee has CC limit account (cash credit account) and interest amounting to Rs.6,56,639/- has been paid but assessee has not shown any interest expense debited in his P& L account furnished for the year under consideration. Assessee has not followed section 40A(3) of the Act.
6. The assessee explained that the assessee has agriculture land from which the income of Rs.2,00,000/- has been shown in computation of ITA No. 2135/DEL/2024 [A.Y 2017-18]
Mehta, individual, to Mange Ram Kewal Kishan,firm. The assessee filed the copy of account in the name of Shashi Kumar Mehta, Farmer a/c.
The assessee explained that earlier the constitution of Firm was partnership with PAN AATFM9882B and the firm was dissolved on 31.03.2015. The copy of dissolution deed was furnished on record. After dissolution of the firm, the business was carried on by Shri Shashi Kumar
Mehta,individual as proprietorship concern. The ledger of Shashi Kumar
Mehta farmer a/c was opened in the books of partnership firm, which was carried on in the firm Mange Ram Kewal Kishan (Proprietorship w.e.f. 01.04.2015).
7. The Assessing Officer held that as the firm was dissolved on 31.03.2015, the assessee cannot be the sundry creditor of his proprietorship concern and added the amount of Rs. 17,71,879/- considering the same as bogus/unexplained sundry creditors u/s 68 of the Act.
8. Aggrieved, the assessee went in appeal before the ld. CIT(A) who confirmed the addition made by the Assessing Officer.
9. Now the assessee is in appeal before us.

ITA No. 2135/DEL/2024 [A.Y 2017-18]
13. Regarding the addition of Rs. 80,82,783/- made by the Assessing
Officer on account of cash deposited in the bank account, we find that the assessee has attempted to prove the entire source of cash deposit during demonetization as cash in hand required to provide advance to the farmers in his Katcha Arahtia business of commission agent. Although the assessee, prima facie, appears to have discharged its onus of explaining source of cash deposit, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the AO found the assessee drawing cash from banks when he had sufficient cash in hand. On the other hand, the Revenue’s endeavour to disbelieve the ITA No. 2135/DEL/2024 [A.Y 2017-18]
assessee’s contention that cash deposit has been made out of cash in hand, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of ₹ 5 lakh only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The ground of appeal no 2 is partly allowed.
14. In the result, appeal of assessee in ITA No. 2135/DEL/2024 is partly allowed.
Order pronounced in open court on 04.11.2025. [SATBEER SINGH GODARA]

[NAVEEN CHANDRA]
JUDICIAL MEMBER

ACCOUNTANT MEMBER

Dated : 09th December, 2025. VL/