DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1),AGRA, SANJAY PLACE vs. SURENDRA KUMAR GAUTAM, SADABAD

Assessing Officer further concluded that the assessee has failed to show that 2 | P a g e the impugned amount, as recorded in the books of account maintained by him, is out of genuine cash sales. Finally, a show cause notice dated 25.03.2022 along with draft assessment order was also served upon the assessee. Assessee, vide letter dated 26.03.2022 responded, but not to the satisfaction of the Assessing Officer. Learned Assessing Officer came to the conclusion that an amount of Rs.2,45,36,500/- was deposited in specified bank notes (SBN) and an amount of Rs.69,28,000/- in non-specified bank notes. Assessing Officer further observed that the assessee mentioned that the impugned cash was received from un-identifiable persons in response to notice issued u/s. 148 of the Act. However, the assessee later on took the plea that cash deposit was shown from his accounted business income and was not accepted. The Assessing Officer, accordingly, treated the amount of Rs.69,28,000/- deposited in non-specified bank notes as assessee’s business income, however, remaining amount of Rs.2,45,36,500/- deposited in specified bank notes (SBN) was treated as unexplained income and added u/s. 69A of the Act.

3 | P a g e “1. That the CIT (A) has erred on facts and in law in deleting addition of Rs.2.45.36,500/-made on account on unexplained cash deposits in the bank account without considering the fact that the assessee, in his submission filed before issuance of notice u/s 148, has submitted that cash was generated from unidentifiabile person.

2. That the CIT(A) has erred on facts and in law in deleting the addition by accepting the Assessee's explanation that cash recovered from the debtors, without considering the fact that remark made by the auditor in the audit report indicates that the debtors have not been independently verified by the auditor which raises serious doubts about the authenticity and accuracy of the claim of the assessee regarding cash recovery from debtors. Also, in the return fled by the assessee for A.Y. 2016-17, the sundry debtors shown at Rs 14,76,416/- only whereas the assessee has claimed cash recovered from debtors much more than above amount.

3. That the CIT(A) has erred on facts and in law in allowing the appeal of the assessee by relying on the party-wise details of cash sales, including the name, complete address and amount of each party submitted by the assessee ignoring the fact that this piece of evidence was not submitted before the Assessing Officer during the assessment proceedings. Thus, the CIT(A) has failed to adhere to the provisions of Rule 46A, which mandates that an opportunity must be provided to the Assessing Officer for giving his own perspective on additional evidences before being considered in the appellate proceedings.

4. That the CIT(A) has erred on facts and in law in allowing the appeal of the assessee by considering the part submission of the assessee that sales increase in the month of October due to high demand for Urea, while completely ignoring the other part of the same submission, which states that farmers give advances to book Urea and fertilizers as per their needs and if the claim of the assessee regarding advance payments by farmers was correct, then an increasing trend of sales and corresponding cash deposits should have been reported in the months prior to October. However, no such trend was observed, thereby raising doubts on the genuineness of the assessee's explanation.

5. That the CIT(A) has erred on facts and in law in allowing the appeal of the assessee by relying upon the fact that VAT has been paid on entire sales and sales recorded in the Books of Account were accepted by the VAT department, completely ignoring the fact that Sales Tax Returns were not provided to the auditor during the audit which is evident from point no. 5 of the audit report wherein it is clearly mentioned that the Sales Tax Returns were not made available for verification, thereby raising serious doubts about the correctness and completeness of the sales figures recorded in the Books of Account. 4 | P a g e

6. That the order of the CIT(A) dated 06.01.2025 is bad in law and deserves to be set aside as it is based upon by not considering the material inconsistency between the audit report and the records produced by the assessee.

7. The main point for consideration on the basis of aforesaid grounds raised in the revenue’s appeal is, as to whether learned CIT(Appeals) has erred in deleting the addition of Rs.2,45,36,500/- made by the Assessing Officer as unexplained cash deposit in assessee’s bank account during the demonetization period during the year under consideration.

During the course of appellant proceedings, the appellant has furnished complete stock details comprising of month wise opening stock, month wise purchase and sale (sales bifurcated in to cash sales and other than cash sale), closing stock at each month end and copy of complete stock register. It is also noted that the appellant had opening cash-in-hand on Rs. 2,03,46,999/- as on 01.11.2016 and closing balance of Rs. 2,57,27,378/- as on 08.11.2016. Further, more the appellant had a track record of deposition of cash before the date of demonetization period that the appellant had already deposited a sum of Rs 3,60,18,280/- during the period from 01.04.2016 to 08.11.2016 which justifies that the appellant had usually depositing the cash into the bank in the normal course of business.

However, the Assessing officer stated that till September, sale was below of Rs. 50.00 lakh and in the month of October, it shoot up to Rs. 1,07,21,520/-. In this regard, the appellant stated that in the month of October & November sale of fertilizers generally increases. After verified the cash sales details, it is found that the appellant has declared cash sales for the month of October, 2015 & 2016 amounting to Rs. 1,03,70,600/- & Rs. 1,07,21,520/- respectively, similarly, for the month of November, 2015 & 2016, there are total cash sales amounting to Rs. 1,60,50,100/-and Rs. 2,12,27,840/- respectively. Demand of urea is quite high in the month of October and November. The relevant extract of the cash deposit is reproduced as under :- “2.2. As regards higher sale in the month of October, it is submitted that Sadabad is a very fertile potato farming area. An average of 50-60 Packets of Potato are produced in 1 Biga. Potato seeds are prepared in the month of October. For preparation of potato seeds urea is required. Farmers purchase urea, fertilizer and potas for better quality production of potato and to save from germs and fertility of soil. Also Government provides subsidised rate of Urea and fertilizer to farmers. Potato grow in cold seasons which is called Ravi crop. Farmers arrange urea and fertilizer earliest possible because the products becomes short in the market due to non availability of these products in market. In case of shortage, Rates of urea and fertilizers are shoot up unexpectable so farmers gives even advances and book Urea and fertilizer as per their needs in 6 | P a g e case these products not available to farmers, there will be no Ravi crops. This is the reason why there is heavy sale of UREA AND FERTILIZER in the month of October.

2.2 We are giving hereunder details of cash deposit in Bank in earlier years: Comparative details of Cash deposit in Bank in earlier year.

Month 2013-14 2014-15 2015-16 April 5226500 2534200 283800 May 604000 3606000 2479200 June 2752800 2360900 2517000 July 6161600 6115000 3729600 Aug 4500800 7253400 5289150 Sep 1313400 4839300 1662000 Oct 7773700 11847200 10293000

2.3 This is quite evident from above that in earlier also the amount of cash deposited in Bank is quite higher due to the reason that in the month of October, sale of urea is quite high. In view of above the sale in the month of October, 16 in quite comparable with earlier years.” After verified the details, it is found that the appellant had deposited cash amounting to Rs. 1,12,75,700/-, Rs. 1,02,93,000/- and Rs. 1,18,47,200/ for the period October, 2016, 2015 and 2014 respectively. It is crystal clear that the appellant had usually depositing the cash into the bank in the normal course of business. The source of cash deposit in Bank is out of sale proceeds of fertilizer sold by the appellant during the year under consideration. The amount realized on sale of goods was duly recorded in Books of account and the same was deposited in Bank. Since entire sale was recorded in Books of Account and the VAT was already paid hence source of cash deposit stands explained. The sale recorded in Books of Accounts was accepted by the VAT department also. An order was passed by the Assistant Commissioner, Hathras Sector-3, Department of Commerce UPVAT on 4th March, 2020 vide Order Number 19308911500259 and accepted the sale and purchase made by the Appellant.

In view of the above discussion and sincerely following the Hon'ble judiciary decisions, in my considered opinion, the appellant had made sales to various parties in cash out of sufficient stocks available with it. The quantitative details maintained in the stock registers were duly furnished by the appellant before the Assessing Officer. No discrepancy whatsoever has been found by the Assessing Officer in respect of the stock position held as on 8-11-2016 and cash sales made and cash recoveries made thereafter. To the extent of 7 | P a g e cash sales made, the corresponding stocks have been duly reduced in the stock register. Hence, there is no reason to dispute the fact that the cash deposits in bank account had been sourced out of either cash sales made by the appellant during the demonetization period or cash recoveries made from its customers prior to the demonetization period. Therefore, there was no occasion to keep the old SCNs which were declared no more legal tenders. Hence, out of the said cash in hand, a sum of Rs. 2,45,36,500/- was rightly deposited in the bank accounts by the appellant during the period of demonetization and the same is duly appearing in the audited books of account maintained by the appellant for the year consideration. Hence, the contention of the appellant is found tenable. Hence, this ground of appeal is noted as allowed.”

9. It becomes clear from the perusal of the afore quoted impugned order that it is self speaking and on the basis of the month-wise details of entire stock and sales along with copy of entire stock register, ld. CIT(Appeals) found that the assessee had a track record of deposits of cash before demonetization period, justifying such deposits in the bank during the normal course of business. The comparative details of cash deposits in the year 2013-14, 2014-15 and 2015-16 goes to show that the deposits in the month of October in these years was proportionately higher. The reason shown by the assessee that the sale of urea in the month of October was quite high, has rightly been accepted by the first appellate authority. Assessing Officer’s doubt in respect of the increase in sale in the month of October is based on conjecture and surmises, ignoring the quantitative details maintained in the stock register at his disposal during the assessment proceedings. This apart, an omission of a fact in audit report or alternate/inconsistent pleadings cannot be made basis to discard assessee’s cogent and convincing 8 | P a g e documentary evidence. It is not the case of the Revenue that the sales made by assessee in the month of October do not commensurate to the cash deposited in the bank account during this month. The impugned order does not suffer from any error of law or fact and is liable to be sustained. Aforesaid point is accordingly determined in negative against the revenue and in favour of the assessee.

Order pronounced in the open court on 29.09.2025.