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Judgment
This appeal is filed by the assessee against the order of ld. Addl/JCIT (A), Jodhpur [“Ld. CIT(A)”, for short] dated 02.03.2026 for the Assessment Year 2017-18 raising following grounds of appeal :-
“1. Erroneous Addition under Sections 68/69A
That on the facts and in the circumstances of the case and in law, the Learned Assessing Officer ("Ld. AO'") has erred in making, and the Learned Commissioner of Income Tax (Appeals) ["Ld. CIT(A)") has further erred in confirming/sustaining, the addition on account of cash deposits made during the demonetization period by treating the same as unexplained income under Section 69A / Section 68 of the Income-tax Act, 1961, without appreciating that the said deposits represent realization from trade debtors arising out of sales duly recorded in the regular books of account.
2. Failure to Appreciate Recorded Sales Already Offered to Tax
That the Ld. AO has failed to appreciate, and the Ld. CIT(A) has further erred in ignoring, that the corresponding sales giving rise to such trade debtors have already been duly recorded in the books of account, credited to the Profit & Loss Account, and offered to tax. Once such sales have been accepted, the consequential realization thereof cannot be treated as unexplained income.
3. Double Taxation of Same Income
That the Ld. AO has erred in making, and the Ld. CIT(A) has erred in confirming, the addition which results in taxing the same income twice-first as business receipts and again as unexplained income-being contrary to settled principles of taxation.
4. No Rejection of Books under Section 145
That the Ld. AO has neither rejected the books of account under Section 145 of the Income- tax Act, 1961 nor pointed out any specific defect therein, and the Ld. CIT(A) has failed to appreciate the same. In absence of rejection of books, the entries recorded therein, including trade debtors and their realization, cannot be disregarded selectively.
5 Direct Nexus between Cash Deposits and Trade Debtors
That the Ld. AO has erred in disregarding, and the Ld. CIT(A) has failed to appreciate, that the cash deposits are directly linked to trade receivables appearing in the t books of account and represent recovery of business dues, thereby fully explaining the nature and source such deposits. Hence, the provisions of Sections 68 /69A are not applicable.
5.1 Judicial Support
That reliance is placed on the decision in Baldev Raj Charla vs ACII, wherein it has been held that where cash deposits are linked to recorded sales, addition under Section 68/69A is not justified.
6. Settled Legal Position on Sales and Realization
That the Ld. AO has erred in making, and the Ld. CIT(A) has erred in sustaining. the addition despite the settled position of law that once sales are accepted as genuine, the corresponding realization cannot be treated as unexplained income.
6.1In Kailash Jewellery House vs CIT, it has been held that realization of recorded sales cannot be treated as unexplained cash credit.
6.2In Hirapanna Jewellers vs PCIT, it has been held that where sales are recorded in books, demonetization cash deposits cannot be treated as unexplained income.
7 Without Prejudice - Non-applicability of Section 115BBE
Without prejudice to the above, the Ld. AO has erred in invoking, and the Ld. CIT(A) has erred in confirming the applicability of, Section 11 5BBE, despite the fact that the impugned income is duly explained and forms part of regular business receipts.
8. Wrong Application of Amended Section 115BBE
That the Ld. AO has erred in applying, and the Ld. CIT(A) has erred in upholding. The amended provisions of Section l1SBBE by taxing the alleged income at 60% (plus surcharge and cess), without appreciating that the cash deposits pertain to the period 0S.11.2016 to 30.11.20l6, i.e., prior to the enactment of the Taxation Laws (Second Amendment) Act, 2016.
The amendment being substantive and onerous in nature cannot be applied retrospectively. Hence, the action of the lower authorities is bad in law.”
At the time of hearing, ld. AR of the assessee brought to our notice relevant facts of the case and submitted his submissions as under. He submitted that assessee is in the business of running petrol pump and in the year under consideration, the case of the assessee was selected for the reason of cash deposited during the period of demonetisation by the assessee. Even though assessee has submitted all the relevant information supporting the cash sales which matches the cash deposits during the whole year in particular during demonetisation period. After considering the submissions of the assessee, AO rejected the same and proceeded to make the addition of Rs.3,66,465/-.
Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A) and ld. CIT(A) [Addl./ JCIT(A), Jodhpur] sustained the addition made by the AO. Ld. AR submitted that the cash deposited by the assessee during demonetisation period and supported by the line of business i.e. running a petrol pump are clearly substantiated. He further brought to our notice the detailed grounds of appeal.
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. I observed that the addition made by the AO for the reason that during demonetisation period, assessee has deposited cash which, according to him, is unexplained. However, on carefully going through the business of the assessee, I noticed that the assessee has already substantiated the source of cash and cash deposit made during the year. Therefore, I am of the view that addition made by the AO is uncalled for and already proved beyond doubt the availability of cash for making the cash deposit. Therefore, I am inclined to delete the addition made by the AO and allow the grounds raised by the assessee.
In the result, the appeal filed by the assessee is allowed.