Ganpati Multiservices vs Income Tax Officer

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘the CIT(A)’) dated 20.11.2025, for AY 2017-18.

Ms. Gunjan Jain, appearing on behalf of the assessee submits that the assessee is a partnership firm engaged in the business of marketing and promotion of business entities by printing distribution and pasting of pamphlets. During the period of demonetization, the assessee had deposited Rs.34,50,000/- in old currency in its bank account with ICICI Bank. The assessee explained that the cash deposits were from:

The ld. AR submits that it was explained before the CIT(A) that since the business was in the initial stage and required high liquidity, the assessee was maintaining high cash balances. The assessee in order to substantiate cash sales furnished copy of invoices at pages 39 to 207. The assessee also placed on record confirmations from some of its customers at pages 210 to 215 of the paper book. In order to show capital introduce by the partners, the ld. AR referred to bank account statement of Shri Vineet Jindal (at page 208 of the paper book) and confirmation of gift of Rs.5,00,000/- given by Smt. Raj Rani Goyal mother of Shri Mohan Goyal at page 209 of the paper book. Since, the assessee could not furnish these documents before the Assessing Officer (AO), the AO made addition of Rs.34,50,000/- u/s.69A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessee filed documentary evidences as additional evidences under Rule 46A before the First Appellate Authority. A remand report on the additional evidences filed by the assessee was sought from the AO by the CIT(A). In the remand report no adverse comments were made by the AO on merits of the additional evidences. The ld. AR thus prayed for deleting the addition of Rs.34,50,000/- u/s.69A of the Act.

Per contra, Shri Manoj Kumar representing the department vehemently defending the impugned order prayed for dismissing appeal of the assessee. The ld. DR submits that no documentary evidences whatsoever were furnished by the assessee before the AO to substantiate source of cash deposits during demonetization. The explanation and the source of cash deposits given by the assessee before the CIT(A) are afterthought.

Both sides heard, orders of the authorities below examined. The submissions were made by ld. AR of assessee on the solitary issue assailing addition of Rs.34,50,000/- u/s. 69A of the Act. Admittedly, the assessee had deposited the aforesaid amount in old currency during the period of demonetization as under:-

The source of cash deposits has been explained as cash sales Rs.16,64,750/-, capital introduce by the partners Rs.16,00,000/- and advances from customers. To corroborate the source of cash deposits from sales, the assessee has furnished invoices and confirmation from customers. I find that no adverse findings were given by the CIT(A) with regard to assessee’s claim of cash deposits against cash sales. The documentary evidences placed on record by the assessee, further substantiate the claim of assessee. Hence, cash deposits from cash sales Rs.16,54,750/- is accepted and the addition to that extent is directed to be deleted.

With regard to cash deposits from capital introduce by the partner Rs.16,00,000/-, the assessee in order to prove capital introduce by the partner has referred to bank statement of Shri Vineet Jindal at page 208 of the paper book. The said statement shows withdrawal of Rs.8,00,000/- on 28.04.2016. Further, the assessee has placed on record confirmation from Ms. Raj Rani Goyal as gift of Rs.5,00,000/- to Shri Mohan Goyal. The contention of the assessee is that capital was introduced to meet the financial requirement at the initial stage of business. In so far as capital introduce by Shri Vineet Jindal is concerned, an inference can be drawn that the cash withdrawals from account of the partner was pooled as capital, hence, the same is accepted. As regard the remaining amount no cogent evidence is available to show that the gift given by Smt. Raj Rani Goyal to Shri Mohan Goyal was introduced as partners capital in the business. Hence, the source of cash deposits to the extent of Rs.8,00,000/- as partners capital is accepted and the addition is deleted to that extent only.

The third source of cash deposits by the assessee is advances from the customers. No documentary evidence is available on record to substantiate advances from the customers. Hence, the said argument of the assessee is devoid of any merit and hence, rejected.

In the result, addition only to the extent of Rs.24,54,750/- (Rs.16,54,750/- + Rs.8,00,000/-) is directed to be deleted and the remaining amount of addition is sustained. In the result, ground of appeal no. 5 is partly allowed.

The assessee in appeal has also assailed applying of provisions of section 115BBE of the Act. The Hon'ble Madras High Court in the case of SMILE Microfinance Ltd. vs. ACIT, WP (MD) No.2078 of 2022 decided on 19.11.2024 has held that amendment to section 115BBE of the Act would come into effect from 01.04.2017 i.e. relevant to AY 2018-19 onwards. Thus, in the impugned assessment year un-amended provisions of section 115BBE of the Act would apply. The ground of appeal No.7 is partly allowed.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on Wednesday the 08^th day of April 2026.