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Judgment
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to ‘ld. CIT(A)’) dated 31.07.2025 for AY 2017-18.
At the time of filing of appeal, the Registry has pointed out a defect that appeal is time barred by 6 days.
None appeared on behalf of the assessee, we proceeded to hear the case with the assistance of Ld. DR.
We have heard Ld. DR on the issue of condonation of delay. In our considered opinion, there was a reasonable cause for the delay in filing the appeal. Therefore, we condone the delay in filing the appeal before the Tribunal.
Brief facts of the case are, assessee is an individual and filed her return of income on 30.12.2017 declaring total income of Rs.7,81,480/-. The case was selected for limited scrutiny through CASS for the reason ‘abnormal inquiries in cash deposits’ during demonetization period as compared to pre demonetization period. Accordingly notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response assessee submitted the relevant information as called for. The Assessing Officer observed that from 21.11.2016 to 28.11.2016 assessee has made the cash deposit of Rs.79.85 lakhs during demonetization period. He observed that assessee has declared total income of Rs.7,81,480/-as against the cash deposit of Rs.79.85 lakhs in her bank account. When the assessee was asked to substantiate the same by filing the relevant supporting documents. Meantime Assessing Officer issued notice u/s 133(6) of the Act to Axis Bank Ashoka Niketan Branch, ICICI Bank Rohini Branch, Indian Bank Janakpuri Branch and Corporation Bank Pankha Road Branch Delhi. The above Branches has submitted the requisite detail. Several notices were issued to the assessee for compliance, however, assessee has submitted in response to questionnaire on 28.11.2019 and in response assessee had submitted that she was doing business from home as well as having one counter in Sadar Bazar Delhi outside shops. The Assessing Officer observed that assessee has not substantiated with proper details further observed that assessee has not furnished month wise details of sales and purchases and observed that even though assessee declared her income u/s 44AD still the assessee has to maintain basic records of sales and purchases. The assessee has submitted, that she has carried on trading of clothes. From the submission of the assessee, Assessing Officer observed that assessee has declared a purchase of Rs.49,18,444/- total sales of Rs.1,02,45,845/- and had held opening stock of Rs.4119214/-. Assessee also furnished month wise summary of sale, from the above information, Assessing Officer observed, wherein upto the month of August average sale per month is shown as 4 to 5 lakh but in the month of Sep.& Oct. 2016 sale were disclosed at Rs.4515600/- & Rs.3469400/-respectively. The submissions of the assessee cannot be believed to be true in absence of any supporting evidence. He further observed that assessee has declared opening cash in hand of Rs.16,36,948 but the same is also disclosed at Nil rupees in her return of income in the AY 2016-17. Since not convinced with the submissions of the assessee the Assessing Officer proceeded to make the addition of Rs.79,85,000/- u/s 69A of the Act r.w.s. 115BBE of the Act.
Aggrieved with the above order, assessee preferred an appeal before NFAC Delhi and filed the grounds of appeal and detailed submissions which is reproduced at page 3 to 13 of the appellate order. After considering the detailed submissions of the assessee Ld. CIT(A) observed that assessee has declared `Income from Business and Profession’, declaring turnover of Rs.1,02,45,845/- on presumptive basis u/s 44AD. After considering the detailed submissions of the assessee Ld. CIT(A) allowed the grounds raised by the assessee by observing as under:-
5.2During the appellate proceedings, the appellant had submitted that the appellant was a small time trader in clothes and other textile items operating from home and also counter in the crowded wholesale cloth market of Sadar Bazar, Delhi. With regard to cash deposits, the appellant had submitted that the appellant is dealing sales and purchases on cash basis and had not maintained regular books of accounts. Since, the appellant had not maintained the books of accounts, she declared her business income of Rs.8,19,670/-being 8% on turnover ofRs.1,02,45,845/- on presumptive basis u/s 44AD of the Act.
5.3With regard to cash deposits during demonetization period, the appellant has submitted that during Diwali sales the appellant has received sales amount in cash, hence the same was deposited during the demonetization period. Further, the appellant also had cash out other past savings. Further, the appellant has submitted the copy of P&L account for the F.Y. 2016-17, month-wise details of purchase and sales expenses, month-wise cash in flow and out flow statement and also list of suppliers with PAN from whom goods were purchased in support other submission.
5.4Further, the appellant relied on the following court decisions:
5.4.1Hon’ble ITAT, Delhi, in the case of Mohit Sukhija Vs NFA, ITA No.4661/DEL/2024.
“8.…..This case is related to cash deposited during demonetisation period amounting Rs.14,92,500 where appellant filed return of Income U/s 44AD and AO made additions U/s69A of Income Tax Act.
22.When the assessee gives any reply or submission or any documents to the Assessing Officer, it is duty of the Assessing Officer to examine the same in the light of the available evidence. In the present case the Assessing Officer and the ld CIT(A) have concluded the findings on the basis of conjectures and surmises. The Assessing Officer has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be dependent on the Rule of evidence, the assessee in this case explained the source of bank deposits are from cash sales. The Assessing Officer proceeded to disbelieve the explanation of the assessee on the presumption basis without bringing the corroborative material on record. The Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. The Assessing Officer without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion, is erroneous.”
5.4.2Hon’ble ITAT, Delhi, in the case of Pradeep Jain Vs ITO, ITA No.8001/DEL/2018.
“6.I have considered the rival submissions… “Since assessee is involved in small business activity and filed return of income under presumptive provisions under section 44AD of the I.T. Act, there was no justification to consider the sales of assessee to be bogus or to make addition of cash in hand as per details submitted by the assessee because A.O. did not bring any sufficient evidence on record to justify the, addition. I, therefore, do not find any justification to sustain the addition. I, accordingly, set aside the Orders of the authorities below and delete the entire addition.”
5.5The submission made by the appellant is considered and found acceptable. It is observed that the appellant was a small time textile trader dealing sales and purchases in cash. During the time of Diwali sales of F.Y. 2016-17, the appellant received the cash. Subsequent to Diwali, the GOI had announced the demonetization. Hence, the appellant had deposited the cash in her bank account amounting to Rs.79,85,000/- which is partly out of cash sales and partly out of past savings. Since, the appellant had not maintained books of accounts for the impugned A.Y., the appellant had offered her business income under presumptive basis u/s 44AD of the Act @ 8% on turnover of Rs.1,02,45,845/-. The appellant had offered the business income since she had not maintained books of accounts. Therefore, the appellant had explained the source of cash deposits made during the demonetization period as business sales. In support of the same, the appellant had submitted the documentary evidences such a P&L account for the F.Y.2016-17, month-wise details of purchase and sales expenses, month-wise cash in flow and out flow statement and also list of suppliers with PAN from whom goods were purchased. Further, the appellant also submitted that she had offered her business income on presumptive basis u/s 44AD for the last two A.Y.s i.e., AY 2015-16 and AY 2016-17.
5.6The AO assessed cash deposit of the assessee by treating the same as unexplained investment or monies u/s 69A of the Act which reads as follows,
“Section 69A. Unexplained money, etc.—Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the money and the value of the bullion, jewellery or other valuable article maybe deemed to be the income of the assessee for such financial year.]”
As per the provisions of the above referred section two conditions have to be fulfilled before invoking,
(i)There should be books of accounts and
(ii)The money or valuables are not recorded in the books of accounts.
In the present facts of the appellant’s case, she has not maintained any books of accounts and produced the details of purchases & sales before the AO. Therefore provisions of section 69A of the Act is not applicable.
5.7None of the submission and evidences produced by the appellant before the AO was considered and enquired up on. Purchase and sales details were given by the appellant with evidences but AO has not made any further enquiry to disprove the veracity of evidences produced. The appellant has admitted turnover of Rs.1,02,45,845/- which is much higher than the cash deposit of Rs.79,85,000/-. Further, the AO has accepted the income admitted by the appellant in return of income u/s 44AD of the Act. In that case AO has accepted the turnover of the appellant to beRs.1,02,45,845/-. For the same income section 69A of the Act cannot be invoked.
5.8In para 6 of the submission, the appellant has submitted latest decision of Hon’ble ITAT Delhi in the case of DCIT vs Rai Bahadur Narain Singh in ITA No.3027/DEL/2024 dated 28.05.2025 where it has been held as follows,
“11.In so far as assessee's levy of tax at a higher rate under section 115BBE of the Act is concerned, we find that the Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742of 2020, dated 19.11.2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only.”
Even in the appellant’s case, the cash transactions happened before01.04.2017, therefore the section 115BBE is not applicable to the appellant’s case.
5.9In view of the above facts and judicial decisions cited above, I am of the considered opinion that the appellant has explained the source of cash deposits amounting to Rs. 79,85,000/- that the cash is out of day-to-day sales during the Diwali festival period. Further, the appellant rightly offered the business income on presumptive basis u/s 44AD of the Act. Therefore, the addition made by the AO in this regard u/s 69A of the Act treating the cash deposits as unexplained income amounting toRs.79,85,000/- is not sustainable. Hence, the AO is directed to delete the addition made u/s 69A of the Act. Accordingly, the grounds of appeal raised by the appellant on this issue is hereby allowed.
6.As a result, the appeal is allowed.
Aggrieved with the above order revenue is in appeal before us raising following grounds of appeal:-
1.On the facts and circumstances of the case the Ld. CIT(A) erred in law in deleting the addition of Rs.79,85,000/-, made by the AO on account of unexplained money.
2.On the facts and circumstances of the case the Ld. CIT(A) erred in law by stating that the essential condition for applicability of section 69A of the Income Tax act, 1961 is the maintenance of the books of accounts.
3.On the facts and circumstances of the case the Ld. CIT(A) erred in ignoring the AO's order where the replies of the assessee have been duly considered and found to be unspecific to the matter under consideration.
4.On the facts and circumstances of the case the Ld CIT(A) erred in law and on facts in holding the provisions of section 115BBE of the Act were not applicable to the sustained addition for the AY 2017-18 relying upon decision of Madras High Court in the Writ petition in the quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) that interpret the section 115BBE of the Act to apply prospectively from 01.04.2017, whereas the section applies to the AY 2017-18 covering transactions during whole F.Y 2016-17.
5.The appellant reserves the right to add, amend or alter the grounds of appeal on or, before the date of disposal.
At the time of hearing, Ld. DR brought to our notice, detailed findings of the Assessing Officer and submitted that assessee has not submitted relevant details during assessment proceedings and the cash deposit made by the assessee is not properly substantiated. The claim of the assessee that assessee has sold substantial sales during September, October is unsubstantiated and he heavily relied on the findings of the Assessing Officer.
On the other hand, none appeared on behalf of the assessee and noticed that assessee has declared her return of income under presumption basis u/s 44AD of the Act. Since the assessee is dealing in the business of trading of clothes and VAT is not applicable in the case of assessee.
Considered the submissions of Ld. DR and material placed on record, we observed that assessee has made cash deposits of Rs.79.85 lakhs during demonetization period and assessee is a small time trader who has not maintained books of account and declared the income u/s 44AD of the Act on presumptive basis. Since there was no requirement for the assessee to maintain any books of account and assessee has shown proper source of cash deposits during the year under consideration and after considering the detailed findings of the Ld. CIT(A) we do not see any reason to disturb the same, accordingly grounds raised by the revenue are dismissed.
In the result, appeal filed by the revenue is dismissed.