Mukesh Mittal vs Income Tax Officer, Ward-1

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 14.08.2025, for Assessment Year 2017-18.

Shri Rajesh Goel, appearing on behalf of the assessee submits that the assessee is engaged in retail sale of manure, pesticides and seeds. Entire sales of the assessee are in cash. During the period relevant to the assessment year under appeal, the assessee had deposited cash of Rs.67,12,000/- from sales over a period of 12 months. Out of the aforesaid amount, Rs.10,66,000/- was deposited during demonetization. The Assessing Officer (AO), in ex-parte proceedings, treated the amount deposited during demonetization as unexplained income and made addition u/s 69A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). Further, the AO treated remains amount of cash sales i.e. Rs.56,45,000/- as assessee’s total sales turnover and estimated profit @10% on Rs.56,46,000/-. Aggrieved by the assessment order dated 24.09.2019, the assessee carried the issue in appeal before the CIT(A). The assessee produced books of accounts before the CIT(A) to substantiate that the cash deposits during the period relevant to the assessment year under appeal were out of cash sales. The CIT(A) accepted assessee’s business and also that the assessee in normal course of business is making cash sales and is depositing cash in his bank account, but upheld the addition of Rs.10,66,000/- only for the reason that the assessee failed to furnish cash vouchers relating to the demonetization period. With regard to estimation of gross profit @10% by the AO, the CIT(A) restricted the same to 8%. The ld. Counsel submits that the assessee has no grievance with regard to the said estimation of profit @8% on total turnover, hence, he is not assailing estimation of profit @8%. The ld. Counsel for the assessee pointed that in the preceding assessment year the total turnover of the assessee was more than Rs.1 crore. The assessee had filed return of income and the same was accepted by the Department. In the subsequent assessment year as well, the turnover of the assessee was in the range of Rs.80 lakhs to Rs.1 crore. In support of his submissions, the ld. Counsel referred to copies of acknowledgements of returns of income for preceding and succeeding assessment years.

Per contra, Shri Manoj Kumar representing the Department vehemently supporting the impugned order prayed for dismissing appeal of the assessee.

Both sides heard, orders of the authorities below examined. Undisputedly, the assessee did not respond to the notices issued by the AO, hence, the AO completed the assessment invoking the provisions of section 144 of the Act. During first appellate proceedings, the assessee furnished additional evidences in the form of books of accounts, which were accepted and examined by the CIT(A). A perusal of the impugned order shows that the CIT(A) has accepted the assessee's manner of depositing cash from cash sales throughout the year and has raised doubt over the genuineness of cash deposit during demonetization only. No doubt has been raised by the CIT(A) with regard to the cash deposits prior to demonetization and post demonetization. Once the assessee has been able to establish that the assessee in normal course of business is making cash sales which were regularly deposited in the bank, there is no reason to doubt the genuineness of the cash deposit during demonetization. I find merit in the submissions of the assessee that the cash deposit during demonetization Rs.10,66,000/- is part of the total turnover for the Financial Year 2016-17. Accordingly, the addition of Rs.10,66,000/- separately made by the AO and upheld by the CIT(A) is deleted.

In so far as estimation of gross profit to the total turnover is concerned, the assessee has accepted rate of of 8% of profit on total turnover. Considering the fact that the AO has estimated profit only on Rs.56,46,000/-, the AO is directed to compute profit @8% on the total turnover i.e. Rs.67,12,000/-.

In the result, appeal of the assessee is allowed.