Nathani Polymers vs Income Tax Office, Ward-34(6)

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 30.12.2025, for Assessment Year 2017-18.

Shri K. Sampath, appearing on behalf of the assessee submits that the solitary issue raised in the present appeal is against the addition of Rs.38,05,000/- made u/s. 69A r.w.s. 115BBE of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on account of cash deposits during demonetization period. The Id. Counsel submitted that during the course of assessment proceedings, the assessee had furnished written submissions explaining the source of cash deposits as arising from cash sales. The assessee also furnished audited financial statements for the year ended 31.03.2016 and details of purchases and sales for the period 01.04.2016 to 31.03.2017. The Id. Counsel further submitted that the details of sales and purchases were reproduced by the CIT(A) in the appellate order and no discrepancy therein has been pointed either by the Assessing Officer (AO) or by the CIT(A). The ld. Counsel contended that the addition has been made without appreciating the evidences furnished by the assessee. The ld. Counsel further submitted that the assessee had also furnished copy of VAT returns corroborating the sales recorded in the books. It was explained that the assessee is engaged in trading of PVC granules and the sales are largely made in cash to small manufacturers. The AO and the CIT(A) without appreciating documents on record and submissions of assessee made/confirmed the addition. The ld. Counsel prayed for deleting the addition made u/s.69 of the Act in light of documentary evidences brought on record before the lower authorities.

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 the assessee has failed to substantiate source of cash deposits in the bank.

Both sides heard, orders of the authorities below examined. The assessee is a trader of PVC granules. The addition in the present case has been made u/s.69A of the Act on account of cash deposits during the demonetization period. As per the assessment order, the assessee had deposited cash amounting to Rs.38,05,000/- in the bank account, which was treated as unexplained money. The case of the assessee is that the cash deposits represent cash sales duly recorded in the books of account. The assessee has furnished audited financial statements; details of purchases and sales; & VAT returns substantiating turnover. A perusal of the CIT(A) order shows that the sales and purchase details were available on record. No specific defect has been pointed in the books of account or in the sales recorded by the assessee. The addition has been sustained primarily on the ground of suspicion regarding genuineness of cash sales. It is a settled position of law that suspicion, however strong, cannot partake the character of evidence. The addition u/s. 69A of the Act can only be made where the assessee is found to be owner of money not recorded in books of account. In the instant case the assessee has demonstrated that cash deposits in bank are duly reflected in books and sales register and financials of the assessee are duly audited.

Considering entire facts of the case, I find merit in submissions of the assessee, hence, addition of Rs.38,05,000/- made u/s.69A of the Act is directed to be deleted.

In the result, appeal of the assessee is allowed.