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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal is directed against the order dated 30.10.2025 of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as the “CIT(A)/NFAC”] passed u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] wherein the appeal of the assessee was partly confirmed and addition made by the AO vide Assessment Order dated 11.06.2021 u/s 69 A of the Act were confirmed.
Brief facts of the case are that the assessee is engaged in the business of trading in grains, filed his return of inco me for A.Y . 2018–19 on 31.08.2018 declaring total income of Rs.5 ,58,890/-. Subsequently, the case was selected for scr utiny thro ugh CASS and notice u/s 143(2) of the Act was issued on 22.09.2019. During the course of assessment pro ceedings, the Assessing Officer observed that the assessee had made substantial cash deposits in multiple bank accounts, includ ing accounts with Kotak Mahindra Bank, ICICI Bank and Punjab Natio nal Bank, aggregating to Rs.9,25,46,846/-. The assessee explained that the cash deposits were o ut of business transactions and redeposit of earlier cash withdrawals. However, the Assessing Officer was not satisfied with the explanation and held that the assessee failed to substantiate the source of such deposits with proper supporting evidence. Accordingly, the entire cash deposits Rs.9,25,46,846/- were treated as unexplained money u/s 69A of the Act and added to the income of the assessee. Consequently, the assessment was completed u/s 1 43(3) r.w.s. 144B of the Act determining the total income at Rs.9,31,05 ,740/- as against the returned income of Rs.5,58,890/-. Being aggrieved, the assessee preferred an appeal before the CIT(A).
During the arg ument at the very outse t, the ld. AR submitted that he shall not press his grounds in appeal in case the addition is restricted to 5% of the balance cash deposits instead of 10% as made by the ld. CIT(A). The ld. DR on the other hand re lying upon the judgments of the ld. C IT( A) submitted that the addition @10 % made by the ld. C IT(A) be confirmed as the ld. CIT(A) has taken a very lenient view in the matter.
We have heard the ld. AR and the ld. DR. We find that the ld. CIT(A) has discussed the issues in dispute elaborate ly by observing as under:
“Thus, the ass essee explains T hat his total cas h deposi ts after excl udi ng one of the ICICI B ank Acc ount no. 092905000532 is only Rs . 5,14,56, 911/- and t he sa me were s ufficiently sourced from cash generated out of cas h sales and cash withdrawals totali ng to Rs. 6 ,06,23,576/-. I have considered the ass ess ee’s submissi ons. Even tho ugh, t here a re merits in the ar gument’s of t he assessee, but it is not possibl e t o make one to one rec onci liation whether Cash D eposits were made out of cash sales and cash withdrawals. Cas h deposits which were made out of cash sales are clearly explai na ble and the same are hereby fully co nsider ed am ounti ng to Rs.2,72,49,240/- cash deposits thi s extent are hereby tr eated as explained. After excl udi ng t he ab ove deposits, now only cash deposits of Rs . 2 42,07,671/- r emains to explai n, for whi ch t he ass esse submits that thes e cas h deposits were made o ut o f cas h wit hdrawals. Thus, assessee submitte d that he has sufficient cas h withdrawals of Rs . 3,33,74,736/- whic h were the source of the balanc e cash deposits . However, it i s not po ssible to do one to one c orrelation of cash deposits with ref erence t o cash withdra wal s. Therefore , eve n t hough balance cas h deposits of Rs. 2,42,07,671/- was subst antially so urced from cash wit hdrawals but it i s not possible to tr eat t he s ame as fully explai ned . Therefore, to safeguard the inter ests of the Revenue, 10% of balance Cash Deposits are her eby treated as from unex plained s ources. Thus, the addition to this exte nt whic h c omes t o R s. 24,20,767/- is hereby confirmed as unex plained money and the balanc e additio n is hereby del eted. To sum up, out o f the to tal addition of Rs.9,25,46,846/- additi on of Rs. 24,20,767/- is hereby confirmed and balance addition is deleted. In t he res ult the app eal is partly allowed.”
Upon careful perusing the find ing of the Ld. CIT(A) as reproduced above, it is evident that the AO has carried out additio ns under presumptions and without any evidences on record. In respect of addition on account of cash deposited, it was observed that AO has treated the cash deposited as unexplained cash credit whereas the assessee has claimed the same as cash sales and cash withdrawals. Since, the ld. C IT(A) has restricted the disallowance @10% of the balance cash deposits, therefore, in view of the peculiar facts and circumstances o f the case and in the interest of substantial justice, we deem it fit and proper to restrict the said disallowance @5 % instead of 10% as against the balance cash deposits o f Rs.2,42,07 ,671/- which comes to Rs.12,10,384/-. Necessary computation shall fo llow as per law.
This assessee’s appeal is partly allowed in above terms.