TaxTMI 
TaxTMI 
2026 (9) TMI 1791
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....essment order passed by the Assessing Officer u/s 143(3) of the Act dated 30.12.2019 making addition to income of Rs. 2,73,85,824/- which was invalid and bad in law as the order was passed without following the principles of natural justice and without considering the details and submissions and details filed by Appellant. In addition to it the appeal order was issued on 18/08/2025 and the last hearing was on 25/02/2025 and no draft appellate order was provided to the appellant, which is beyond the judicial parameters and CBDT instructions on the subject, hence appeal order dated 1808/2025 to be held as invalid". 1.1 "The CIT(A) has erred seriously in issuing appellate order without commenting or distinguishing any case laws relied painstakingly by the appellant, hence appellate order to be held as invalid" 2.1 "On the facts and in the circumstances of the case, the CIT(A)51, Mumbai erred in confirming the addition of Rs. 2,73,85,824/-on account of cash deposits in Bank Accounts without considering the cash book/bank book filed and details/submissions filed by Appellant to establish the source and genuineness of cash deposits with regard to the nature of business ....
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.... of the case, the CIT(A)51, Mumbai has erred in confirming the addition of Rs. 2,73,85,824/-on account of cash deposits without considering the details of dates on which cash deposited, nature and denomination of amounts deposited, the names of the persons from whom cash received by Appellant along with receipt voucher from customer, bank statement, and without considering the source of cash deposit in Banks. Therefore, on this account also the addition liable to be deleted". 2.8 "On the facts and in the circumstances of the case, the CIT(A)51, Mumbai has erred in confirming the addition of Rs. 2,73,85,824/-on account of cash deposits without appreciating the fact that there are cash in hand as per books of Appellant on account of cash sales, which in any way, cannot be considered as income of Appellant and only the profit element can be brought to tax. Therefore, on this account also the addition liable to be deleted". 2.9 "On the facts and in the circumstances of the case, the CIT(A)51, Mumbai has erred in confirming the addition of Rs. 2,73,85,824/-on account of cash deposits under wrong section u/s 68 of the IT Act without appreciating the fact that the Bank P....
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....ciety charges claimed by Appellant. Therefore, the addition requires to be deleted". 7. "On the facts and in the circumstances of the case, the CIT(A)51, Mumbai has erred in confirming the initiating and issuing penalty notice u/s 271AAC of the IT Act. 8. "On the facts and in the circumstances of the case, the CIT(A)51, Mumbai has erred in confirming the initiating and issuing penalty notice u/s 272A(1)(d) of the IT Act as there was non-compliance to the statutory notices issued as evident from the body of assessment order itself." 9. "On the facts and in the circumstances of the case, the CIT(A)51, Mumbai has erred in confirming the wrongly charged interest u/s 234B& 234C of the IT Act. 3. Brief facts of the case are that the assessee filed its return of income declaring Rs. 3,09,83,107/-as Loss under normal provisions and Income of Rs. 29,04,706/- u/s. 115JB of the Act. The case was selected for complete scrutiny under CASS. The assessee is engaged in the business trading in consumer durables including Television sets, LCD, Refrigerators, Air Conditioners, Music Systems, etc. and operates from showrooms located at various places in Mumbai. 4. Grou....
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....ourt propounded the principle of human probabilities and applying it in that case held that whether apparent is real is to be decided on the basis of incriminating circumstances. He further relied on the cases of Durga Prasad More 82 ITR 540 [SC] and Hersh Win Chadha Vs DCIT (I.T.A.Nos.3088 to 3098 & 3107/Del/2005).By applying the test of preponderance of probabilities and considering the circumstantial evidence, the cash deposit shown by the assessee was considered by the AO as non-genuine and unexplained. As the assessee had not furnished relevant supporting documents, the average monthly cash-in-hand in F.Y. 2015-16 and F.Y. 2017-18 was used by the AO to determine the quantum of unexplained cash deposit of 2,73,85,824/- which was treated as unexplained cash credits u/s. 68 and brought to tax as per provisions of section 115BBE of the Act. 5. Aggrieved, the assessee filed appeal before the ld.CIT(A) contesting the addition on the grounds that there was violation of principles of natural justice and non-consideration of submissions and evidence filed. It appears that the assessee had made an exhaustive reply alongwith various facts and figures as also judicial decision relied u....
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.... being deposited into the bank but retained as cash in hand. In November 2016, covering the demonetization period, the anomaly became more pronounced. Sales were recorded at only Rs. 73.69 lakh, yet cash deposits soared to Rs. 3.53 cr., producing an extraordinarily high deposit to sales ratio of 4.79, which was more than four times the highest monthly ratio observed in the preceding year. This strongly suggested that the November deposits did not originate solely from current month sales but were largely funded by cash accumulated in earlier months. He again pointed out the failure of the assessee to vouch for the cash sales figures by way of duly filed VAT returns indicating such a sale. 5.3 He further noted that the assessee's closing cash balance rose sharply from Rs. 99.76 lakh in August 2016 to Rs. 2.01 cr. in September 2016 and Rs. 2.82 cr. in October 2016, without any corresponding increase in recorded business turnover or evidence of seasonal demand justifying such accumulation. The assessee failed to substantiate the genuineness of this cash build-up which was in contrast to its regular practice of depositing the cash and having little cash in hand. The sales remained u....
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....nation regarding nature and source is offered, irrespective of whether the regular accounts are otherwise accepted. In the present case, although the appellant has maintained books of account, the cash deposits made during the demonetization period were not supported by verifiable sales data, as the VAT returns were not filed in time and the claimed sales could not be independently corroborated. The failure to substantiate the source of cash deposits rendered them unexplained within the meaning of section 69A of the Act, and hence the addition was warranted without the necessity of rejecting the entire set of books of account. Accordingly, for reasons as detailed above, the contentions of the assessee were rejected by the ld.CIT(A) and the addition of Rs. 2,73,85,824/- on account of cash deposited during the demonetization period and held as unexplained by the AO was confirmed. 6. Before us, the ld.AR has reiterated the same contentions as made before the lower authorities. It is submitted that the assessee was engaged in a business which involved lot of cash transactions. It had filed all the contemporaneous records before the lower authorities explaining the cash deposited dur....
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....n record to prove that the assessee did not have adequate stock to effectuate the sales made during the year under appeal. The final figure of VAT on annual basis after verification/corroboration was at Rs. 674,080,389/- which was less only by Rs. 4,394/- as compared to P&L a/c shown in return of income filed. Therefore, the turnover of Rs. 67.40 cr. was matching with that shown to VAT dept. This record was independent having shown to other Government department. The cash deposit made during the period of demonetization was nothing but the cash realized out of sales made in cash. The conclusive way to substantiate this fact were the documentary evidences which the assessee had produced with respect to the acquisition of products, inventory management of the products and the sale of the products. The company had maintained appropriate records for its inventory and cash accounting. By analyzing these documentary evidences with the financial statement, audit report, income tax returns; it could be easily traced that all the cash sales had been duly offered as revenue and were subjected to applicable tax. All sales including cash sales had been offered to taxation and the same were not....
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....the assessee company had availed Overdraft Facility from ICICI Bank sanctioned on May 2015 from Bank. In April 2016 the Facility was under renewal and the company had already utilized limit of around Rs. 24.30 cr. ICICI Bank were insisting on reducing limit due to certain reasons as the Drawing Power of the Company didn't meet with the norms as decided by Bank. The same was brought to the notice of Company August 2016. As a matter of fact borne out of record that the assessee had deposited cash during demonetization period in two other Current Accounts of the Company other than ICICI Bank. When the source and genuineness of the cash receipts were substantiated by way of documentary evidences, the holding of cash could not be doubted by questioning the reasons for business decisions. It was further argued that the assessee had misrepresented or concealed any aspect of the transaction. The cash sales had been already been disclosed in the return of income and was also subjected to tax. It had maintained cash balance so as to facilitate various business activities and objectives. 6.4 It was further argued that the receipt of cash was undisputed however, the addition was erroneously....
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....posits during the year under appeal as well as the year preceding and year succeeding to the year under consideration. The AO had not rejected the book results of the assessee. 6.6 It is also stated that the AO in the remand report reiterated the addition made by holding that the documents such as cash book submitted by the assessee were internally generated document, maintained by itself and not sufficient to conclusively prove the genuineness of the cash deposit. The AO also stated that the submission of the appellant was duly considered at the time of passing the assessment order which has been contested. 7. Per contra, the ld.DR has supported the orders of the authorities below contending that the assessee could not explain the huge cash availability before the demonetization. 8. We have heard the rival submissions and perused the materials available on record. At the outset, we find that the AO made the addition based on an analysis of the books of account drawing a conclusion that the assessee tried to explain the impugned deposit from the cash in hand available to it from earlier months. The ld.CIT(A) affirmed that conclusion holding that there was no justification ....
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....he addition is based on a hypothetical exercise which is fully divorced from the book results. No addition could be made only on surmises and presumption howsoever, the doubt may be strong. No independent enquiry into the matter is also borne from the records. The observations regarding holding substantial cash in hand for making the impugned addition lacks any substance unless any serious defects are pointed by the authorities and it is the commercial decision and business prudence of the assessee could not be dictated by the Revenue. 8.3 In the instant case, the assessee maintained regular books of account and the AO has not pointed out any defects in the same and had accepted the trading results declared by the assessee. It is also seen that the assessee had filed day to day and item wise stock records but AO has not pointed out any defects in the same. Moreover, once the AO has accepted the trading results and did not raise any doubts on books of accounts as well as on the day to day stock records and sales, it is not correct to say that the cash deposited out of such cash sales was unexplained, more particularly when he failed to find any error in the details and evidences ....
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....ource of such credit; or(ii) explanation offered by it is not upto the satisfaction of the AO. In other words, whenever the assessee provides explanation, before rejecting the same, the AO has to record dissatisfaction as to why the explanation furnished by the assessee is not acceptable. As is evident from the facts of the present case, the assessee had not only offered the explanation regarding nature and source of cash deposits in SBN but also substantiated the same with the help of documentary evidences in the shape of Audited Financial Statements, Sale Register, Purchase Register, Stock Register and Cash book before the lower authorities. No specific defects whatsoever was brought out on record by the AO/ ld. CIT(A) in those evidences and books of accounts so furnished. It is not understood as to how the addition could be made by the lower authorities when the source of such cash deposits, being cash sales, was duly accepted by them. The Hon'ble Delhi High court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court) has held as under: "In the facts of above case cash of Rs. 24,58,400/- was deposited in bank account. The Assessing Offi....
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....ra 14] [In favour of assessee]" 8.7 In another case on identical circumstances, the coordinate bench of Amritsar ITAT in the case of Raj Kumar vs ITO in ITA No.195/Asr/2022 has observed as under: "12.1 We also considered that the amount deposited in the bank account was out of sale of various items which had been held by the assessee as stock in trade and since the deposits in the bank account were out of sale of stock therefore the stock of the assessee has depleted and the cash has come in respect of stock, such sales had been disclosed in the trading account against the purchase which had not been doubted, neither the opening and closing stock had been doubted. Therefore, nothing could have been doubted when the source of cash was well explained and was shown in the bank account. However, the addition was made only on the basis of surmises without establishing any motive on the part of the assessee and without disturbing the closing stock as on 31/03/2017 which had been arrived at after reducing the sale in quantity of stock in trade." 8.8 It is also evident from the submissions made before the ld.CIT(A) the assessee had duly reconciled the sales turnover with tho....
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....receipts as per 26AS with ITR. Accordingly, in absence of any satisfactory explanation and material available on record, the aforesaid differential rental receipts of Rs. 18,00,000/- was brought to tax and added to the total income. 13. Before the ld.CIT(A),the assessee contested the addition claiming when the credit for TDS was not claimed in this assessment year, the corresponding receipt could not be brought to tax as taxable income and TDS credit have to be in same year as per accepted principles of accountancy. It is further clarified that there was mistake on the part of Bandhan Bank in mentioning our PAN and letter dated 01/01/2020 from the Bank. The ld.CIT(A) observed that the assessee had submitted an email dated 01.01.2020 addressed to the tenant intimating that rent was required to be paid to the new owner and TDS return may be rectified. No further evidence with respect to transfer of ownership hasd been filed by it. In view of the same, the AO was directed to verify the Form 26AS of the assessee to check if the corresponding income had been rectified by the tenant and in such a case delete the addition. In case the Form 26AS still showed the rental receipt as income....
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....ostly not in tax-bracket, hence no loss to revenue in any case. Such expenditure was regular in each year which had been accepted by the department. 18.1 However, the ld.CIT(A) observed that the statutory requirement under Chapter XVII-B of the Act mandates deduction of tax at source from specified payments if they fall within the ambit of the relevant TDS provisions, irrespective of the quantum of the payment or the tax bracket of the recipient. The obligation to deduct TDS is not conditional upon whether the payee ultimately has taxable income, nor upon whether there is a loss to the Revenue. The appellant had not demonstrated that the stated payments were outside the scope of the relevant TDS provisions. Further, the fact that similar claims may have been accepted in earlier years did not confer any immunity where the statutory provisions are clear and applicable. The assessee had also not produced any conclusive evidence to show that the recipients had offered the amounts to tax so as to avail the benefit of the second proviso to section 40(a)(ia) of the Act. Accordingly, the disallowance made by the AO amounting to Rs. 7,68,970/- was upheld. 19. Before us, the ld.AR has ....
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....d to be added to the total income and (ii) the Bank had reversed an interest liability of Rs. 35,31,294/- and hence, the same needed to be added back u/s 41 of the Act. 26. In this regard, before the ld.CIT(A),the assessee made a detailed along with copies of ledger account and balance sheet to show that the transactions identified by the AO were duly reflected in the books of accounts and also explained as to why enhancement of income was not required on those issues. The response was forwarded to the AO for comments who however, reiterated the earlier proposal. 26.1 The ld.CIT(A) observed that with respect to receipt from M/s Sony Mony Traders Pvt. Ltd. which the AO alleged that the same was not reflected in the Balance sheet, the assessee submitted the copy of its ledger account and Balance sheet in support of the opening balance and the closing balance of the instant year. It was seen from the ledger account that the said transactions were reflected in a running account wherein there were both debits and credit entries on various dates. The opening balance of Rs. 8,70,48,423/- and the closing balance of Rs. 10,15,699/- were duly reflected in the Balance Sheet. The AO had ....