ANAND CHOUDHARY,MAIN ROAD V. ACIT/DCIT, CIRCLE-1, RANCHI

ITA 199/RAN/2025

AI Insights

The case revolves around an appeal by Anand Choudhury, the proprietor of M/s Anand Hardware and Tools, against the order of the CIT(A), NFAC, Delhi, which confirmed the addition of Rs.1,67,68,000 to the assessee's income for the assessment year 2017-18. This addition was initially made by the Assessing Officer under section 68 of the Income Tax Act, treating the cash deposits in the bank as unexplained cash credits. The Tribunal examined the circumstances under which these deposits were made, particularly during the demonetization period, and found that the assessee had provided sufficient evidence to substantiate that these were from recorded cash sales and not from undisclosed sources.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716546 (ITAT-RANCHI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 17-06-2025
• Other Referred Cases: Dinesh Chandra Das v. Asst. CIT, Vijay Kumar Arora Vs. State Govt. of NCT of Delhi, Subramanian Swamy Vs. A. Raja, Roop Singh Nagir Vs. Punjab National Bank, Agile Properties (P.) Ltd. vs. CIT, H.M. Kashi Parekh & Co. Ltd vs. CIT, National Co-operative Development Corporation VS. CIT, Poona Electric Supply Co. Ltd. v. CIT Bombay City, Shree Sanad Textiles Industries Ltd. V. DCIT, ACIT v. Chandra Surana, Kailash. Jewellery House, Ramlal Jewellers (P.) Ltd., M/s Hirapanna Jewellers, J.R. Rice India Pvt. Ltd vs ACIT, Kanpur Steel Co. Ltd. v. CIT, Lalchand Bhagat Ambica Ram vs. CIT, Vishan Lal vs. ITO, Subash Chand Sharma v. ITO, Agson Global Pvt Ltd vs ACIT, Meeran Mohideen vs ITO, Gur Prasad Hari Das vs CIT, Dhirajlal Girdharilal v CIT, Commissioner of Income-tax Vs. Ram Narain Goel, CIT vs. United Commercial and Industrial Co. (Pvt.) Ltd., CIT vs. Precision Finance Pvt. Ltd., CIT vs. Metachem Industries, CIT vs. Oasis Hospitalities Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PER BENCH; KHUBCHANDT PANDYA
• Assessee Lawyers: R.R. MITTAL
• Keywords: Business income; Corroborative evidences; Unexplained cash credit; Rejection of books of accounts; Income from undisclosed sources; Source of fund
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE S/ RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER Anand Choudhury, S.N.Ganguly Road, Main Road, Ranchi PAN/GIR No. (Appellant Revenue by Per Bench This is an appeal filed by the assessee against the order of the ld CIT(A), NFAC, Delhi dated No.CIT(A),Ranchi/10635/2019 2. Shri R.R.Mittal, Pandya, ld Sr DR 3. The assessee has filed written submission as follows: “Shri Anand Choudhary proprietor of Tools filed his original Return of Income for the A.Y. 2017 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI S/HRI GEORGE MATHAN, JUDICIAL MEMBER RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER ITA No.199/RAN/2025 Assessment Year : 2017-18 Anand Choudhury, S.N.Ganguly Road, Main Vs. ACIT/DCIT,Circle .ACRPC 8779 M (Appellant) .. ( Respondent Assessee by : Shri R.R.Mittal, Adv Revenue by : Shri Khubchand T Pandya, Date of Hearing : 22/08/202 Date of Pronouncement : 22/08/2 O R D E R This is an appeal filed by the assessee against the order of the ld CIT(A), NFAC, Delhi dated 29.5.2025 Ranchi/10635/2019-20 for the assessment year Shri R.R.Mittal, ld AR appeared for the assessee. Shri Khubchand T ld Sr DR represented on behalf of the revenue. The assessee has filed written submission as follows: Shri Anand Choudhary proprietor of M/s Anand Hardware and Tools filed his original Return of Income for the A.Y. 2017 P a g e 1 | 16 IN THE INCOME TAX APPELLATE TRIBUNAL, , JUDICIAL MEMBER AND RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER ACIT/DCIT,Circle-4, Ranchi Respondent) ld Sr DR 2025 2025 This is an appeal filed by the assessee against the order of the ld in Appeal 2017-18. ed for the assessee. Shri Khubchand T The assessee has filed written submission as follows: M/s Anand Hardware and Tools filed his original Return of Income for the A.Y. 2017-18 relevant Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 2 | 16 to the Previous Year 2016-17,vide e-filing acknowledgement no. 936389201260717 on 26.07.2017 declaring a total income of Rs. 45,26,480/-. The return was processed u/s 143(1) of the Income-tax Act, 1961.Subsequently, the case was selected for Scrutiny through Computer Aided Scrutiny Selection (CASS). During the course of assessment proceeding, detailed questionnaire was issued. A specific format (on page 2 to 6 of the questionnaire) was given to the assessee to fill in and submit. The assessee submitted the filled in proforma on cash deposits. The same has been examined. The learned Deputy Commissioner of Income Tax, Circle 1, Ranchi has not accepted the cash sales made during the year together with payment of taxes on sales and VAT returns filed. Further the learned Deputy Commissioner of Income Tax, Circle 1, Ranchi has treated the deposit of cash in bank as unaccounted cash credit u/s 68 when the same is duly recorded in books of accounts. Written Submission Anand Choudhary proprietor of M/s Anand Hardware and Tools filed his original Return of Income for the A.Y. 2017-18 relevant to the Previous Year 2016-17, vide e-filing acknowledgement no. 936389201260717 on 26.07.2017 declaring a total income of Rs. 45,26,480/-. The return was processed u/s 143(1) of the Income-tax Act, 1961. Subsequently, the case was selected for Scrutiny through Computer Aided Scrutiny Selection (CASS). Accordingly, a notice u/s 143(2) of the Act dated 10.08.2018 was issued and served upon the assessee and detailed questionnaires were issued and duly complied by the assessee. However, the assessing officer passed the order U/s 143(3) after making the addition of Rs.1,67,68,000/- being SBN deposited in the Bank account, hence this appeal. The Assessee is in the business of Hardware and fittings of Building, October 2016 being Diwali month and the assessee decided to use this opportunity for clearance of old stock and offered additional incentives on cash sales, and all these sales are supported by sales bill, and required taxes on sales has been duly paid and return filed. Sales are supported by bills and VAT returns filed and all these details and evidence were duly produced before the assessing officer. The assessing Officer nowhere in his order brought out any material on record to show that the assessee has any additional source of income other than that disclosed in the return nor Assessing Officer spells out in his order that cash deposits made by the assessee were from some undisclosed source. Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 3 | 16 All throughout Assessing Officer has raised suspicion on the probability and behavioral pattern of cash sales and cash deposits by the assessee. There is no law in the country that prevents citizens from selling goods in cash. Documentary evidence furnished before the Assessing Officer clearly clarifies that receipt on account of cash sales has been deposited in the bank account, assessee had sufficient availability of cash as per the Cash book which is also not disputed by the Assessing Officer. The entire transaction of cash Sales and deposits are duly reflected in the books of account of the assessee and are verifiable from relevant records. Cash receipt recorded in the books of account under the head “Sales’ and the Assessing Officer has made the same addition once again u/s 68 of the Act. Once the assessee has included the amount as its income, the action of the Assessing Officer is nothing but a double addition of the same amount. Cash deposits of Rs. 1,92,68,000/- do not match with the business profile of the assessee and are not in line with its past transaction history. All cash deposited was deposited after demonetization was announced on the night of 8th November, 2016. It also failed to prove the existence of any genuine business. So this is concluded that the assessee having retained the unaccounted money had deposited the same and trying to show it as an accounted part from its sale proceeds. All details required were submitted however with a predetermined mind addition of part of the cash deposits made in the bank have been treated as unexplained. It is judicially well settled under the Income tax law and also under the Indian Evidence Act that books of account maintained in the regular course of business, backed by supporting evidence, do carry substantial evidentiary value. They can't be rejected on the basis of mere disbelief or on suspicion and surmises or speculation. While passing the order assessing officer ignored the comparative details of 3 years submitted, from the perusal of the same it can be seen that the assessee has a 44% increase in sales and a 250% increase in net profit from the retail trade, which gives credence to our submission regarding utilizing the period of Diwali for clearance and additional incentive allowed on cash sales. All purchases as well as sales are duly recorded in the Books and auditors have also not pointed out any defect in the books of accounts maintained in the Tax Audit Report. Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 4 | 16 A.Y. 2015-16 A.Y. 2016-17 A.Y. 2017-18 Turnover/ Sales 4,58,34,468.43 6,22,16,693.36 8,95,84,667.35 Purchase 4,78,77,861.19 5,48,05,450.93 7,83,65,125.93 Opening Stock 94,84,680.00 1,70,45,232.00 1,50,15,247.00 Closing Stock 1,70,45,232.00 1,50,15,247.00 1,30,18,746.00 Gross Profit 49,85,289.14 51,13,907.63 85,09,170.83 Net Profit 14,64,999.16 16,81,180.39 42,27,673.18 Test of Human Probabilities / Preponderance of Probabilities Persons can behave differently even when placed in similar situations. Due regard and latitude to human conduct and behavior has to be given and accepted while considering the validity and truthfulness of an explanation. One should not consider and reject an explanation as concocted and contrived by applying a prudent man's behavior test. The principle of preponderance of probability as a test, if called for, may be applied to discharge onus only in suitable cases and has no universal application. Probability means the likelihood of anything being true and refers to the appearance of truth or likelihood of being realised which any statement or event bears in light of the present evidence (Murray's English Dictionary). Application of the concept of probability of human conduct can be resorted to acted upon only where the probabilities are reasonable and strong and admit of no alternative. In the matter of circumstantial evidence courts and tribunals act on circumstances that admit no exception. In the Case of Dinesh Chandra Das v. Asst. CIT [2013] 143 ITD 691 (Cuttack - Trib.) held that “Inference of probability could only be drawn from proved fact. Where the fact, sought to be relied on, does not stand proved, mere reliance of probability does not suffice for making addition under the Act. It is settled law that a person cannot be punished on mere suspicion and surmises. Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 5 | 16 It is further submitted that the principle that suspicion however strong cannot be a substitute for legal truth is well established. For this proposition, we rely on the following decisions. We rely on the following cases :- Reliance upon suspicion and surmises not supported by any evidence or partly inadmissible material is not proper Dhirajlal Girdharilal v CIT [1954] 26 ITR 736 (SC) Commissioner of Income-tax Vs. Ram Narain Goel 224 I.T.R. 180 (Punjab & Haryana). The decision is based on the principle decided by the Honorable Supreme Court of India in a plethora of cases. In the case of Vijay Kumar Arora Vs. State Govt. of NCT of Delhi in Criminal Appeal No. 125 of 2009 dt. 13.01.2010 it was held that \"The law relating to circumstantial evidence is well settled. In dealing with circumstantial evidence, there is always a danger that conjecture or suspicion lingering in the mind may take the place of proof. Suspicion, howsoever, strong cannot be allowed to take the place of proof, and therefore, the court has to be watchful and ensure that conjecture and suspicion do not take the place of Legal proof. The doctrine of benefit of the doubt applies – The court should exclude each and every hypothesis. Supreme Court judgment decided on 24.8.2012 in the case of Subramanian Swamy Vs. A. Raja (2G spectrum case) honorable Supreme Court – \"Held, Suspicion, however strong, could not take place of legal proof\" Suspicion however high cannot be a substitute for legal proof Roop Singh Nagir Vs. Punjab National Bank (2009) 2 SCC 570 (Para 23). When an explanation is given and examined, it is a contested matter requiring proof. It can be proved, remain unproved, or disproved. Only when it is disproved by establishing the actual nature and source of the deposit contrary to the explanation, then there can an inference be drawn. If the explanation remains unproved, it can be only deemed to be income and should be taxed as part of the regular income. In criminal jurisprudence, the maxim is that everyone is innocent until proven guilty. Similarly, in tax jurisprudence, it is necessary to assume that all cash is white unless proved to be black. Similarly, in tax jurisprudence, it is necessary to assume that all cash is white unless proved to be black. The money laundering concept has darkened our vision to think that all cash is black and we have to Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 6 | 16 clear our view first. The second maxim is that let ten guilty escape rather than punish one innocent. Applying it to the tax field we should let some black money to be converted into white rather than penalise the white money of an honest taxpayer. Come to think of it, the question of determining the tax payable should remain a civil dispute and be decided in a civilised way without recourse to penalties and prosecutions. As such some positive evidence is needed and subjective opinion would be inadequate material for the Assessing Officer to constitute evidence before rejecting a reasonable explanation furnished by the assessee as held in CIT v. Agile Properties (P.) Ltd. [2014] 225 Taxman 107 (Delhi) Only the real income of the assessee is liable to tax as held in H.M. Kashi Parekh & Co. Ltd vs. CIT 39 ITR 706 (MUM). Recently Supreme Court in the case of National Co-operative Development Corporation VS. CIT (2020) 316 CTR 593 held that income has to be determined on the principles of commercial accountancy. There is, thus, a distinction between 'real profits' ascertained on principles of commercial accountancy. In the case of Poona Electric Supply Co. Ltd. v. CIT Bombay City (1965) 3 SCR 818 Supreme Court has held that income tax is on the real income. In the case of a business, the profits must be arrived at on ordinary commercial principles. The scheme of the IT Act requires the determination of 'real income' on the basis of ordinary commercial principles of accountancy. To determine the 'real income', permissible expenses are required to be set off. When the assessing officer has not doubted the genuineness of purchases or opening stock and has not rejected the books of accounts u/s 145(3), then the Assessing Officer cannot deny the source of cash deposit out of cash sales and thus he cannot make any addition under section 68 of the Act. Before taking any adverse view regarding sales as declared by the assessee resulting in the accumulation of cash in books of account of the assessee it has to be established beyond doubt that there are no sales and cash is generated out of any other undisclosed source, only then Sections 68 comes into play. It is to be noted that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 7 | 16 accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. There is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. Hon’ble Ahmedabad ITAT in the case of Shree Sanad Textiles Industries Ltd. V. DCIT (ITA No. 1166/Ahd /2014) has given very logical findings at Para 9.7, once no question has been raised regarding the purchase or opening stock, then corresponding sales cannot be questioned. If the assessing officer has doubted the cash sales and accordingly made an addition under section 68 and the assessee has already revealed such sale in P&L A/c and offered for taxation. Now assessing officer can’t treat such a sale as undisclosed income, and no addition under section 68 is often made once more in respect of that sale because it has already been offered for taxation. LAKHMICHAND BAIJNATH V. CIT [1959] 35 ITR 416 (SC).  The amount credited in business books can normally be presumed as a business receipt.  When an amount is credited in business books, it is not an unreasonable inference to draw that it is a receipt from business,  if the explanation given by the assessee as to how the amounts came to be received is rejected by all the income tax authorities as untenable Section 68 deals with unexplained cash credit found in the books of accounts for which the assessee offers no/unsatisfactory explanations about the nature and source. Section 68 reads as follows: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. From the reading, the following conditions have to be satisfied to invoke the section 68: 1. Assessee has to maintain “books”. Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 8 | 16 2. The amount has to be credited into the books maintained by the assessee during the year. 3. The assessee offers no explanations/ explanation offered is not satisfactory in the opinion of the Assessing Officer. A.O. TO CONDUCT PROPER ENQUIRIES BEFORE MAKING ANY ADDITION U/s 68  CIT Vs. United Commercial and Industrial Co. (Pvt.) Ltd. (1991) 187 ITR 596 (Cal)  CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal)  Korlay Trading Co.,. Ltd. (1998) 232 ITR 820 (Cal).  Kamal Motors v. CIT [2003] 131 Taxman 155 (Raj.).  CIT v. R.S. Rathore [1995] 212 ITR 390 (Raj.),  Life Insurance Corporation of India vs. CIT (1996) 219 ITR 410 (SC)  CIT vs. Metachem Industries (2000) 245 ITR 160 (MP)  CIT vs. Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). The statement of the assessee is further supported by the audited books of account of the assessee, bank-wise summary of cash deposits, copies of the bank statement, and details of monthly cash sales and cash deposits. Further, even out of Rs. 192.68 Lacs, deposits of Rs. 25 lacs were in new currency notes and non-demonetized old currency notes (Rs. 10/20/50/100). This inference gets strengthened when the Assessing officer accepts most of the deposits as related to business but goes on to treat the balance deposits as unexplained money without proving the contrary. With respect to the deposit of the cash on hand with the bank, the explanation of the assessee that the bank was not accepting huge cash in one go, and therefore assessee had to deposit the cash in installments. Even otherwise, it was submitted correctly that merely because the cash holding as on 8/11/2016 was not deposited immediately cannot lead to the conclusion that the assessee did not have that cash. It can merely lead to suspicion but based on this addition cannot be made without making further inquiry and conclusively proving that the assessee did not have that kind of cash available with it. It is judicially well settled under the Income tax law and also under the Indian Evidence Act that books of account maintained in the regular course of business, backed by supporting evidence, do carry Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 9 | 16 substantial evidentiary value. They can't be rejected on the basis of mere disbelief or on suspicion and surmises or speculation. Gur Prasad Hari Das vs CIT (1963) 47 ITR 634 (All) – If high denomination notes are found in assesses possession, it must be prima facie be presumed to be falling part of the assessee and the burden is on the Department to prove that it constituted assessee’s concealed income from undisclosed sources on the basis of material in possession of the department. Without any material or evidence, it could not be presumed that it represents the income from some undisclosed sources. Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288(SC) – Where amount en-cashed on demonetization was part of cash balance in the books of account, ASSESSING OFFICER cannot disbelieve a part of such cash balance as being not of specified denominations when the books are not rejected. Kanpur Steel Co. Ltd vs CIT (1957) 32 ITR 56 (All) - If the cash balance of the assessee-company was steadily increasing it would not be unreasonable to accept the explanation given by the assessee- company that, for the sake of convenience, the cash balance was being kept in high denomination currency notes. High-denomination currency notes could be stored more easily and, at the time of accounting, they would have facilitated counting. Since the balance was increasing steadily, the assessee might not have felt it necessary to keep the balance in currency notes of low denomination. Such an explanation by the assessee is not an unreasonable explanation. Otherwise, also assessee has no other sources of income to generate such undisclosed income. ITO v. Vishan Lal - ITA No.634/Lucknow/2014]; Subash Chand Sharma v. ITO –ITA No.327/Agra/2017, dtd.31.5.19] Agson Global Pvt Ltd vs ACIT: ITA No.3741/Del/2019 (Del Trib.) Held that once the books of account were accepted by the Department and the cash sales recorded therein were considered in arriving at the assessed income of the assessee, the cash deposited in banks against such cash sales could not be treated as undisclosed income of the assessee under section 68 without bringing on record any credible evidence/material. Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 10 | 16 Meeran Mohideen vs ITO: ITA No. 2423/Chn/2018 (Chennai Trib.) Where no fault in the accounts of the assessee was pointed out and profits were made in the earlier year simply because huge cash deposits were made during demonetisation, addition is unsustainable Various courts have held that presumption, however, strong, cannot be a substitute, nor can it take the place of evidence, and the rule of estimation is no substitute for HIGH COURT OF ALLAHABAD in the case of Kanpur Steel Co. Ltd. v. CIT [1957] 32 ITR 56 (All), approved in Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) held that “Once the assessee is able to explain the sources of deposits in the bank based on the cash book, which is not disputed and rejected by the Revenue, no addition on the basis of the bank deposits can be made out “ IN THE ITAT HYDERABAD BENCH 'A' in the case of NECX (P.) Ltd. v. Income-tax Officer 2022 145 taxmann.com 232 (Hyderabad - Trib.) held that “ Where the assessee produced several sales invoices to show the source from where cash was received which was deposited in the bank account of the assessee and, further, turnover of the assessee was also not disputed by the Assessing Officer, CIT(A) was not justified in sustaining additions under section 68 made on account of said cash deposited in bank account of assessee and same was to be deleted. HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax v. Vishal Exports Overseas Ltd. [2024] 164 taxmann.com 286 (Gujarat) held that “ Where the Assessing Officer made an addition on account of an unexplained cash deposit in the bank on the ground that the assessee did not have sufficient cash balance and there was no conclusive proof as to how such a huge amount came into possession of the assessee in the form of cash since cash was duly accounted for in the cashbook and audited bank accounts and no other conclusive proof could be given by the assessee, impugned addition was to be deleted. IN THE ITAT JAIPUR BENCH 'A' in the case of ACIT v. Chandra Surana [2023] 149 taxmann.com 379 (Jaipur - Trib.) held that “Where assessee-jeweler claimed that cash deposited in the bank account Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 11 | 16 during the demonetization period pertained to cash sale transactions of gold jewelry since the assessee had maintained regular books of account, bills, vouchers, and day-to-day stock register having complete quantitative details of cash sale transactions of jewelry, addition under section 68 could not be made. 1. Abhishek Prakashchand Chhajed vs Income Tax Officer ITA No. 113/AHD/2023 dated 04/10/2023 The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the cash generated from sales and duly recorded in the books of account cannot be treated as unexplained cash credit under Section 68 of the Income Tax Act, 1961. Bench held that the assessee has duly shown the cash receipt from the sale of gold/gold ornaments duly recorded in audited books of the account supported by sales bill and stock details. The Assessing Officer has not pointed out any defect in the books of accounts. Therefore, the Assessing Officer cannot treat the cash generated from sales duly recorded in books of account from unexplained/unaccounted sources unless books of account are rejected based on valid reasons. Polepalli Srinivasulu Gupta vs DCIT I.T.A. No.240, 241, 242, 243, 244, 245 & 246/Viz/2021 dated 28/06/2022 The Income Tax Appellate Tribunal (ITAT), Visakhapatnam bench has deleted an addition under section 69A of the Income Tax Act, 1961 by holding the deposit of banned notes received by the assessee from cash sales during demonetization period is legally valid. Bench has relied on the judicial pronouncement in the case of Principal Commissioner of Income Tax vs. Agson Global (P) Ltd, and held that the cash sales made by the assessee deposited in the bank account are in accordance with law and hence the addition made by the AO is deleted. 2. Asst. Commissioner of Income Tax Vs M/s Hirapanna Jewellers I.T.A. No.253/ Viz/ 2020 dated 12/05/2021 The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench ruled that no cash inflow involved due to demonetization as the assessee explains the reason for huge sales with evidence. Bench held that in the light of the trading account and find that there was sufficient stock to affect the sales and we do not find any defect in the stock as well as the Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 12 | 16 sales. Since the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. 3. Delhi High court in the case of CIT v. Kailash. Jewellery House in ITA No. 613/2010 (Delhi High Court) “In the facts of above case cash of Rs.24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs.24,58,400/- was credited in the sale account and had been duly 13 ITA No.2922 /Del/2023 Suresh Chand vs. ITO included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department.” 4. ITAT Mumbai in the case of [2023] 154 taxmann.com 584 (Mumbai - Trib.) ACIT v. Ramlal Jewellers (P.) Ltd. Under similar circumstances while deleting the addition made towards cash deposit has held as under: “Section 68 of the Income-tax Act, 1961- Cash credit(Cash deposit in bank)- Assessment year 2016-17- Assessee company was engaged in jewellery business - During assessment proceedings, Assessing Officer noted that immediately after demonetization assessee had shown inflated cash sales and also made deposits in bank account which was completely abnormal as compared to earlier year and also subsequent year - He, therefore, taxed cash deposits under section 68 - It was seen that assessee had maintained regular books of account which was subject to audit and had produced entire sale bills, stock register and purchases and also quantitative tally of sales and corresponding stock - Addition undersection 68 on account of cash deposits could not be made simply on reason that during demonetization period, cash deposits vis-a-vis cash sales ratio was higher - Whether once, it had been established that sales representing Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 13 | 16 outflow of stocks was duly accounted in books of account and there was no abnormal profit during year, then there was no justification to treat deposits made in bank account out of cash sales to be income from undisclosed sources 5. M/s Suresh Chand Subhash Chand Vs I.T.O. Ward 14(1) , New Delhi I.T.A .No.-101/Del/2015 Bench held that we are of the considered view that the assessee has been able to explain the source of cash deposited in SBN during the period of demonetization and already paid taxes on the income earned from the cash sales which was the immediate source of such deposit, therefore, no further addition could be made towards such cash. 6. J.R. Rice India Pvt. Ltd vs ACIT ITA No.2852/Del/2022 31.07.2023 The Bench comprising of Saktijit Dey, Vice-president and M. Balaganesh, Accountant Member observed that the nature and source of credit being sale proceeds received from the customers stands duly proved and explained. Hence, prima facie, no addition could be made under Section 68 of the Income Tax Act. After the examination of the cash book of the assessee, it was found that the assessee had cash balance ofRs.55,93,580/- on the date of announcement of demonetization, which sufficiently explains the source of deposit of Rs.52,60,000/- in specified bank notes. Apart from this, the assessee had duly furnished the monthwise details of sales, month wise details of purchase, corresponding freight charges incurred month wise power and fuel expenses and month wise selling expenses in the form of rebate and discount. 3. It was submitted by ld AR that the only issue involved in this appeal was against the action of the ld CIT(A) in confirming the addition made by the Assessing Officer in respect of cash deposit in the bank account during the demonetization period. It was the submission that during the demonetization period, the assessee had deposited Rs.1,92,68,000/- in his bank account. It was the submission that the Assessing Officer considering Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 14 | 16 the fact that the sales disclosed by the assessee in the earlier months were far lower than the sales disclosed by the assessee in the October, 2016, made an addition of Rs.1,67,68,000/- being the cash deposit in the bank account of the assessee during the demonetization period. It was the submission that this addition is not in regard to the demonetization currency but in regard to cash deposit in the bank account. It was the submission that during October, 2016, the assessee had before Diwali made sales the old stock at discounted rate and this had generated the turnover of Rs.,1,31,58,234.00 in cash sales. It was the submission that the assessee is dealing in products which are VAT leviable. It was the submission that VAT returns have also been filed regularly. It was the submission that the Assessing Officer took the contention that the sales made in October, 2016 have been manipulated and generated the cash book during the demonetization period. It was the submission that there could be no manipulation insofar as even VAT returns have been disclosed in the turnover. It was the submission that the addition made by the AO and confirmed by the ld CIT(A) be deleted. 4. In reply, ld Sr DR submitted that when compared to sales for earlier months, the cash sales in the October, 2016 were very very high. It was the submission that the Hon’ble Supreme Court in the case of Commissioner of Income-Tax, West . vs Durga Prasad More, 82 ITR 540 (SC) and in Sumit Dayal, reported in 214 ITR 801 (SC) have categorically held that the human Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 15 | 16 probabilities are to be considered. It was the submission that when human probability when looked into, it cannot be said that the assessee could have deposited the huge cash in a short period, then the addition of Rs.1,67,68,000/- as made by the AO and confirmed by ld CIT(A) is liable to be confirmed. 5. We have considered the rival submissions. Primarily, the fact remains that the products dealt in by the assessee are VATABLE. The assessee has filed its VAT returns on regular basis as is required under VAT law. The assessee could have never known about the demonetization declared by the Government. In any case, this demonetization currency which has been deposited by the assessee in the bank account has been considered by the AO for the purpose of addition. The assessee having disclosed its turnover in VAT return in October, 2016 itself, it cannot be said that the assessee has manipulated his sales in the month of October, 2016. Further, it is noticed that the cash deposited in the bank account is fully explained by the assessee as available in the cash book. If the Assessing Officer is questioning the cash deposit in the bank when such cash is recorded in the cash book, then obviously, the stock of the assessee is being to be disputed. This has also not been disputed. The AO is not disputing the stock statement of the assessee. The AO is not disputing the sales of the assessee. The addition as made by the AO of Rs.1,67,68,000/- would no effect mean that the sales of the assessee has been reduced to Printed from counselvise.com ITA No.199/RAN/2025 Assessment Year : 2017-18 P a g e 16 | 16 that extent. This has also not been done by the AO. This being so, we are of the view that the addition as made by the AO and confirmed by the ld CIT(A) is unsustainable. Consequently, the AO is directed to delete the addition as made to the extent of Rs.1,67,68,000/- under section 68 of the Act in the assessment. 6. In the result, appeal of the assessee stands allowed. Order dictated and pronounced in the open court on 22/08/2025. Sd/- sd/- (RATNESH NANDAN SAHAY) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER Ranchi ; Dated 22/08/2025 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.Secretary ITAT, Ranchi 1. The Appellant : Anand Choudhury, S.N.Ganguly Road, Main Road, Ranchi 2. The Respondent: ACIT/DCIT,Circle-4, Ranchi 3. The CIT(A)- NFAC, Delhi 4. Pr.CIT, Ranchi 5. DR, ITAT, Ranchi 6. Guard file. //True Copy// Printed from counselvise.com "