ANANT KUMAR,BARABANKI V. INCOME TAX OFFICER, BARABANKI

ITA 499/LKW/2025

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The case involves Anant Kumar, the proprietor of a jewelry business, who appealed against the orders of the ld. CIT(A) confirming additions made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961, related to unexplained cash deposits during the demonetization period, and disallowance of certain expenses. The AO had made substantial additions to the assessee's income, alleging that the cash deposits were unaccounted for and that the expenses claimed were not properly vouched. The CIT(A) dismissed the appeal due to non-compliance by the assessee in providing necessary documentation and failed to substantiate his claims. The ITAT found that the CIT(A) had not adequately communicated the consequences of non-compliance to the assessee and restored the matter for a fresh decision.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840393 (ITAT-LUCKNOW)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 29-07-2025
• Other Referred Cases: CIT vs. B.N. Bhattacharjee and Ors (1979) 118 ITR 461 (SC), Estate Of Late Tukojirao Holkar vs Commissioner Of Wealth-Tax (1997) 223 ITR 480 (MP), M/s Chabra Land and Housing Limited (1025/1027/CHD/2025)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.R.N. SHUKLA; ADDL
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 68

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.499/LKW/2025 A.Y. 2017-18 Anant Kumar (Individual), Q/549 Kanoon Goyan, Post-Barabanki GPO Tehsil-Nawabganj, Barabanki, U.P. vs. Income Tax Officer, Range-5(4), Barabanki-I PAN: AHCPK3400F (Appellant) (Respondent) Assessee by: None Revenue by: Sh. R.R.N. Shukla, Addl CIT DR Date of hearing: 07.01.2026 Date of pronouncement: 26.02.2026 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC under section 250 of the Income Tax Act, 1961 dated 22.05.2025, wherein the ld. CIT(A) had dismissed the appeals of the assessee against the orders of the ld. Assessing Officer passed under section 143(3) of the Act for the A.Y. 2017-18 on 30.12.2019. The grounds of appeal are as under:- “1. On the facts and circumstances of the case the Ld. CIT(A) vide order u/s 250 having DIN and order no. has erred in ITBA/NFAC/S/250/2025- 26/1076375435(1) confirming the addition made by the AO to the tune of Rs. 72,02,700/- on account of cash deposited in bank account out of the sale proceeds alleging the same to be income chargeable to tax under section 68 of the Income Tax Act, 1961. 2. That the Learned CIT(A) erred in confirming the addition of ₹ 1,51,473/- made by the Learned Assessing Officer by disallowing 20% of expenses is arbitrary and without justification, despite the fact that all expenses are duly recorded in audited books and supported by valid vouchers. 3. That the Learned CIT(A) erred in confirming conclusion made by the Learned Assessing Officer that only a sum of 28,50,000/- out of the total cash deposits of ₹1,00,52,700/- made during the demonetization period Printed from counselvise.com ITA No.499/LKW/2025 Anant Kumar A.Y. 2017-18 2 pertains to legitimate sales, based merely on certain mathematical assumptions and calculations, without appreciating the complete facts and supporting documentary evidence submitted by the Appellant. 4. That the learned CIT(A) erred in confirming the action of the Learned Assessing Officer in invoking the provisions of Section 68 of the Income Tax Act, 1961 while making additions, without appreciating that the said provisions are not applicable in cases where the assessee has deposited cash in the bank account, duly recorded in the regularly maintained books of accounts. In the present case, since the cash deposits were duly disclosed and accounted for, the invocation of Section 68 is unjustified and legally untenable. 5. That the learned CIT(A) also erred in confirming the action of the Learned Assessing Officer in applying provisions of Section 115BBE of the Act in the facts and circumstances of the case of Appellant and determining the tax-liability as per the aforesaid Section without appreciating that provisions of Section 68 were not applicable in the facts of the case and, therefore, provisions of Section 115BBE of the Act could not be invoked. 6. That the learned CIT(A) did not provide a proper opportunity of being heard and passed the ex parte order in haste, which is unjustified. 7. Because the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.” 2. The facts of the case are that a return was filed by the assessee on 25.11.2017 declaring a total income of Rs. 10,48,410/-. The case was selected for scrutiny and an assessment was completed under section 143(3) of the Income Tax Act by making an addition of Rs. 73,54,173/- of which additions under section 68 were made of Rs.72,02,700/- on account of SBN deposited during demonetization period and additions of Rs. 1,51,473/- were made by way of disallowance of certain expenditures @ 20% of such expenditures. During the course of assessment, the ld. AO noted that the assessee was the Proprietor of a firm namely M/s Bhagauti Prasad Anant Kumar Sarraf at Q/549, Kanoon Goyan, Post-Barabanki who was engaged in the retail trade of Jewellery, Gold, Silver & Diamond. He had disclosed a gross turnover of Rs. 2,32,63,268/- a gross profit of Rs.22,57,000/- and a net profit of Rs. 10,31,233/-. The assessee had made total deposits of Rs. 90,12,500/- in SBNs on various dates during the demonetization period. The assessee was required to furnish the details of purchases, sales, cash deposits etc., in prescribed tables and a daily cash summary for the period Printed from counselvise.com ITA No.499/LKW/2025 Anant Kumar A.Y. 2017-18 3 1.10.2016 to 31.12.2016. He was also asked to explain the reason for abnormal increase in cash deposit in comparison to the preceding year and to furnish the stock details for the financial year in question. The ld. AO records that in response to this, the assessee only submitted month-wise quantity of sale and purchase of Sona zewar, gold ornaments, silver ornaments month-wise for the F.Ys. 2015-16 and 2016-17. He did not submit the details of cash sales made during F.Y. 2015-16 or the daily stock register for the period October and November, 2016. Cash book was only submitted for the period 1.04.2016 to 31.12.2016. The cash book for the remaining period i.e. 1.01.2017 to 31.03.2017 was not furnished. From a perusal of the VAT returns from April to December, 2016, the ld. AO observed that the assessee had made purchases from registered parties amounting to Rs. 93,61,533/- and from unregistered parties of Rs. 61,58,405/-. No bills or vouchers were produced for purchases made from unregistered parties and therefore, the ld. AO could not verify the purchases from unregistered parties. Regarding abnormal increase in cash deposits, the assessee maintained that he always held the large amount of cash as majority sales were made in cash. Furthermore, there was no prohibition in keeping cash. Furthermore, it was also submitted that the assessee purchased various old jewellery from customers for which payment was required to be made in cash. It was submitted that major part of Barabanki district was rural and customers felt comfortable taking cash against sale of old jewellery. New jewellery was also purchased in cash. It was further submitted that the cash deposits continued right uptil March, 2017 and in fact were more than the demonetization period. Therefore, the contention that sales had been inflated just to make deposit in SBNs was not justifiable. Furthermore, he submitted that sales of jewellery were affected due to marriage seasons, festivals etc,. Therefore, the cash deposits and sales made during demonetization was justifiable according to the nature and size of his business. The ld. AO was not convinced. He held that the assessee had not been able to justify details of purchases made in cash alongwith bills and vouchers; that he had low cash balance as on 1.04.2016 which demolished the very foundation of the assessee’s arguments; that there had been a huge Printed from counselvise.com ITA No.499/LKW/2025 Anant Kumar A.Y. 2017-18 4 increase in cash holding between the period 26.10.2016 to 8.11.2016 which was against the pattern seen in the assessee’s business; there could be no comparison between the period of demonetization which was only 50 days and subsequent periods that were in excess of three months; the argument that sale of jewellery was dependent on marriages and festive seasons did not explain the sudden increase in cash reserves. The ld. AO also obtained the stock and summary from the assessee and noted that the total sales during the year 2016-17 had increased viz a viz the immediate previous year and more so during the demonetization period. He compared the sales of the present year with the previous year and came to a conclusion that there was a 480% increase in sales in the present financial year as compared to the previous financial year. He also noted that there was a 500% decrease in sales between April to September, when compared to the previous year. Thus, after noting a downward trend in the business, there had been abnormal increase just prior to the period of demonetization. The ld. AO concluded that the assessee had abnormally increased its sales so as to account for cash deposits in SBNs in his bank accounts and to include unaccounted money into his books. He held that in the light of various Court decisions, the provisions of section 68 were attracted in the case of the assessee and accordingly he made an addition of Rs. 72,02,700/- after allowing for a cash deposit of Rs. 28,50,000/- as deposits out of regular sales, which he completed on the basis of the past history of the assessee. Subsequently, he also made addition of Rs.1,51,473/- after examining the books of accounts and finding that some of the expenses were not properly vouched and were made in cash. 3. Aggrieved with this order, the assessee went before the ld. CIT(A). The ld. CIT(A) noted the arguments of the assessee as given in Form No. 35. He also noted the observation of the ld. AO. Thereafter, he listed out the opportunities that he had given to the assessee for compliance and pointed out that despite six opportunities, the assessee had not made compliance. Accordingly, the ld. CIT(A) held that since no material had been brought on record, he was unable to consider the matter on merit. He further held that the assessee was not interested in Printed from counselvise.com ITA No.499/LKW/2025 Anant Kumar A.Y. 2017-18 5 pursuing the present appeal as he had not furnished any written submission in support of his grounds. In the circumstances, after relying upon decisions of the Hon’ble Supreme Court in the case of CIT vs. B.N. Bhattacharjee and Ors (1979) 118 ITR 461 (SC), the Hon’ble Madhya Pradesh High Court in the case of Estate Of Late Tukojirao Holkar vs Commissioner Of Wealth-Tax (1997) 223 ITR 480 (MP) and the decision of the ITAT in M/s Chabra Land and Housing Limited (1025/1027/CHD/2025), he dismissed the appeal of the assessee for want of pursuit. 4. Aggrieved with this order, the assessee filed an appeal before us. When the case was taken up for hearing, none was present on behalf of the assessee. Sh. R.R.N. Shukla, ld. Addl CIT (hereinafter referred to as the DR) assisted the Bench in the matter. He took us through the grounds of appeal filed by the assessee and pointed out that it was the assessee’s contention that the provisions of section 68 could not be applied to the assessee because the assessee had already declared the cash deposited in the bank account from the entries made is the books of account with regard to sales. However, the ld. Addl CIT DR pointed out that the ld. AO had duly shown in his assessment order as to why the claims could not be believed and since the assessee had not made any compliance before the ld. CIT(A) or not furnished any evidence before the ld. CIT(A), the ld. CIT(A) had no option but to confirm the said additions. He accordingly prayed that the addition had to be confirmed because the provisions of section 68 could be invoked even where the assessee could not reply or could not give a satisfactory reply. With regard to the disallowances made on account of addition of 20% of certain expenses that had been made by the AO, he pointed out that it was the plea of the assessee that all expenses had been duly recorded in the audited book and supported by valid vouchers, but he pointed out that the AO had observed that the payments had been made by cash and were self-vouched-therefore, they were not amenable to verification. He, therefore, pleaded that the addition deserve to be confirmed. 5. We have duly considered the facts and circumstances of the case. We note that the five of the six notices issued by the ld. CIT(A) had been issued long before Printed from counselvise.com ITA No.499/LKW/2025 Anant Kumar A.Y. 2017-18 6 the passage of the assessment order. The sixth notice was issued on 5.05.2025 wherein the assessee was given time upto 13.05.2025 and where he sought an adjournment. It appears that the ld. CIT(A) was not inclined to grant this adjournment because of the earlier non-compliance but it is not clear as to whether this rejection of adjournment application was communicated to the assessee and whether the assessee was informed that in the event of failure to make compliance, his appeal would be dismissed for default. In the circumstances, we deem it appropriate to restore this matter back to the file of the ld. CIT(A) so that the ld. CIT(A) may issue a fresh notice to the assessee, making it clear that in the event of failure to comply, the appeal would be dismissed for default and only thereafter proceed to decide the issue at hand. Furthermore, we note that the assessee has not withdrawn his appeal and that has submitted a statement of facts before the ld. CIT(A) in which he claims that he has submitted all the necessary documents to the AO. In the circumstances, the ld. CIT(A) may, if he deems necessary also direct the assessee to submit the same documents before him so that the correctness or otherwise of the orders of the ld. AO could be examined. As the matter stands restored to the file of the ld. CIT(A), the appeal of the assessee is held to be allowed for statistical purposes. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 26.02.2026 in the Open Court. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26/02/2026 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S. Printed from counselvise.com "