DAMODAR PRASAD AGARWAL,JAIPUR V. ITO, WARD-3(5), JAIPUR, JAIPUR

ITA 1204/JPR/2025

AI Insights

The case revolves around an appeal by Damodar Prasad Agarwal against the order of the Commissioner of Income Tax (Appeals) which confirmed the addition of Rs. 94,49,786 to the assessee's income as unexplained cash deposits during the demonetization period from November 9, 2016, to December 30, 2016. The Income Tax Officer had initially made this addition under Section 69A of the Income Tax Act, 1961, treating the deposits as unexplained money. The CIT(A) upheld this decision but directed the exclusion of gross profit from these sales in the recomputation of the addition. The Tribunal, after examining the detailed explanations and evidence provided by the assessee, including the nature of the business, the increase in sales due to relocation to a larger shop, and the impact of the Deepawali festival on sales, found that the additions made were based on assumptions and not on concrete evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 825303 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 30-08-2025
• Other Referred Cases: SMILE Microfinance Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BRIJ LAL MEENA
• Assessee Lawyers: P.C. PARWAL
• Keywords: Business income; Opportunity of being heard; Onus to prove; Accommodation entries

Judgement Text

"vk;djvihyh; vf/kdj.k] t;iqjU;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR JherhvUukiw.kkZxqIrk] ys[kk lnL; ,oaaJhujsUnzdqekj] U;kf;dlnL; ds le{k BEFORE: SMT.ANNAPURNA GUPTA, AM & SHRI NARINDER KUMAR, JM, vk;djvihy la-@ITA No. 1204/JPR/2025 fu/kZkj.ko\"kZ@Assessment Years : 2017-18 Damodar Prasad Agarwal, 16 NA, Behind Lata Cinema Hall, Jhotwara, Jaipur cuke Vs. ITO, Ward-3(5), Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABSPA 0762 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. P.C. Parwal, FCA jktLo dh vksj ls@Revenue by : Sh. Brij Lal Meena, Addl. CIT (thru. V.C.) lquokbZ dh rkjh[k@Date of Hearing : 22/12/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 31 /12/2025 vkns'k@ORDER PER: ANNAPURNA GUPTA, AM The present appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (ld. CIT(A))/National Faceless Appeal Centre (NFAC), Delhi under Section 250 of the Income Tax Act, 1961, (hereinafter referred to as “Act”). 2. At the outset itself, it was stated that the solitary issue in the present appeal related to addition made to the income of the assessee on account of cash deposited in the bank account of the assessee during Printed from counselvise.com 2 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal demonetization period from 9.11.2016 to 30.12.2016, remaining unexplained. The cash deposit so added to the income of the assessee by the Assessing Officer (AO) amounted to Rs.94,49,786/-, the addition being made as unexplained money u/s 69A of the Act. 3. The ld. CIT(A), it was pointed out, confirmed the findings of the AO that the cash deposited during the said period remained unexplained but at the same time considered the assessee’s argument that this cash deposit had already been accounted for in sales and profits thereon declared for taxation, thereforehe directed the AO to exclude the gross profit associated with these purported sales and accordingly recompute the addition to be made to the income of the assessee. 4. The AO, it was pointed out, had also levied tax on the addition so made to the income of the assessee u/s. 69A of the Act at the rate of 60% applying the provisions of Section 115BBE of the Act. This was also challenged before the ld. CIT(A) who confirmed the action of the AO. 5. Aggrieved by the above, the assessee has come up in appeal before us raising the following grounds:- “1. The Ld. CIT(A), NFAC has erred on facts and in law in confirming the addition of Rs.81,19,256/- (94,49,786 -13,30,530) u/s 69A of IT Act by holding that cash Printed from counselvise.com 3 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal deposit during the demonetization period is unexplained money by directing the AO that since the cash deposit have already been accounted for in sales and profits declared for taxation, the gross profit associated with these sales be excluded in making the addition. 2. The lower authorities have erred on facts and in law in taxing the alleged unexplained cash deposit in the bank account u/s 115BBE @ 60% instead of taxing the same @ 30% by ignoring that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 15.12.2016 and made applicable from 01.04.2017 is applicable to any transaction from 01.04.2017 onwards and not to any transaction prior to 01.04.2017 as held by Hon'ble Madras High Court in case of SMILE Microfinance Ltd. Vs. ACIT vide order dt. 19.11.2024. 3. The appellant craves to alter, amend and modify any ground of appeal. 4.Necessary cost be awarded to the assessee.” 6. Taking up first ground of appeal No.1 challenging the addition made to the income of the assessee on account of cash deposit in its bank during demonetization period, learned counsel for the assessee made arguments at length primarily contending that the entire addition was based merely on assumptions and presumptions and this despite the fact that the assessee had duly explained the source of cash deposits, had also satisfactorily explained the abnormalities noted by the AO in the financial figures of the assessee pertaining to cash sales and cash deposits in the impugned year and the preceding year,duly evidenced with records.That no infirmity was pointed out by both the authorities below either in the explanation of the assessee or in the records and documents produced by the assessee. That therefore, the addition made was not sustainable on facts or even in Printed from counselvise.com 4 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal law. Ld.Counsel for the assessee contended that both the authorities below had applied principle of ‘human probability’ to the facts of the present case which he contended completely failed in the light of the explanation of the assessee duly supported with evidences, both before the AO and the ld. CIT(A). 7. The Ld. DR however, supported the orders of the authorities below. 8. Arguments made by both the sides were heard at length and documents and case laws referred to before us as also the contents of the assessment order and the order of the ld. CIT(A) to which our attention was drawn was taken note of. 9. As noted above, the grievance raised by the assessee in the present ground relates to treating the cash deposit in his bank account during demonetization period amounting to Rs.94,49,786/-, as being unexplained, and making addition of the same as unexplained money u/s. 69A of the Act. The learned counsel for the assessee during the course of hearing before us, pointed out that the entire case of the authorities below was based on mere assumptions and presumptions. In this regard, he drew our Printed from counselvise.com 5 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal attention to the order of the AO pointing out that the reason for him treating the source of cash deposit in the bank account during demonetization period as being suspect was on account of the following :- “(1) The AO noted abnormal increase in cash sales during the impugned year as compared to the preceding year, which according to him was not possible for any business or profession more particularly in the gold and diamond jewellery business in which the assessee was engaged.” Our attention was drawn to the findings of the AO at para 3.2 and 3.3 of the order as under:- “3.2 During the course of assessment proceedings, the assessee, against the source of such cash deposits, relevant details were called for. On examination of the said details of the assessee for the FY 2016-17, it has been found that that the assessee has made abnormal cash sales. The quantum of cash sales made during the year consideration were put to comparison of the quantum of cash sales for the FY 2015-16 and it has been noticed that there is a astrological hike in the cash sale declared during the year consideration. There was no reason for the sudden hike in cash sale during the year under consideration, as compare to the cash sales of immediate preceding year. Thus, the cash sales declared during the year under consideration is found to be unreasonable and exceptionally excessive. In order to better analysis the cash sales, the details of cash sales and cash deposits, asfurnished by the assessee, are reproduced hereunder for better presentation: - Printed from counselvise.com 6 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal 3.3 On examination of the details of cash deposits being SBNs during demonetization period so tabulated above, it has been found that there is exceptional increase in cash sales, which is not possible for any business or profession in general cause. In the instant case, the assessee is engaged in the gold and diamond jewellery and in this business, where any exceptional increase in cash sales is not possible. Abnormal increase of cash sales and cash deposits in the bank account as compared to last year was found suspicious as smell a rat and looking to the trend of business of the assessee, it has been found not in order.” Printed from counselvise.com 7 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal “(2) The AO found the assessee’s explanation of the cash deposit being out of cash sales to be unexplainable since majority of the sales was found to be made below Rs.2 lacs and the bills contained no details of the customers to whom it was sold making it impossible for the Department to verify the genuineness of the transaction.” In this regard our attention was drawn to the para 3.4 of the assessment order as under:- “3.4 The assessee has claimed the source of said cash deposit out of cash sales. While going through the details of such cash sales it has been noticed that almost all such sales are below Rs.2,00,000/-. However, in almost all cases the identity of the customer is not clear as relevant details like Father's name, address, PAN, Mobile number etc. of the customers are not mentioned. Thus, the said sales are not open for verification. It is pertinent to mention here that it is a general trend of the business to mention such credentials of the customer for his identification and future services in the Bills of items which worth Jewellery is a precious item. Therefore, it the customer failed to appreciate as under what circumstances such necessary credentials of the customers were not put on the bills. Moreover, all the Bills which the assessee have issued are found to be of below Rs.2,00,000/-. As such, there is no reason as why sale of items only below Rs.2,00,000/- took place. The above facts alongwith the fact that all the notes deposited during demonetization period were in old currency only creates suspicion on picture what the assessee has brought on records.” (3) The AO noted abnormal increase in cash balance during the month of September 2016, October 2016 and from 01.01.2016 to 08.11.2016 as compared to the cash balance during the rest of the year. His findings in this regard, he pointed out, were contained at para 3.4(a) as under:- Printed from counselvise.com 8 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal “3.4 Now discussing about comparison of the cash sales as well as cash deposits during the year under consideration with the previous year, which are discussed hereunder: - a) Perusal of the ROI filed for AY 2016-17, cash balance as on 31.03.2016 has beenshown at Rs 8,36,427/- During FY 2016-17, the case balance at the end of month April, 16 to August, 16 is maintained from Rs. 8,36,427/- to 2,81,211/-, Suddenly there was abnormal increase during the month of September, 16, October, 16 and from 01.11.2016 to 08.11.2016 at Rs. 6,51,013/-, 8,54,54/- and Rs. 99,86,836/-respectively. It has been found to be increase on account of sales in cash but in comparison to the last year, it is seen abnormal increase and has been found not in order. Further, it is also noticed that cash sales are in the range of 1,98,992/- to 8,62,979/- during the month of April, 16 to September, 16 and suddenly there was abnormal increase during the month of Oct, and from01.1.2016 to 08.11.2016 at Rs. 56,13,521/-, Rs. 88,25,707/- respectively.” (4) The AO noted deviation in the pattern of cash deposit in the month of October, noting that while the assessee, both in the preceding year and in the rest of the months for the impugned year, regularly deposited cash collected from sales,however, in the month of October, out of cash sales of Rs.56,13,521/-, the assessee was found to have deposited cash amounting to Rs.36,92,000/- only, thus deviating from the modus operandi of its business or for that matter any business. He further noted cash sales for the period 01.11.2016 to 08.11.2016 to be Rs.88,25,707/-, while the cash deposited in the bank was only Rs.10lacs. His findings in this regard, he pointed out, were contained at para 3.4(b) as under:- Printed from counselvise.com 9 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal “b) On comparison of Cash deposited during the FY 2016-17 and Cash deposited during the FY 2015-16, it has been noticed that in the FY 2015-16, the assessee regularly deposits bank notes so received from cash sales in the bank accounts on day-to-day basis and which is general modus-operandi of any business, which are based on the cash sales. Similarly, in the FY 2016-17, the assessee was also maintaining such modus-operandi of deposits bank notes so received from cash sales in the bank account on day-to-day basis up to September, 2016. Even if, it assumes that the assessee made huge cash sales in the month of October, 2016, then why the assessee did not deposit bank notes in the bank account, as up to September, 2016, the assessee was maintained modus-operandi for depositing day-to-day cash deposits in the bank account as the assessee made cash sales amounting to Rs. 56,13,521/- in the month of October, 2016 and the assessee only deposited cash amounting to Rs. 36,92,000/-, therefore, it seems very surprising and not as per human nature as well as modus-operandi of any business. It is surprising to noticed that the assessee made huge cash sales for the period from 01.11.2016 to 08.11.2016 are of Rs. 88,25,707/-and deposited in the bank account only of Rs. 10,00,000/- and did not deposit brought forward these SBN in the bank account.” (5) The AO noted the assessee to have deposited the entire cash, in old currencies which were no longer legal tender. He drew our attention to the findings of the AO in this regard, at page 6 of his order as under:- “i) The Reserve Bank of India (RBI) had withdrawn Legal Tender character of old bank notes in the denomination of Rs 500/- and Rs 1000/- we.f. 8th November, 2016, through Specified Bank Notes (cessation of liabilities) Act, 2017 and Specified Bank Notes (deposit of confiscated notes) Rules, 2017. ii) The legal tender character of the bank notes in denominations of Rs. 500 and Rs. 1000 issued by the Reserve Bank of India till November 8, 2016 (Specified BankNotes) were withdrawn. iii) As per details provided by the bank, the assessee had deposited Cash in old currencies of denomination of Rs500/- and Rs1000/- valued to Rs. 98,50,000/-.” 10. Learned counsel for the assessee contended before us that all these abnormalities noted by the AO were duly explained by the assessee, both during assessment proceedings and in appellate proceedings. He pointed Printed from counselvise.com 10 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal out that the assessee had explained the reason for abnormal increase in cash sales during the year being on account of the fact that in the earlier years the assessee was operating from a small shop at BOB building Khatipura Road which was of 100 sq. feet area, while in the impugned year he had shifted to a new shop having 1500 sq. feet area and therefore, while the sales of the assessee in the preceding year was Rs.79,96,775/- it had increased to Rs.1,50,67,276/- in the impugned year. 11. He further contended that the reason for not depositing the cash in the month of October and the huge deposit made on 08.11.2016 was also explained as being on account of the Deepawali festival season and cash sale on 08.11.2016 being Rs.46,01,586/-. Our attention was drawn to the explanation of the assessee as above was recorded by the AO at para 4 of his order as under:- “4. During the course of assessment proceedings, the opportunity of being heard was given to the assessee and vide his letter dated 21/11/2019, the assessee has stated reason for variation in figure is due to following:- That assessee was having opening cash balance on 08/11/2016 Rs.53,85,250/-. It was due to Deepawali festival season, could not be deposited into bank in whole. Further there was cash sale on 08/11/2016 for Rs.46,01,586/- and closing balance as on 08/11/2016 was Rs.99,86,826/- in firm M/s ChandaniJewellers. Further it is submitted that assessee has shifted his small shop at Bob Building Khatipura Road to present shop in 09/11/2015. Old shop was having 10x10 =100 Sq. feet area while new shop is having 1500 Sq. feet area measuring (15x25) basement, ground floor, first and second floor. Earlier assessee's sale in FY 2015-16 was Rs. 1,50,76,276/-and in FY 2014-15 was Rs.79,96,775/-. So these figures will not be comparable even though your honour will find 25% of sale is done in Oct and Nov Month.” Printed from counselvise.com 11 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal 12. He further pointed out that before the ld. CIT(A), the assessee had submitted to have maintained day-to-day books of account along with day- to-day stock record. The assessee had also submitted the cash position for the month of September, October and from 01.11.2016 to 08.11.2016 in which abnormal increase in cash balance was noted by the AO, explaining the reason for the same being on account of abnormal sales made during the Deepawali days. Our attention was drawn to the submission made by the assessee to the above effect reproduced in the order of ld. CIT(A) at page 3 as under:- “Submission dated 19/05/2025:- 1. It is submitted that assessee is maintaining day to day books of account along with day-to-day stock record. The cash position of the assessee for the month of September, 2016, October, 2016 and from 01.11.2016 to 08.11.2016 is as under:- Printed from counselvise.com 12 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal From the table, it may be noted that during the year, in the month of October, 2016, the total sales was Rs.70,13,178/-, out of which cash sales is Rs.56,13,521/-(56,58,861- 45,340). Out of such cash sales and the opening balance, assessee made cash payment of Rs.4,63,661/- and deposited Rs.36,90,000/- in the bank account leaving a cash balance of Rs.23,59,754/-. In fact as on 27.10.2016, the opening cash balance with the assessee (after depositing the amount of Rs.36,90,000/- in the bank account) was only Rs.2,18,812/- (PB 32). Thereafter the cash sales between 27.10.2016 to 30.10.2016 was Rs.24,62,527/- which is reasonable considering to Deepawali days. Therefore the cash sales for the month of October, 2016 cannot be considered to be abnormal and the cash balance as on 30 October 2016 was Rs.23,59,754/- needs to be accepted as against the action of the AO in only considering the average cash balance from April, 2016 to August, 2016 at Rs.4,00,214/- as reasonable.” 13. He further contended that the assessee had explained the date wise position of opening cash balance, sale receipts, payment made and deposited in the Bank account and closing cash balance from 01.11.2016 to 08.11.2016 as under:- “2. It is to further submit that the date wise position of the opening cash balance, sales receipt, payment made, deposit in bank account and closing cash balance from 01.11.2016 to 08.11.2016 is as under: - Printed from counselvise.com 13 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal From the above table, it can be noted that cash sales between 01.11.2016 to 07.11.2016 was Rs.42,24,121/- and on 08.11.2016 is Rs.46,01,586/-. The cash sales between 01.11.2016 to 07.11.2016 is normal cash sales subsequent to the Deepawali day considering the cash sales of Rs.24,62,527/ between 27.10.2016 to 30.10.2016. On 08.11.2016, the cash sales was Rs.46,01,586/. This is because on 08.11.2016 at 8 pm demonetization was announced. Immediately thereafter people rushed to the jewelry shop, to purchase the gold ornaments. This resulted in substantial sale 08.11.2016 within 3-4 hours. This fact is evident from news.published in almost all the newspaper (PB 95-96) and on that basis to find out the customers who purchased the gold ornaments on that date, department carried out survey and searches on jewelry shops. Therefore the sale made on 08.11.2016 is fully verifiable and proved. From the copy of cash book (PB 26-37) and copy of sale ledger (PB 73-81), it can be noted that the cash deposited during the demonetization period is out of the cash in hand as per the books of accounts which is mainly on account of cash sale of ornaments. Further the sale declared by the assessee is also declared in the VAT return which has been accepted (PB-91-94). Hence the cashdeposited during the demonetization period is fully explained.” Referring to the above, he contended that the increase in the amount of cash deposit during the period, had been explained as being on account of the declaration of the demonetization which resulted in substantial sale on 08.11.2016 within 3 to 4 hours. 14. He pointed out that assessee had produced copy of his cash book and sale ledger to evidence his above contention and had also pointed out that the entire sales was declared in his VAT return which had been accepted. 15. Our attention, thereafter was drawn to para 4 of ld. CIT(A) of order which contained gist of the contentions made by the assessee before him pointing out that the various observations by the AO were incorrect, as under:- Printed from counselvise.com 14 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal “(i) The increase in cash sales before the demonetization period is normal as explained in para 1-2 above, (ii) There is no requirement in law that in case of cash sales the name, address, PAN no or mobile number is to be mentioned in the bills. In case of cash sales, the assessee is not required to keep record of the of the credential of the customers. Hence, these observations of the AO have no relevance to doubt the sales made by the assessee. (iii) The cash balance available as per books is verifiable from the entries made in the cash book which is duly supported by bills and vouchers. The assessee has also regularly deposited the cash in the bank account. Even in the month of October, 2016, cash of Rs.36,90,000/- was deposited by 26.10.2016. Thereafter because of Deepawali rush, the cash could not be deposited in the bank account. Thereafter on 04.11.2016 and 05.11.2016 which was Friday and Saturday cash of Rs.5,00,000/- each was deposited in the bank account. After this deposit the cash balance available as per cash book on 05.11.2016 was Rs.34,18,756/-. On 06.11.2016 which was Sunday there was cash sale of Rs. 11,65,272/-, on 07.11.2016 cash sales was Rs.8,01,222 and on 08.11.2016 cash sales was Rs.46,01,586/- for the reasons explained in Para 3 above. Accordingly the cash balance as per the cash book 08.11.2016 was Rs.99,86,836/- out of which Rs.98,50,000/- was deposited in the bank account on 12.11.2016. Therefore on the basis of sales/cash availability as per cash book from April 2016 to September 2016 and from January 2017 to March 2017 cannot be compared with the sales/ cash availability in the month of October 2016 and from 01.11.2016 to 08.11.2016. Accordingly the inference drawn by the AO that cash sales during this period is from some other business which is incorporated as Accommodation entries in the garb of cash sales in the books of account is on surmises and conjectures and without any basis. (iv) So far as decision of Hon'ble Supreme Court in case of SmtSrilekha Banerjee and others vs. CIT is concerned in this case the Hon'ble court held that where the source of money was not satisfactorily proved, the department can treat the same as income of the assessee from some undisclosed sources. However in the present case the assessee has proved that the source of money is from sale of ornaments which is duly recorded as sales and considered not only in the stock record but also In determining the profit for the year. Therefore once assessee has explained the source of cash available as per cash book, the burden to prove shift on the department to establish that the cash as per cash book is from the undisclosed income of the assessee. Nothing of this sort was brought on record and therefore this decision is not applicable on the facts of the assessee's case.” Printed from counselvise.com 15 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal 16. Learned counsel for the assessee thereafter drew our attention to the findings of the ld. CIT(A) at para 4.3 of his order as under:- “4.3. The appellant attempted to justify the cash deposits made during demonetisation by attributing them to cash sales during October 2016, citing Deepavali season sales and a surge insales amounting to Rs. 46,01,586 on 08/11/2016, following the government's demonetisation announcement. However, this explanation is inconsistent with the appellant's business conduct in previous years and in the months leading up to demonetisation, as correctly noted by the assessing officer. Furthermore, the appellant's own written submissions acknowledge that the cash sales of Rs. 46,01,586 resulted from an influx of customers purchasing gold after the demonetisation announcement. Therefore, it is established on record that the appellant accepted payment in demonetised currency-non-legal tender. It should be emphasised that once the demonetisation was announced and SBNs were declared non-legal tender with immediate effect, such currency was generally not accepted for transactions, except by banks or authorised entities as notified by the RBI and government during the demonetisation period. Consequently, the appellant's explanation for the cash deposits does not align with its historical business practices or with reasonable expectations and human probability. I therefore find no basis to interfere with the conclusion reached by the assessing officer regarding the determination of unexplained cash deposits amounting to Rs. 94,49,786, and accordingly, this finding is confirmed. Accordingly, the ground No.1 is dismissed. The decisions cited by the appellant have been reviewed; however, they do not appear to be pertinent to the appellant's case. The appellant claimed purported sale of jewellery in exchange for demonetized currency, which is a highly unlikelyoccurrence. Moreover, the cases referred by the appellant involve distinct factual circumstances.” Referring to the above, he stated that the ld. CIT(A) made no attempt at all to find any infirmity in the factual contentions made by the assessee ,pointing out the fallacies in the observations made by the AO which led to the finding that the cash deposit in the bank account of the assessee remained unexplained. 17. He pointed out that the only reason for treating the cash deposit in the bank account as remained unexplained, was the deposit that was made Printed from counselvise.com 16 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal in demonetized currency i.e. not legal tender. To this, the learned counsel for the assessee contended before us that the deposit in illegal tender money in no way could be treated as unexplained source of cash deposit under the provisions of the Income Tax Act and that the said Act of the assessee may have its own consequences under the Specified Bank Notes (Cessation of Liabilities) Act 2017. 18. He therefore contended that since the assessee had discharged his onus of proving the source of cash deposit in his bank account during the demonetization period and no infirmity was found in the same as per the theory of preponderance of probability applied both by the AO and ld. CIT(A) there was no case at all for treating the cash deposit in his bank account as unexplained. 19. The LD. DR before us was unable to controvert the factual contentions made by the learned counsel for the assessee as above. He was unable to controvert the fact that the assessee had explained the source of cash deposits as being out of cash sales made by it and had duly substantiated the same by producing all books of accounts which were duly accepted by the Revenue authorities and no infirmity found in the same. Printed from counselvise.com 17 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal The assessee had also evidenced the genuineness of sales by demonstrating to have declared the same in his VAT returns which were accepted. Ld.DR was also unable to controvert the fact pointed out by the Ld.Counsel for the assessee that all abnormalities and inconsistencies noted by the revenue authorities in the case sales, cash deposits etc., were duly explained by the assessee and the explanation duly substantiated with the books of accounts,which were all accepted by the authorities below . Ld.DR also fairly agreed that no infirmity was found by the Revenue authorities in the explanation of the assessee. 20. In the light of the above , noting the fact that the assessee had explained the source of cash deposit in bank during demonetization period as being out of its cash sales and had substantiated the same by producing its Books of accounts and VAT returns declaring the said sales, in which no infirmity was found by the Revenue authorities and which was not rejected also , we have no hesitation in holding that the assessee had duly discharged its onus of proving the source of cash so deposited in the bank account during demonetization period.Noting the assessee to have duly explained the alleged inconsistencies noted by the Revenue authorities in the figure of cash sales, cash deposit , cash balances in the impugned Printed from counselvise.com 18 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal year as compared to their corresponding figures in the preceding year, and the assessee substantiating the said explanation by producing its entire records before the Revenue authorities, who admittedly found no infirmity either in the explanation of the assessee or the Books of accounts of the assessee, we agree with the learned counsel for the assessee that the entire addition made of cash deposit in the bank account of the assessee during the demonetization period was without any valid basis and was merely based on assumptions and presumptions. We, therefore, hold that the Ld.CIT(A)’s order confirming the addition made by the AO on account of cash deposited in the Bank account during demonetization u/s 69A of the Act is not sustainable. The AO is directed to delete the addition made to the income of the assessee. Ground of appeal No.1 is accordingly allowed. 21. Ground of appeal No.2 raised by the assessee relates to the application of tax rate of 60% to the addition made to the income of the assessee on account of alleged unexplained cash deposit in the bank account of the assessee,invoking the provisions of Section 115BBE of the Act. Printed from counselvise.com 19 ITA No. 1204/JPR/2025 Damodar Prasad Aggarwal 22. Since we have directed deletion of the addition so made to the income of the assessee in para20 of our order above,this ground raised by the assessee becomes infructuous and needs no adjudication. Ground of appeal No.2 is disposed of accordingly 23. In the result, the appeal of the assessee is allowed. Order to be pronounced under Rule 34(4)of the Income Tax (Appellate Tribunal)Rules, 1963 by placing the details on the notice Board. Sd/- Sd/- ¼ujsUnz dqekj½ ¼vUuiw.kkZ xqIrk½ (Narinder Kumar) (Annapurna Gupta) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31/12/2025 *Mittali, Sr. PS vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Damodar Prasad Aggarwal, Jaipur 2. izR;FkhZ@ The Respondent- ITO Ward-3(5), Jaipur 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZQkbZy@ Guard File (ITA No. 1204/JPR/2025) vkns'kkuqlkj@ By order, lgk;diathdkj@Asst. Registrar Printed from counselvise.com "