DIPIKA SINGH,KOLKATA V. ITO, WARD 50(2), NOW WARD 50(1), KOLKATA

ITA 194/KOL/2025

AI Insights

The case involves Dipika Singh Bhatendra, the appellant, who contested the additions made by the Income Tax Officer (ITO) under Section 69A for unexplained cash deposits during the demonetization period and an estimated income on undisclosed sales. The appellant argued that the sales were recorded in the books and the profits were duly taxed, challenging the applicability of Section 69A. The Tribunal examined the application of Section 69A and the rejection of books under Section 145(3), ultimately finding in favor of the appellant and directing the deletion of the additions made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784113 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 24-01-2025
• Other Referred Cases: JMK Exports vs. ACIT, ITO vs. Joydeb Kundu, ITO vs M/s. Senco Alankar
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUCHIKA SHARMA
• Assessee Lawyers: S SOUMITRA CHOUDHURY; ANIRBAN GUPTA; ARS
• Keywords: Set aside; Business income; Opportunity of being heard; Unexplained cash credit; Unexplained investment; Deemed to accrue or arise in india
• Section: 143(3); 68; 69

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.194/KOL/2025 (Assessment Year: 2017-18) Dipika Singh Bhatendra East Raypara Rajarhat, Barasat, Kolkata-700135, West Bengal Vs. ITO, Ward 50(2) Now Word 50(1), Uttarpan, Manicktala Civic Centre, Kolkata-700067, West Bengal (Appellant) (Respondent) PAN No. BLLPS4355P Assessee by : S/ Shri Soumitra Choudhury & Anirban Gupta, ARs Revenue by : Ms. Ruchika Sharma, DR Date of hearing: 04.11.2025 Date of pronouncement: 11.11.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 12.08.2024 for the AY 2017-18. 02. At the outset, we note that the appeal of the assessee is barred by limitation by 85 days. At the time of hearing the counsel of the assessee explained the reasons for delay in filing the appeal. The Ld. A.R did not raise any objection in condoning the delay. After hearing the rival contentions and perusing the materials available on record, we find that the delay is for bonafide and genuine reasons, hence, we condone the delay and admit the appeal for adjudication. Printed from counselvise.com Page | 2 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 03. The only issue raised by the assessee in the various grounds of appeal is against the confirmation of addition of ₹20,63,763/- by ld. CIT (A) as made by the ld. AO on account of cash deposited during the demonetization period u/s 69A of the Act as unexplained money. The assessee has also challenged the estimation of profit at the rate of 3.68% on the undisclosed sales of ₹60,43,953/- thereby making an addition of ₹2,22,417/- without rejecting the books of accounts u/s 145(3) of the Act, which was also confirmed by the ld. CIT (A). 04. The facts in brief are that the assessee filed the return of income on 17.12.2017, declaring total income of ₹3,75,760/-. The assessee derived income from business and profession and other sources during the year. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were issued and duly served upon the assessee. The ld. AO during the course of assessment proceedings observed from the record that the assessee had deposited cash into two bank accounts with Syndicate bank, Rajarhat branch cash aggregating to ₹22,00,350/-. Accordingly, show cause notice was issued to assessee as to why the same should not be added u/s 69A of the Act. There was no compliance by the assessee and accordingly, the ld. AO made an addition of ₹20,63,763/- as unexplained money u/s 69A of the Act, after allowing the deduction of cash in hand as per cash book of ₹1,36,587/-. The ld. AO also noted that during the year the assessee has deposited into these bank accounts a sum of ₹2,87,71,678/-. However, as per the return of income and audited accounts, the total sales declared were only ₹2,05,27,375/- and if the cash deposited during the demonetization period is excluded then the suppressed turnover on the basis of total deposits in the bank accounts worked out to ₹60,43,953/- which was not disclosed by the Printed from counselvise.com Page | 3 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 assessee. The ld. AO accordingly estimated the income on the said suppressed sales at the rate of 3.68% thereby making an addition of ₹2,22,417/-. 05. In the appellate proceedings, the ld. CIT (A) affirmed the order of the ld. AO when the assessee did not comply with the various notices issued. The ld. CIT (A) dismissed the appeal ex-parte. 06. The ld. A.R argued that infact the sales were duly recorded in the books of account and the profit earned during the year from the business was offered to tax and due taxes were paid. Therefore, at the very first place the invocation of section 69A is wrong as the same is not applicable to the case of the assessee. Therefore the Ld .A.R prayed that the addition so made under the wrong provisions of Act by misconstruing the provisions of law may be deleted by setting aside the order of Ld. CIT(A). The Ld. A.R submitted that undoubtedly the provisions of Section 69A were not applicable to the present case. In defense of arguments the Ld. A.R relied on the decision of Co-ordinate Bench in the case of JMK Exports vs. ACIT in ITA NO. 1428/Del/2021 for AY 2017-18 dated 26.03.2024. Further he submitted that sales were not doubted by the AO and therefore how there can be a double addition first by way of profit on such sales and thereafter by adding the entire amount of cash sales deposited during demonetization period by placing reliance on the decision of Co- ordinate Bench in the case of ITO vs. Joydeb Kundu in ITA No. 8/Kol/2021 for AY 2017-18 dated 16.05.2023. The Ld. A.R therefore prayed that in view of aforesaid proposition and the case laws the order of Ld. CIT(A) may be set aside and the AO may be directed to delete the addition. Printed from counselvise.com Page | 4 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 07. The Ld. D.R on the other hand relied heavily on the orders of authorities below. The Ld. D.R therefore prayed that the order of Ld. CIT(A) may kindly be affirmed. 08. After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee has undisputedly deposited cash during demonetization period amounting to of ₹22,00,350/-, which were duly accounted for by the assessee in the books of account. We note that the cash was deposited out of the cash available in the cash book which was out of sales effected by the assessee in the normal course of business. We note that the assessee has shown these cash sales in the profit and loss account and computed the income accordingly. In our opinion, if the addition u/s 69A of the Act is allowed to be made as unexplained money which is not so as the said cash deposited were out of cash sales then it would result into double addition of the same income which is not permissible under the Act. We also note that the AO has not rejected the books of account and even sales were not doubted. Therefore, the action of the AO by adding the cash deposited during demonetization u/s 69A amounted to double addition which is not permissible under the Act. First by way of accepting the sales and secondly by way of making further addition towards cash deposits u/s 69A of the Act. The case of assessee finds support from the decision of Co-ordinate Bench in the case of ITO vs. Joydeb Kundu (supra) wherein the Hon’ble Bench has held as under: “8. We have carefully gone through the material available on record and considering the rival submission made by the parties, in the present case both the authorities below accepted the fact that the amount received by assessee are nothing but sale proceeds in the course of business of the assessee. The addition has made only on the basis that after demonetization, the demonetization note could not have been accepted as valid tender. Since the Printed from counselvise.com Page | 5 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 sales proceeds for which cash was received are added u/s 69A of the Act which would amount to double taxation once as sale and another against as unexplained cash credit which is violate principles of taxation. The ld. AR further contended that Hon’ble ITAT of Kolkata in the case of ITO vs M/s. Senco Alankar in ITA No. 10/Kol/2021 dated 27.06.2022 on an identical fact held as under: “7. We have heard the rival submissions and carefully considered the material placed on record and gone through various judicial precedents relied upon by both the parties. At the outset, we find that the moot point for consideration is in respect of explanation furnished by the assessee regarding nature and source of cash deposit to the tune of Rs.1,95,03,291/- (Rs.3,87,69,800 – Rs.1,92,66,509) during the demonetization period which has been treated as deemed income of the assessee and added to the total income u/s. 69A of the Act as unexplained money. We find that written submissions and all the relevant documentary evidences were placed on record. 7.1 The foremost point which invites our attention is the computation method adopted by the AO in arriving at this figure of Rs.1,95,03,291/- which is nothing but based on a hypothesis to arrive at estimated probable sales value that could have been made on 08.11.2016 between the time window from 8.30PM to 12 midnight and the entire day. As discussed above, Ld. AO has made certain assumptions on the logistics and the conduct of business transactions/operations to arrive at this probable sale value estimation. We find that the assumptions so made by the Ld. AO are devoid of any scientific basis and third party comparable which gives credibility to such an estimation. All these assumptions and calculations carry AO’s own figment of imagination. We note that the assessee has countered all the assertions and assumptions made by the AO by submitting the details from its audited books of accounts and stock registers by providing all the relevant details from time to time. We note that the assessee had given all the explanations which are reasonable and there is no other material except for the estimation of probable sales value done by the Ld. AO for the purpose of treating the deemed income as unexplained money in the hands of the assessee. We also note that assessee has duly recorded in its books of accounts all the sales made on the date of announcement of demonetization in the time window available on that day which has been credited in the P&L Account. It is also noted that the assessee had stock in hand to meet the sales demand, all of which is duly recorded in the stock register furnished before the authorities below. It is also noted that there is no specific discrepancy pointed out in respect of the books of account, more particularly when the purchases have not been doubted in the assessment. Ld. AO has noted that details of customers on the invoices raised during the time window on the date of announcement of demonetization were not recorded on the invoices for some of the instances wherein the details were recorded, summons were issued to those customers, most of which remained unreplied. We note Printed from counselvise.com Page | 6 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 that all the sales were cash sales and in case of cash transactions of sale, delivery of goods is taken against the cash payment and it is hardly necessary for the seller to bother about the name and address of the purchaser. 7.2 We further observe that the assertion of the ld. AO on the mere possibility of assessee earning considerable amount out of cash sales on the date of announcement of demonetization is a pure conjecture on the part of the AO and is based on surmises, speculating on the approach adopted by the assessee. Rather, the estimation approach of arriving at probable sales value by the Ld. AO cannot be rationally inferred to justify the addition so made. Thus, we find that the Ld. AO indulged in suspicion, conjecture and surmises and acted without any evidence and upon a view of facts which cannot reasonably be entertained. It is a settled position of law that in making the assessment, the AO is not entitled to make a pure guess and make an assumption without reference to any evidence or any material at all. It has been consistently held by various Hon’ble Courts that there must be some matter more than their suspicion to support the assumption made u/s. 143(3) of the Act. We find force from the decision of Hon’ble Apex Court in the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) wherein it was held as under – “The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the Income-tax Officer and the fact that the appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination noted, - this also was a pure conjecture or surmise on the part of the Income-tax Officer. It is, therefore, clear that the Tribunal in arriving at the conclusion it did in the present case indulged in suspicion, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and this court is entitled to interfere.” 7.3 Ld. Counsel pointed out that assessee had all the capabilities, infrastructure, manpower, process and procedures to handle and deal with high volume of customers during small time window available to it. For comparability of the circumstances which existed on the day of demonetization announcement, he pointed to the occasion of Dhanteras which is a festival wherein similar kind of high traffic volume of customers happens for the purchase and sale of gold/bullion/jewellery, it being an auspicious day for making such investments. It was placed on record that on the day of Dhanteras which fell on 28.10.2016 i.e. prior to the day of announcement of demonetization, sales bills to the tune of 229 numbers were generated while dealing with those many customers which was also during the smaller time window available on that day depending on the muhurats. It was also pointed out that the VAT returns Printed from counselvise.com Page | 7 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 filed by the assessee for the year under consideration have not been revised in any manner so as to reflect any kind of adjustment or accommodation made in the accounted data of the assessee. All these facts and explanations were placed before the lower authorities, copies of which are placed in the paper book at page 19 to 28 and 52 to 75. 8. On the issue of wrong invocation of provisions of Section 69A the Act, we observe that the same is not applicable to the transactions recorded in the books of accounts maintained by the assessee. For the sake of convenience, the provisions of section 69A are extracted as below: 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.] 8.1. A perusal of above section reveals that it deals with unexplained money in the form of bullion, jewellery or other valuable articles which are not recorded in the books of account if maintained by the assessee for any source of income and the assessee has not offered any explanation about nature and source of acquisition of money, bullion, jewellery or other valuable article but in the present case, the facts are quite clear that the assessee has shown the receipt of money from cash sales which has been duly accounted in the books of accounts. In the case of JMK Exports (supra) wherein the it has been held as under: “19. In the facts of the present appeal, it is an admitted factual position that the disputed transactions are duly recorded in the books of accounts of the assessee. Therefore, at the very threshold the provisions of section 69 will not get attracted. In fact, learned Standing Counsel appearing for the Revenue Printed from counselvise.com Page | 8 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 fairly accepted aforesaid factual and legal position. In any case of the matter, both the Assessing Officer and learned First Appellate Authority have proceeded on the premise that the credit entries appearing in the books of account are unexplained cash credit u/s. 68 of the Act. It is quite patent and obvious that provisions contained u/s. 68 and 69 of the Act operate in different situations and conditions therein are also different. Therefore, when it was never the case of the Department that the disputed addition has to be treated as unexplained investment u/s. 69 of the Act, at the second appellate stage, a new dimension cannot be given to the disputed issue by converting the addition from section 68 to section 69, that too, without providing an opportunity of being heard to the assessee. More so, when applicability of section 69 was never within the purview of the Tribunal and not even the case of the Department. I don’t intend to deal further on the issue as to whether the Tribunal has powers to change the provision under which the addition has been made by the Departmental Authorities as it is academic in the present case considering the fact that the conditions of section 69 are not satisfied.” 09. Considering the facts of the case in the light of the above decisions , we are of the view that the order passed by the AO is not sustainable under the law on two counts: i) that provision of section 69A were wrongly invoked by wrong interpretation of the provisions of the Act and ii) that the addition would result in double taxation of the same sales which is not permissible under the Act as has been discussed hereinabove. Accordingly, we set aside the order of Ld. CIT(A) on this issue and direct the AO to delete the addition. 010. Secondly, the ld. AO has also made an addition of ₹2,22,417/- at the rate of 3.68% on account of suppression of sales amounting to ₹60,43,953/-, without rejecting the books of accounts u/s 145(3) of the Act. We note that the ld. AO has not pointed out any defect or deficiency in the books of the assessee or evidences filed by the assessee as the books were duly audited by the chartered accountant. In absence of any rejection of books of account u/s 145(3) of the Act , the addition made by the ld. AO by estimation of income on suppression sales cannot be sustained. Accordingly, the appeal of the Printed from counselvise.com Page | 9 ITA No.194/KOL/2025 Dipika Singh; A.Y. 2017-18 assessee is allowed on the second addition by directing the ld. AO to delete the addition. 011. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11.11.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 11.11.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "