KAMDHENU UDYOG PVT. LTD.,KOLKATA. V. A.C.I.T., CIRCLE - 12(1), KOLKATA

ITA 478/KOL/2025

AI Insights

Kamdhenu Udyog Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre, which upheld the rejection of their books of account and the addition of \\u20b9;1,42,75,500 as unexplained cash credit during the assessment year 2017-18. The Income Tax Officer (ITO) had rejected the books of account under Section 145(3) due to alleged manipulation to accommodate unaccounted cash during the demonetization period and treated the cash deposits as unexplained under Section 68. The Tribunal found that the ITO's rejection was not supported by any specific defects in the books and that the addition amounted to double taxation, as the income was already reported as sales.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772407 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: 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: SOMNATH DAS BISWAS
• Assessee Lawyers: SIDDHARTH AGARWAL
• Keywords: Corroborative evidences; Unexplained cash credit; Rejection of books of accounts; Deemed to accrue or arise in india
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.478/KOL/2025 (Assessment Year:2017-18) Kamdhenu Udyog Pvt. Ltd. C/o Subash Agarwal & Associates, Advocates Siddha Gibson, 1, Gibson Lane, Suite 213, 2nd Floor, Kolkata-700069 West Bengal Vs. ACIT, circle 12(1) Aaykar Bhavan, P-7, Chowringhee Square, Kolkata-700069, West Bengal (Appellant) (Respondent) PAN No. AABCK4503C Assessee by : Shri Siddharth Agarwal, AR Revenue by : Shri Somnath Das Biswas, DR Date of hearing: 08.07.2025 Date of pronouncement: 26.08.2025 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 24.02.2025 for the AY 2017-18. 02. Ground no.1, is not pressed at the time of hearing and accordingly, the same is dismissed as not pressed. 03. Ground no.2, is against the upholding of assessment order by the ld. CIT (A) wherein the books of accounts were rejected by the ld. AO u/s 145(3) of the Act without the necessary conditions as envisaged by the said section being satisfied. Printed from counselvise.com Page | 2 ITA No.478/KOL/2025 Kamdhenu Udyog Pvt. Ltd.; A.Y. 2017-18 04. The facts in brief are that the assessee filed the return of income on 06.11.2017, declaring total income at ₹4,95,74,790/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and statutory notices u/s 143(2) of the Act and other notices along with questionnaire were duly issued and served upon the assessee. The assessee is engaged in the business of manufacturing of poultry feed and running of poultry farming, etc. During the course of assessment proceedings, the ld. AO called for the details and evidences from the assessee which were duly filed. The ld. AO noted that during the demonetization period assessee has deposited cash of ₹1,42,72,500/- and compared the said transactions with the cash deposited by the assessee in the preceding year also which are extracted below: - Printed from counselvise.com Page | 3 ITA No.478/KOL/2025 Kamdhenu Udyog Pvt. Ltd.; A.Y. 2017-18 05. The ld. AO on comparison of cash deposits during the year vis-à-vis previous year that the cash deposited by the assessee has decreased by 43.41% during demonetization period as compared to the said period during the previous year 2015-16, whereas turnover has increased 34.80% with profit increased by 99.75% in comparison to previous financial year. The ld. AO also compared that sales in October 2016 were ₹8,12,35,328/-, which fell to ₹6,07,29,850/- during such time when market demand of product was generally high. The ld. AO further noted that this has resulted into artificial negative growth for the month of October which normally showed that cash sales are artificially manipulated to generate fabricated cash in hand balance on 08.11.2016 with post facto scheme to accommodate their unaccounted SBN cash and to defraud the revenue. The ld. AO thereafter noted that the purchase from related parties in the whole year had substantially increased in comparison to F.Y. 2015-16 as 17.55% and thus, the assessee has shown huge cash receipts from various parties with no supporting evidences. Thereafter, the ld. AO rejected the books of accounts u/s 145(3) of the Act and treated the cash deposit during demonization in SBIN of ₹1,42,72,500/- as unexplained cash credits u/s 68 of the Act. 06. The ld. CIT (A) in the appellate proceedings, dismissed the appeal of the assessee by upholding the rejection of books of account. 07. After hearing the rival contentions and perusing the materials available on record, we find that in this case, the ld. AO has given a very wrong and contradictory findings for rejecting the books of account. We find that the ld. AO has not recorded any single defect in the books of accounts. The only defect pointed out by the ld. AO was that the books of accounts were manipulated to accumulate the cash Printed from counselvise.com Page | 4 ITA No.478/KOL/2025 Kamdhenu Udyog Pvt. Ltd.; A.Y. 2017-18 as on 08.11.2016.We also note that the ld. AO has analyzed the cash sales/ receipts during the F.Y. 2015-2016 and 2016-2017 and rather found that the cash sales during the year under consideration has decreased by 43.41%. We also note that the Learned AO has recorded a clear-cut finding that during the month of October 2015, the sales were ₹8,012,35,328 which fell to ₹6,07,29,850/-, which was again not in consonance with the market trend. Thereafter, the Learned AO has not assigned a single reason as to what defects were found in the books warranting the rejection under Section 145(3) of the Act. We also note that even the assessee suomoto reported in the Tax Audit Report the details of specified bank accounts and transactions during 9-11-2016 to 30-12-2016 with dates which is available at page number 48 of the paper book of the assessee which showed the details of ₹1,42,72,500 deposited into various bank accounts by the assessee. Under these circumstances, we are of the considered opinion that the rejection of books by the assessee is not in accordance with the provisions of Section 145(3) of the Act as the necessary underlying conditions were not satisfied. Accordingly, we hold that the books were wrongly rejected by the Learned AO. Ground No. 2 is allowed. 08. The issue raised in ground No. 3 is against the order of Learned CIT (A) upholding the action of the Learned AO in making the addition of ₹1,42,75,500 as unexplained cash credit by invoking provisions of Section 68 read with Section 115BBE of the Act. 09. The facts in brief are that the assessee has deposited this cash as discussed above out of the sale proceeds in the regular course of business and shown the same in the books of accounts. We note that even the books of accounts of the assessee were audited by the Printed from counselvise.com Page | 5 ITA No.478/KOL/2025 Kamdhenu Udyog Pvt. Ltd.; A.Y. 2017-18 Chartered Accountant and no adverse inference was drawn. We note that the SBN were duly recorded by the auditor in Note 25 appended to final accounts titled as Details of Specified Bank Notes held and transaction during 9-11-2016 to 30-12-2016. Therefore, the addition made by the AO has resulted in double addition and also double taxation as the same income was taxed twice. Once the assessee has shown as sales from the business and secondly, the addition under Section 68 which is wrong and against the provisions of the Act. The case of the assessee finds support from the decision of ITO vs. Joydeb Kundu in ITA No. 8/Kol/2021 for AY 2017-18 dated 16.05.2023 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 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 Printed from counselvise.com Page | 6 ITA No.478/KOL/2025 Kamdhenu Udyog Pvt. Ltd.; A.Y. 2017-18 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 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 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. Keeping in view the above mentioned peculiar facts and circumstances of the case, the guess work adopted by the ld. AO in arriving at probable sales value Printed from counselvise.com Page | 7 ITA No.478/KOL/2025 Kamdhenu Udyog Pvt. Ltd.; A.Y. 2017-18 and the judicial precedents relied upon, we find no reason to interfere with the factual findings given by the Ld. CIT(A) in deleting the addition of Rs.1,95,03,291/- made by the ld. AO. Accordingly, the appeal of the revenue stands dismissed.”…………………………………… Accordingly ground No. 3 is allowed. 010. The issue raised in Ground No. 4 is against the confirmation of addition of ₹98,504/- by the Learned CIT (A) as made by the Learned AO on account of EPF and ESI. The ground is not pressed at the time of hearing and accordingly, the same is dismissed as not pressed. 011. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 26.08.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 26.08.2025 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 "