KIRIT KUMAR PATEL,HYDERABAD V. INCOME TAX OFFICER, WARD-9(2), HYDERABAD.

ITA 1458/HYD/2025

AI Insights

Shri Kirit Kumar Patel appealed against the order of the Learned Commissioner of Income Tax (Appeals), which had upheld the additions made by the Assessing Officer under section 69A of the Income Tax Act, 1961. The additions pertained to Rs.14,00,000 deposited in the assessee's bank account during the demonetization period and Rs.79,60,000 for the purchase of a flat. The Tribunal examined the financial records, including audited balance sheets and day-to-day cash statements, and found that the cash deposits were from legitimate sources and that the flat purchase was duly recorded in the books of the partnership firm where the assessee was a partner.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784784 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2017-2018
• Appeal Filed On: 12-09-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAI PRASAD
• Keywords: Tangible material
• Section: 143(3)

Judgement Text

" ITA No 1458 of 2025 Kirit Kumar Patel Page 1 of 14 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ DB-A ‘ Bench, Hyderabad ŵी रिवश सूद,Ɋाियक सद˟ एवं ŵी मधुसूदन साविड़या लेखा सद˟ समƗ | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No.1458/Hyd/2025 (िनधाŊरण वषŊ/Assessment Year: 2017-18) Shri Kirit Kumar Patel Hyderabad PAN:AEHPP6614E Vs. Income Tax Officer Ward 9(2) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri K.A. Sai Prasad, CA राज̾ व Ȫारा/Revenue by:: Ms. Payal Gupta, Sr.DR सुनवाई की तारीख/Date of hearing: 06/11/2025 घोषणा की तारीख/Pronouncement: 14/11/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: This appeal is filed by Shri Kirit Kumar Patel (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 05.08.2025 for the A.Y. 2017-18. Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 2 of 14 2. The assessee has raised the following grounds of appeal: 3. The brief facts of the case are that the assessee is an individual deriving income from business. He filed his return of income for A.Y. 2017–18 on 20.11.2017 admitting total income of Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 3 of 14 Rs.13,17,720/-. The case of the assessee was selected for limited scrutiny in CASS and, accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued by the Learned Assessing Officer (“Ld. AO”). The assessee filed his online submissions in response. During the year under consideration, the assessee (i) deposited Rs.14,00,000/- in his bank account and (ii) purchased one flat from M/s Niti Enterprises and Alekya Constructions Ltd. vide sale deed dated 22.08.2016 for a consideration of Rs.79,60,000/-. The Ld. AO was not convinced with regard to the sources for investment in the purchase of the flat and the source for the cash deposit in the bank account. He treated the said amounts as unexplained money under section 69A of the Act and, accordingly, made additions of Rs.79,60,000/- (on account of investment in purchase of flat) and Rs.14,00,000/- (on account of cash deposit during the demonetization period). The assessment was completed under section 143(3) of the Act on 28.12.2019 by assessing the total income of the assessee at Rs.1,06,77,720/-. 4. Aggrieved with the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). After considering the submissions of the assessee, the Ld. CIT(A) dismissed the appeal of the assessee. While dismissing the appeal, the Ld. CIT(A) recorded, inter alia, that the assessee failed to produce a cash book or day-to- day cash details for the entire financial year, and on that allegation declined to accept the assessee’s explanation in respect of the cash deposit during the demonetization period. Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 4 of 14 5. Aggrieved with the order of the Ld. CIT(A), the assessee is in appeal before us. At the outset, it was submitted by the Learned Authorized Representative (“Ld. AR”) that only two issues arise out of the assessee’s grounds: (i) the addition of Rs.14,00,000/- under section 69A of the Act on account of cash deposit during the demonetization period, and (ii) the addition of Rs.79,60,000/- under section 69A of the Act on account of investment in purchase of the flat. As regards the addition of Rs.14,00,000/- under section 69A of the Act on account of cash deposit during the demonetization period, the Ld. AR submitted that the Ld. CIT(A) dismissed the claim without properly appreciating the documents produced and proceeded on the allegation that the assessee failed to produce a cash book/day-to- day cash details for the whole financial year. It was contended that the assessee is a regular income-tax return filer and his accounts for A.Y. 2016–17 (the immediately preceding previous year) were duly audited by a Chartered Accountant. Our attention was invited to the audited Balance Sheet as on 31.03.2016 of the proprietorship concern M/s K. Patel & Co. of which the assessee is the proprietor (page no. 4 of the paper book), demonstrating cash- in-hand of Rs.20,94,588/- as on 31.03.2016. The audit was completed on 25.09.2016 and the return for that year was filed on 14.10.2016, i.e., prior to the announcement of demonetization; therefore, there is no question of any post-fact manipulation of the cash-in-hand figure as on 31.03.2016. Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 5 of 14 5.1 The Ld. AR further drew our attention to the assessee’s day-to-day personal cash balance (page no. 24 of the paper book) demonstrating that the cash-in-hand as on the date of demonetization declaration stood at Rs.14,53,456/-, which balance is a drawdown from the opening cash-in-hand carried forward from 31.03.2016. Out of this available balance prior to and on the date of demonetization, the assessee deposited Rs.14,00,000/- of demonetized currency into his bank account during the demonetization period. Thus, the assessee had sufficient cash-in- hand to explain the deposit; however, the lower authorities, without properly considering these facts and evidences, sustained the addition. Deletion of the addition was prayed for. 6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities and supported the finding of the Ld. CIT(A) that, in the absence of a full-period cash book/day-to-day cash details for the entire financial year, the explanation was not acceptable. 7. We have considered the rival submissions and perused the material available on record, including the audited financial statements for A.Y. 2016–17 (page no. 3 & 4 of the paper book), the return filing and audit dates (25.09.2016 and 14.10.2016), and the day-to-day personal cash balance placed at page no. 24 of the paper book. In this regard, the audited balance sheet of the assessee as on 31.03.2016 placed at page no.4 of the paper book is reproduced as under: Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 6 of 14 Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 7 of 14 8. On perusal of the above, it is an admitted position emerging from the records that the assessee’s books for the immediately preceding year were audited prior to demonetization, and the cash-in-hand of Rs.20,94,588/- as on 31.03.2016 stood crystallized much before 08.11.2016. Further, we have also gone through the day-to-day cash statement of the assessee placed at page no.24 of the paper book which is to the following effect: 9. On perusal of the above, it is evident that the day-to- day cash statement produced (page no.24 of the paper book) shows a continuing drawdown of this opening cash culminating in cash-in-hand of Rs.14,53,456/- on the date of demonetization. Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 8 of 14 Against this, the assessee deposited Rs.14,00,000/- in his bank account during the demonetization period. The Ld. CIT(A) rejected the explanation primarily on the ground that the assessee did not file a complete cash book/day-to-day cash details for the whole financial year. However, in the facts of this case, the core enquiry is whether sufficient cash-in-hand existed with the assessee on or around the dates of deposit. The assessee has discharged this onus by producing (i) audited accounts for the immediately preceding year evidencing substantial cash-in-hand as on 31.03.2016, finalized prior to demonetization, and (ii) a day-to-day cash statement in personal capacity up to the demonetization date showing availability of Rs.14,53,456/-. Further, the Revenue has not brought on record any tangible material to disbelieve the audited cash-in-hand or to point out inflation, contradiction, or sham cash movements between 01.04.2016 and 08.11.2016. In the absence of such adverse material, mere non-production of an entire-year cash book, when credible contemporaneous evidence demonstrates availability of adequate cash at the relevant time, cannot, by itself, justify an addition under section 69A of the Act. On these facts, we hold that the assessee had sufficient cash balance to deposit Rs.14,00,000/- into his bank account during the demonetization period. The source stands explained, and the impugned addition under section 69A of the Act is therefore unsustainable. Accordingly, the addition of Rs.14,00,000/- made under section 69A of the Act on account of cash deposit during demonetization is directed to be deleted. Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 9 of 14 10. As regards the second issue of addition of Rs.79,60,000/- under section 69A of the Act towards the purchase of the flat, the Ld. AR invited our attention to the copy of the registered sale deed placed at page nos. 10 to 18 of the paper book. It was submitted that the assessee had purchased the said flat from M/s. Niti Enterprises and M/s. Alekhya Constructions Ltd. It was further submitted that the assessee is a partner in M/s. Niti Enterprises. The Ld. AR further submitted that since the assessee is a partner in the partnership firm M/s. Niti Enterprises, the firm had passed a general entry in its books of accounts by debiting the account of the assessee-partner towards the sale consideration of Rs.79,60,000/- against the transfer of the flat. Therefore, the consideration was not paid in cash/cheque, but duly accounted in the books of the partnership firm. Our attention was drawn to the registered sale deed (page no.12 of the paper book), wherein at para no.6 it is specifically mentioned that the vendor has received the full sale consideration, which is only in the context to the book entry passed in the accounts of the partnership firm. Further, the Ld. AR drew our attention to the audited financial statements of M/s. Niti Enterprises for A.Y. 2017–18 placed at page nos. 33 to 36 of the paper book, where the balance sheet as on 31.03.2017 (page no. 36 of the paper book) clearly reflects Rs.79,60,000/- as receivable from the assessee, and the balance sheet of the assessee as on 31.03.2017 placed at page no. 22 of the paper book, where the assessee has shown Rs.79,60,000/- as payable to M/s. Niti Enterprises. Thus, both Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 10 of 14 sides record the same amount, i.e., the partnership firm shows receivable, and the assessee shows payable, which demonstrates proper accounted consideration and absence of any unaccounted flow of money. Therefore, the Ld. AR argued that the flat was acquired through accounted book adjustment in the books of the partnership firm where the assessee is a partner, there is no undisclosed investment by the assessee and the addition made under section 69A of the Act is factually and legally unsustainable and liable to be deleted. 11. Per contra, the Ld. DR relied on the orders of the lower authorities. The Ld. DR invited our attention to page no. 2 of the registered sale deed (page no. 12 of the paper book) and submitted that the recital records that the full sale consideration had been received by the vendor, and therefore the same indicates that the assessee had made such payment, which has remained unexplained. The Ld. DR also submitted that the assessee failed to file any confirmation in this regard from M/s Niti Enterprises, in the absence of which the contention of the assessee cannot be accepted. Hence, the Ld. DR submitted that the orders of the lower authorities are liable to be upheld. 12. We have carefully considered the rival contentions and perused the material available on record. It is undisputed that the assessee is a partner in M/s. Niti Enterprises, one of the vendors of the property. We have gone through the audited balance sheet Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 11 of 14 of M/s. Niti Enterprises for A.Y. 2017–18 placed at page no. 36 of the paper book, which is to the following effect: 13. On perusal of the above, we find that M/s. Niti Enterprises clearly reflects Rs.79,60,000/- as receivable from the assessee. We have also gone through the balance sheet of the assessee as on 31.03.2017 placed at page no. 22 of the paper book, which is to the following effect: Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 12 of 14 14. On perusal of the above, we find that the assessee has also shown Rs.79,60,000/- as payable to M/s. Niti Enterprises. Hence, the assessee and the partnership firm have both reflected Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 13 of 14 the consideration of Rs.79,60,000/- in their respective balance sheet for the relevant year. The audited balance sheet of M/s. Niti Enterprises categorically shows the amount of Rs.79,60,000/- as receivable from the assessee. Correspondingly, the assessee’s balance sheet shows the same amount as payable to M/s. Niti Enterprises. Therefore, we are of the considered view that the purchase consideration of the flat is fully recorded in the books of both parties, and the same is not paid in cash/cheque, but settled through account adjustment in the partnership firm. Once the consideration is fully reflected in the regular books of accounts of the assessee as well as the vendor, there cannot be any presumption of unexplained money under section 69A of the Act. The registered sale deed stating that the consideration has been received only confirms the accounted book entry, and does not indicate any unrecorded monetary flow. The objection of the Revenue that the assessee has not filed the confirmations from M/s. Niti Enterprises, does not have any substance, as from the audited balance sheet of M/s. Niti Enterprises it is clearly evident that M/s. Niti Enterprises has recorded an amount of Rs,.79,60,000/- as receivable from the assessee. Furthermore, the Revenue has not brought on record any material evidence to show that any actual amount had changed hands. Therefore, in our considered view, the addition has been made purely on presumptive inference, which is not permissible under section 69A of the Act. Hence, we hold that the addition of Rs.79,60,000/- made under section 69A of the Act towards the purchase of the Printed from counselvise.com ITA No 1458 of 2025 Kirit Kumar Patel Page 14 of 14 flat is unjustified and liable to be deleted. Accordingly, the addition of Rs.79,60,000/- under section 69A of the Act towards the purchase of the flat is directed to be deleted. 15. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 14th November, 2025. Sd/- Sd/- (RAVISH SOOD) JUDICIAL MEMBER (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER Hyderabad, dated 14th November, 2025 Vinodan/sps Copy to: S.No Addresses 1 Shri Kirit Kumar Patel, c/o Katrapati & Associates, 1-1- 298/2/B/3 Sowbhagya Avenue Apts, 1st Floor, Ashok Nagar, Street No.1 Hyderabad 500020& 2 Income Tax Officer Ward 9(2) Hyderabad 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order Printed from counselvise.com "