KRISHNA MOHAN ,PATNA V. ACIT, CIRCLE-14, PATNA , PATNA

ITA 476/PAT/2025

AI Insights

The case involves Krishna Mohan, the proprietor of M/s Maa Ambey Traders, who appealed against the order of the National Faceless Appeal Centre, Delhi, which confirmed the addition of 5,63,35,000 to his income for the Assessment Year 2017-18. This addition was initially made by the AO on account of cash deposits during the demonetization period, which were deemed unexplained under Section 69A of the Income Tax Act. The Tribunal examined whether the cash deposits were from unexplained sources or legitimate business transactions. It was found that the cash represented sales recorded in the books, and the increase in turnover was due to the lifting of a ban on tobacco sales, not unexplained income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791861 (ITAT-PATNA)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 22-10-2025
• Other Referred Cases: Shankar Khandasari Sugar Mills Vs. CIT, Ragini Verma Vs ACIT Circle-49(1), Kolkata, 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: MD. AH CHOWDHARY
• Assessee Lawyers: MANISH RASTOGI
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Unexplained cash credit; Unexplained investment; Rejection of books of accounts; Deemed to accrue or arise in india
• Section: 143(3); 142(1); 68; 69

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH, PATNA BEFORE SHRI DUVVURU RL REDDY, VP AND SHRI RAJESH KUMAR, AM ITA No.476/PAT/2025 (Assessment Year: 2017-18) Krishna Mohan Prop-M/s Maa Ambey Traders, Maurari Complex, Karbigahiya, patna-800001, Bihar Vs. ACIT, Circle-14, Patna Patna, Bihar (Appellant) (Respondent) PAN No. AHUPM5205C Assessee by : Shri Manish Rastogi, AR Revenue by : Shri Md. AH Chowdhary, DR Date of hearing: 27.11.2025 Date of pronouncement: 09.12.2025 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 03.09.2025 for the AY 2017-18. 2. The only issue raised in the various grounds of appeal is against the confirmation of addition of ₹5,63,35,000/- by the learned CIT (A) as made by the learned AO on account of cash deposited in the bank during the demonetization period. The assessee has also challenged the order of learned CIT (A) on the ground that the admission of additional under Rule 46A without referring the same to the learned AO. Printed from counselvise.com Page | 2 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 2.1. The facts in brief are that the assessee filed the return of income on 30.11.2017, declaring total income of ₹29,99,960/-. The case of the assessee was selected for scrutiny under CASS on the ground of huge cash deposit during demonization period. Accordingly, notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued, which were complied with by the assessee by filing the copies of ITR, audited report, computation of total income, bank accounts and detail of cash deposits, etc. The assessee submitted the following details. The learned AO found that during demonetization period though the assessee deposited ₹5,63,05,000/- however, only 17,000/- were deposited in SBN. The learned AO also noted that there was steep rice in the cash deposits during the demonetization period which was almost 25 times rise in the turnover of the assessee from ₹1,18,63,219/-, in order to A.Y. 2016-17 to ₹25,44,40,568/- in A.Y. 2017-18. Finally, the learned AO treated ₹5,63,35,000/- as unexplained money u/s 69A of the Act and added the same to the income of the assessee in the assessment framed u/s 143(3) of the Act dated 23.12.2019. 2.2. In the appellate proceedings, the learned CIT (A) also dismissed the appeal of the assessee after taking into consideration the reply/ submission of the assessee. The learned CIT (A) while upholding the order of the learned AO even held that the assessee has not furnish any documents/ proof to corroborate huge cash deposited during demonetization period. 2.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is engaged in the business of wholesale trading of Tobacco and Chewing Begel Nuts (pan masala) under the name and style of M/s Maa Ambay Traders. Printed from counselvise.com Page | 3 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 During the demonetization period, the assessee deposited a sum of ₹5,63,35,000/- as cash in the various bank accounts including ₹17,00,000/- in SBN Notes. We note that this is undisputed that the said cash represented the cash sales made by the assessee and duly shown in the books of account which were available before the authorities below. The books of account of the assessee were audited as the total turnover of the assessee during the year was ₹25,44,14,568/-. The assessee offered the income to tax as per the books of account, which was not disputed by the learned AO. In other words the sales made by the assessee during this period, was also not doubted and disputed by the authorities below. We also note that the increase in turnover of the assessee was attributed to the ban/prohibition being lifted on sale of tobacco products with effect from 19.07.2016 pursuant to Patna High Court direction, which was earlier imposed on 7.11.2014 by the State Govt. We further note that the learned CIT (A) dismissed the appeal on the ground that the assessee has furnished the additional evidences under Rule 46A which were not maintainable as assessee was allowed sufficient time to file these papers/documents during the assessment proceedings. We have examined these evidences and find that the so-called additional evidences comprised of all the certificates from the bank in respect of cash deposited in SBN notes during demonetization period which would not fall within the ambit of additional evidences in terms of Rule 46A of the IT Rules, 1962 as the certificate submitted by the assessee is clarificatory in nature which was submitted to substantiate the submission made by the assessee in this regard. The case of the assessee is squarely covered by the decision of Karnataka High Court by the case of Shankar Khandasari Sugar Mills Vs. CIT reported in 193 ITR 699. We therefore, find that the learned AO wrongly recorded a Printed from counselvise.com Page | 4 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 finding that the assessee has not furnished the cash book nor proved the cash deposits during the demonetization period, which was confirmed by the learned CIT (A) on this ground only. However, the cash book was duly submitted before the learned AO which was recorded at page no.3 of the assessment order and was also submitted before National Faceless Appeal Centre as is apparent from the acknowledgement filed before us, a copy of which is available at page no.21 of the Paper Book. In this case, we found that the learned AO has not rejected the books of accounts and sales were also not doubted, Therefore, the addition if allowed to be sustained in respect of cash deposits of ₹5,63,35,000/-, it would result in double addition of the same income. First, the assessee suo moto offering the sales in the profit and loss account and secondly, by way of making this addition which is not permissible under the Act. 2.4. Besides, addition was made by the learned AO u/s 69A of the Act which is not correct section under which this addition could not be made. The case of the assessee is squarely covered by the decision of this Tribunal in the case of Ragini Verma Vs ACIT Circle-49(1), Kolkata in ITA No.1361/KOL/2023 for A.Y.2017-18, order dated 13-06-2024. The operating part thereof is extracted as under: - “7. After hearing the rival contentions and perusing the material on record including the decisions cited before us, we observe that the assessee has shown to have done trading in sarees in Kolkata. We also note that all the transactions of sale and purchases were made in cash and the assessee has also maintained the books of account and recorded the transactions as regards purchase and sales therein. This is undisputed that the cash deposited in to the bank account of assessee was out of cash books and a finding to that effect has been given by the AO as well. We also note that the AO has not rejected the books of account and even sale was not doubted. Therefore the action of the AO by adding the cash sales 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 sales u/s 69A of theAct. 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: Printed from counselvise.com Page | 5 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 “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 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 Printed from counselvise.com Page | 6 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 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 istaken 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 Printed from counselvise.com Page | 7 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 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 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. 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 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 Printed from counselvise.com Page | 8 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 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. 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) and direct the AO to delete the addition.” 2.5. It has not been the case of the tax authorities that the during demonetization, sales had not been shown by the assessee as income in the books. In this case if we accept the plea of the department it would result into double taxation of the same income in the hands of the assessee. Moreover, the assessee has explained source of cash deposit by way of sales which was duly incorporated in the books of account and accepted by the AO. Considering these facts and circumstances, we are inclined to set aside the order of learned CIT (A) by directing the learned AO to delete the addition. 3. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 09.12.2025. Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (VICE PRESIDENT) (ACCOUNTANT MEMBER) Patna, Dated:09.12.2025 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 9 ITA No.476/PAT/2025 Krishna Mohan; A.Y. 2017-18 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Patna 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "