MANMOHAN PRAVINCHANDRA MADANI,AHMEDABAD V. THE ITIO, WARD-3(2)(10), AHMEDABAD

ITA 1173/AHD/2025

AI Insights

The case involves Manmohan Pravinchandra Madani, a jeweller, who appealed against the order of the CIT(A) confirming the addition of \\u20b928,91,220/- to his income for A.Y. 2017-18, which was treated as unaccounted income under section 69A of the Income Tax Act, 1961. The addition was based on substantial cash deposits made during the demonetization period, which the Assessing Officer (AO) deemed unexplained. The Tribunal examined whether the cash deposits were part of the business turnover and thus should not be treated as unexplained income. The Tribunal noted that the assessee had maintained regular books of accounts, which were audited, and the cash sales were recorded and accepted as income. The Tribunal found no specific defect in the books of accounts or the records of purchases, sales, and stock, leading to the conclusion that the addition made under section 69 was unjustified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717369 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 23-05-2025
• Other Referred Cases: CIT v. Shakti Industries Ltd., New Pooja Jewellers v. ITO, CIT v. Vishal Exports Overseas Ltd., Shree Sanand Textile Industries vs. DCIT, Smt. Harshila Chordia v. ITO, ACIT v. Devas Soya Ltd., M/s. Adinath Ornaments Pvt.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATEEK SHARMA
• Assessee Lawyers: ASEEM THAKKAR
• Keywords: Business income; Unexplained cash credit; Rejection of books of accounts; Income from undisclosed sources; Onus to prove; Assessment record; Deemed to accrue or arise in india; Bogus
• Section: 144; 143(3); 68; 69; 40A(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.1173/Ahd/2025 (Assessment Year: 2017-18) Manmohan Pravinchandra Madani B/7, Jaiprakash Society, Nr. Ramwadi, Isanpur, Ahmedabad-382443 Vs. Income Tax Officer, Ward-3(2)(10), Ahmedabad [PAN No.ABZPM0564H] (Appellant) .. (Respondent) Appellant by : Shri Aseem Thakkar, AR Respondent by: Shri Prateek Sharma, Sr. DR Date of Hearing 06.08.2025 Date of Pronouncement 13.08.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 24.03.2025 passed for A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal: “1. The Ld. CIT(A), NFAC, Delhi has erred in confirming the addition of Rs.28,91,220/- made by the Assessing officer for the cash deposits in Axis Bank. The Kalupur Commercial Co. Op. Bank Ltd. and Bank of Baroda as alleged unaccounted income from undisclosed sources and treating it as deemed income u/s. 69A of the I.T. Act,1961 which in fact is the part of business turnover of the appellant. 2. The Ld. CIT(A), NFAC, Delhi has erred in confirming the action of the Assessing Officer in taxing the addition made by him applying the provisions of Sec. 115BBE which are for admitted business transactions. Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 2– 3. The Ld. CIT(A), NFAC, Delhi has erred in confirming disallowance of Rs.6,22,253/- made by the Assessing Officer u/s.40A(3) of the I. T. Act, 1961 in respect of payments made for purchase of goods and labour charges. 4. The Ld. CIT(A), NFAC, Delhi has erred in confirming the additions made by the Assessing Officer without considering the fact that the alleged cash deposits being part of business turnover has already been considered while computing the total income for which the return of income filed hence taxing the same income twice. 5. The Appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal.” 3. The brief facts of the case are that the assessee, is an individual engaged in the jewellery trading business under the name “M/s. Om Gold & Silver Company”. The assessee filed his return of income for A.Y. 2017-18 on 18.09.2017 declaring total income of ₹5,16,510/-. The Assessing Officer observed that the assessee had deposited substantial amounts of cash into various bank accounts i.e. including Axis Bank, Kalupur Co-op Bank Ltd., Dena Bank, and Bank of Baroda during FY 2016-17. A show cause notice under section 144 of the Act was issued to the assessee but the Assessing Officer noted that the assessee failed to provide a satisfactory explanation or supporting documentary evidence to substantiate the source of cash deposits. The Assessing Officer noted that during the demonetization period (9th Nov to 30th Dec 2016), cash deposits made by the assessee were substantially higher than the average monthly deposits during the pre-demonetization period. The AO observed that the average daily cash deposit outside the demonetization window was around ₹4,840/-, whereas during the 52 days of demonetization it rose sharply to ₹56,890/-, indicating an excess daily deposit of ₹52,050/-, resulting in total excess cash deposits of ₹28,91,220/- during this 52-day period. Further scrutiny by the Assessing Officer showed that the assessee had shown unusually high cash sales of ₹32,74,256/- in October 2016, compared to average monthly cash sales of just ₹2,84,935/- during Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 3– April to September 2016. The assessee failed to provide any documentary evidence to support such a sudden and unexplained increase in sales. The AO held that the cash book furnished was not genuine and assessee failed to justify the cash deposits. Accordingly, the excess cash deposits during the demonetization period were treated as unaccounted income under section 69 of the Act and added to the total income of the assessee. 4. In appeal, CIT(Appeals) dismissed the appeal of the assessee with the following observations: “In the light of overall facts of case, on perusal of appellant grounds of appeal, it is noticeable that appellant is contending the order of AO as bad in law as it involves erroneous passing of an assessment order by AO by treating the total income as at Rs. 40.29 lacs as against of admitted income of Rs.5.16 lacs and thereby such order of AO is not maintainable, is the contention of the appellant. Further in these GOA, appellant contended that, AO has erred in treating the cash deposits as at Rs.28.91 lacs as unexplained money of the appellant u/s.69A of I T Act, though the same is admitted as part of business turnover of the appellant and thereby contended such addition as not maintainable as per law. Further in these GOA, appellant contended that AO erred in applying the provisions u/s.115BBE of I.T Act for assessing the unexplained income as attributable to cash deposits though the same is involving admitted business income / receipts of the appellant and thereby contended such order of AO as not maintainable. Further in these GOA, appellant contended that AO erred in making addition u/s. 40A(3) of IT Act for Rs.6.22 lacs for payments involving purchases and thereby such addition is not maintainable, is the contention of the appellant. Further in these GOA, AO erred in not considering the facts and submissions as made before AO involving explanation of these cash deposits as attributable to business turnover already admitted and thereby making such addition is contended as tantamount to taxing the same income twice and accordingly pleaded to delete the same. Precisely, in all these GOA, appellant is contending entire cash deposits as assessed by AO as unexplained as involving business receipts of the appellant as already admitted as allowable and cash payments made to purchases as incurred as allowable and thereby claims such order of AO as bad in law and pleaded to treat the same as not maintainable. However, on perusal of facts on record as brought out by AO in the assessment order, it is clearly noticeable that, appellant is indeed involved in making substantial cash deposits of Rs.28.91 lacs during the period of demonetization and for which AO has sought for complete and comprehensive explanation of sources as reconcilable with such supporting confirmations as attributable to appellant cash book visa-a-visa bank statement as contended as per law. Apparently, as reasoned by AO appellant merely contended that the same as attributable to cash sales already admitted by the appellant as forming part of the business turnover and thereby the cash deposits are claimed as explainable business turnoveriof the appellant. In the absence of such supporting confirmations as reconcilable with each such cash deposit with relevant Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 4– cash sales confirmations / ledger extracts as attributable to such transacting parties as reconcilable with appellant cash book as contended by the appellant, AO treated the appellant claims as involving cash balance as on 8.11.2016 as not justifiable and thereby further analysed such cash sales as applicable to month of October 2016 sales. On such analysis, AO adduced that cash sales in the month of Oct 2016 as at Rs.30.72 lacs as against of such total sales for the entire period up to Sep 2016 of Rs.17.36 lacs as per the appellant submission and adduced the same as unreasonable. Accordingly, AO arrived at average cash sales for the month of April 2016 to Sep 2016 being only at Rs.2.84 lacs, appellant claim of huge cash sales as at Rs.32.74 lacs for single month of Oct 2016 as not acceptable as involving genuine claim in the absence of such supporting proofs / confirmations as obtained from such transacting parties involved in cash sales as reconcilable with relevant cash book / ledger extracts of appellant visa-a-visa these parties to sales for its further reconcilability with cash deposits of demonetization period. Considering these apparent discrepancies involving appellant mere claims to treat the entire cash deposits as only attributable to cash sales as unexplainable and thereby treated the entire cash deposits of demonetization period as at Rs.29.91 lacs as unexplained money of the appellant u/s.69A r.w.s.115BBE of IT Act. Similarly, with reference to the cash purchases, appellant found the same as incurred in violation of provisions u/s.40A(3) of IT Act for labour charges and other purchases and thereby brought the same to tax as reasoned in the assessment order. In the light of these facts as analyzed and reasoned by AO in the assessment order and on perusal of appellant GOA and related submissions etc., it is clearly noticeable that, appellant is contending such findings of AO as not maintainable as AO failed to adduce his reasoning / findings if any involving such mistakes in cash sales, stock inventory etc. as applicable as per appellant books of accounts as claimed to hold the appellant books of accounts as not maintainable to treat the cash deposits as unexplainable. On this analogy, appellant advanced various contentions on the AO findings contending that referred show cause notices and other notices referring to certain points of query having not received and thereby appellant reply as filed as involving cash book is to be accepted as it involves no identification of any specific mistakes by AO and thereby contended the addition made as not maintainable as reasoned by AO as involving average cash sales month wise. Further in the submissions, appellant contends that there were substantial cash deposits for FYs 2015-15, 2016-17 and 2017-18 to adduce appellant cash sales in these years earlier and subsequent to the period of demonetization and thereby claims such cash sales as reconcilable as explainable cash deposits and accordingly requested to delete the addition as not justifiable as observed by AO. On this analogy, appellant adduced various contentions / submissions contending the additions made by AO as far from truth and not justifiable as involving unexplained cash deposits as attributable to cash deposits of demonetization period and requested to delete the same. However, appellant did not adduce such detailed comprehensive workings / substantiations with proofs as made available to AO during scrutiny as applicable to these contentions involving filing of relevant submissions before AO as per law. Apparently, appellant has filed only certain submissions / part submissions involving cash book workings / cash sales details etc. and could not adduce such item wise explanation of each and every cash deposits as noticeable during the period of demonetization with such supporting cash sales with relevant confirmations / ledger extracts as obtained from these transacting parties as deem fit so as to explain such abnormal increase in cash sales during the period of Oct 2016 as compared to other months of the same year and same month of earlier and subsequent years as claimed. Further, appellant also did not adduce details of sales as took place month wise from April 2016 to Oct 2016 so as to reconcile average monthly sales as comparable with Oct month sales as observed by AO so as to find any Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 5– apparent discrepancies on such findings of the AO on its arithmetic figures for its consideration. Further, appellant did not adduce such detailed workings with such confirmations/ ledger extracts from such parties to sales etc. as applicable to earlier years and subsequent years month wise sales as took place for its comparison as contended by appellant as having substantial cash sales from year to year as in the period of demonetization and in the absence of the same , appellant mere contentions as advanced to hold the cash deposits of demonetization period as explainable contrary to the findings of AO is to be treated as not justifiable as per the facts/ submissions made available by appellant as per law. Further, appellant contentions to hold that the AO erred in treating the cash deposits as unexplained without identifying the mistakes involved in the sales / stock inventory etc. of the appellant warranting for rejection of books of accounts neither has a basis nor has any justification when the AO has made categorical observations on the insufficiency of the cash book involving its non-substantiation with supporting documentary proofs / evidences for its consideration as per law. Further, appellant also did not adduce such supporting submissions / evidences as needed to justify its correctness as involving explainable cash sales with relevant proofs as reconcilable with confirmations / ledger extracts of the transacting parties to sales as contended as per law for verification of AO during scrutiny. In the absence of these finer facts and keeping in view the various apparent discrepancies as analyzed by AO as reasoned needs to be treated as apparently justifiable as appellant failed to advance any such contrary evidences conclusively to establish the correctness of cash sales as involving explainable cash deposits of demonetization period, as contended. Further, appellant has advanced contentions holding that cash deposits as assessed as unexplained having attributable to admitted business sales is to be treated as involving double taxing of the same business receipts again and thereby contended such addition as not maintainable. This analogy of the appellant is not acceptable as the appellant failed&to establish the cash deposits as attributable to cash sales as reasoned and discussed supra and thereby the business receipts as admitted by the appellant are to be treated as independent from these unexplained cash deposits as attributable to demonetization period and accordingly appellant contentions as advanced on this analogy are to be treated as not maintainable as per the facts on record. Further, appellant has placed reliance on various citations as per the submissions to hold the same as allowable and on perusal of facts of case / ratios of adjudication of the citations as applicable to appellant facts of case, the same are neither comparable nor equitable in its facts of case and ratios of adjudication apparently as per law. Further, appellant did not bring out such comparative analysis as applicable to appellant facts of case and ratios of adjudication as attributable to the citations as needed to adduce and thereby appellant mere contentions on this analogy is to be treated as not maintainable as per the facts of case and circumstances as explained above. In the light of these facts, appellant contentions / GOA as advanced to hold the cash deposits addition as made u/s.69A r.w.s.115BBE of I.T Act is to be treated as justifiable as per the facts of case as reasoned by AO in the assessment order. Similarly with reference to the other addition involving cash purchases in contravention of the provisions u/s.40A(3) of IT Act, appellant merely contended the same as not justifiable and could not submit any such supporting substantiations as per law so as to reconcile such cash purchases as explainable as per these provisions as reasoned by AO. In the absence of the same, appellant GOA as advanced on this issue of addition is to be treated as not maintainable as per the facts reasoned by AO in the assessment order. Considering all these finer facts of case involving multiple discrepancies/ apparent failures on the part of appellant in filing comprehensive submissions with supporting proofs of confirmations / ledger extracts etc. of cash sales transacting parties, apparently there exists no infirmity in the order of the AO as per the Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 6– facts available on record and in view of the same, appellant various interrelated / over- lapping contentions as advanced in grounds of appeal needs to be treated as not maintainable as per law. In the result, appellant appeal is dismissed as not maintainable as per facts available on record on merits as appellant is failed to adduce any such supporting proofs/ evidences as needed to advance the grounds of appeal as contended as analyzed supra. Accordingly, appellant appeal is dismissed as not maintainable as per law. 6. Accordingly, appellant appeal against the assessment order u/s. 143(3) of I.T Act dated 25.12.2019 for AY 2017-18is dismissed on merits as not maintainable as per law as above. 7. In the result, appellant appeal for AY 2017-18 against the assessment order passed u/s. 143(3) of I.T Act dated 25.12.2019, is dismissed.” 5. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Having gone through the records and having heard the rival contentions of both the parties before us, we are of the considered view that it is evident that in the instant case the assessee had maintained regular books of accounts, which are duly audited under section 44AB of the Act. The cash sales have been recorded in the books, and such cash has been deposited into the bank accounts. The Assessing Officer has not rejected the books of accounts under section 145(3) of the Act, nor had the Assessing Officer pointed out any defect in the purchase, sales, stock, or other supporting records. In fact, the purchase records, stock registers, cash book, and VAT returns have all been placed on record by the assessee and no specific infirmity has been pointed out by Tax Authorities. The AO has also accepted the opening and closing stock, thereby indicating no discrepancy in the trading activities. It is a settled position in law that unless the books of accounts are rejected, the contents therein must be accepted. This legal position has been upheld by the Hon’ble Gujarat High Court in the case of CIT v. Shakti Industries Ltd. [(2013) 36 taxmann.com 16 (Guj.)], where it was held that additions cannot be made unless the books Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 7– of accounts are first rejected and that any estimate or addition should have reasonable nexus with the material available on record. Similarly, in the case of New Pooja Jewellers v. ITO [ITA No.1329/Kol/2018], it was held that when cash sales have already been treated as income, any separate addition on account of cash deposits of the same amount would amount to double taxation. In this case, too, the sales are recorded in the trading account and accepted as income; thus, re-characterizing the cash component of such sales as unexplained income under section 69 is unsustainable. In another similar case, CIT v. Vishal Exports Overseas Ltd. [Tax Appeal No. 2471 of 2009, Gujarat High Court], it was held that when the Assessing Officer has already accepted the sales realization as income, a further addition under section 68 would result in double taxation and hence cannot be sustained. This ratio squarely applies to the present case, where the Assessing Officer has not disturbed the sales but still proceeded to treat part of the receipts as unexplained income. We further find that in Shree Sanand Textile Industries vs. DCIT [ITA No.1166/Ahd/2014], the Hon’ble ITAT Ahmedabad held that if purchases are accepted, then the corresponding sales cannot be doubted without specific adverse evidence. This principle is relevant here as the Assessing Officer, while accepting the purchases and closing stock, has failed to bring any material evidence to dispute the genuineness of the cash sales. Moreover, the decision of the Hon’ble Rajasthan High Court in Smt. Harshila Chordia v. ITO [(2008) 298 ITR 349 (Raj.)] also supports the assessee's case. It was held therein that cash receipts from customers recorded in the books cannot be treated as unexplained cash credits merely because they were in cash, when no defect is pointed out in the accounting or business conduct. We also draw support Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 8– from the decision in ACIT v. Devas Soya Ltd. [ITA No.336/Ind/2012], where the ITAT Indore Bench reiterated that cash sales duly recorded in the books of accounts and backed by proper documentation cannot be treated as unexplained cash credits under sections 68 or 69 merely based on suspicion. We also place reliance on the recent decision of Ahmedabad ITAT in the case of M/s. Adinath Ornaments Pvt. ITA No.553/Ahd/2022 (order dated 09/04/2025) wherein ITAT made the following observations while dealing with a similar issue: “Upon a comprehensive review of the judicial precedents and factual matrix, we observe that the burden of proof under section 68 was satisfactorily discharged by the assessee. The cash book, purchase register, stock details, and VAT returns were produced and formed part of the assessment record. The AO did not make any independent enquiry, did not call for cross-verification of sales, and did not find any contradiction in the stock position or method of accounting. The CIT(A) rightly relied on existing records, and did not admit or rely upon any fresh evidence. The allegation regarding URD purchases was adequately addressed with purchase register and bank statement showing payment through banking channels in July 2016, much before demonetization period. The additions made by the AO were based on presumption and suspicion and not supported by evidence. The judicial precedents collectively support the proposition that where the assessee has explained the source of cash deposits with reference to books of account and supporting documentation, and no defect or adverse finding is recorded by the AO, no addition under section 68 can be sustained.” 6. In the present case, the Assessing Officer has not brought on record any contrary evidence to show that the sales are fictitious or bogus. He has also not conducted any verification or inquiry with customers, nor has he disproved the inventory or purchase records. Merely relying on the comparative analysis of deposits before and during the demonetization period is not sufficient to treat the cash as unexplained, particularly when the source of such cash is duly recorded in the books. Therefore, considering the above factual matrix, the consistent judicial precedents, and the lack of any specific defect in the assessee’s books of accounts, purchases, sales, or inventory, we are of the considered view that the addition made under section 69 of Printed from counselvise.com ITA No. 1173/Ahd/2025 Manmohan Pravinchandra Madani vs. ITO Asst. Year –2017-18 - 9– ₹28,91,220/- and confirmed by the CIT(A) is unjustified and unsustainable in law. The same is accordingly directed to be deleted. 7. Before us, the Counsel for the assessee submitted that he shall not be Ground of Appeal relating to addition made u/s 40A(3) of the Act. Accordingly, the assessee’s Ground No. 3 is dismissed as Not Pressed. 8. In the result, the appeal of the assessee is partly allowed. This Order pronounced in Open Court on 13/08/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 13/08/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 11.08.2025(Dictated on dragon software/Dictated half part) 2. Date on which the typed draft is placed before the Dictating Member 11.08.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 12.08.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 13.08.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 13.08.2025 7. Date on which the file goes to the Bench Clerk 13.08.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "