MOHD. NAUSHAD ANSARI (PROP. GULSAN SEV FOODS),AHMEDABAD V. THE ITO, WARD-5(3)(3), AHMEDABAD

ITA 620/AHD/2025

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The case involves Mohd Naushad Ansari, the proprietor of Gulshan Sev Foods, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which confirmed the addition of Rs.28,54,000 made by the Assessing Officer under section 68 of the Income-tax Act. The addition pertained to unexplained cash deposits in the assessee's bank accounts during the demonetisation period. The Assessing Officer and CIT(A) rejected the assessee's explanations and evidence, leading to the appeal before the Tribunal. The Tribunal, after reviewing the detailed submissions and evidence provided by the assessee, including audited financial statements and a comparative analysis of cash flows, concluded that the additions were unjustified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713211 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Roshan D. Hathi v. CIT (107 ITR 938), Kelekhan Mohd. Hanif v. CIT (50 ITR 1)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT PRATAP SINGH
• Assessee Lawyers: M. K. PATEL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Onus to prove; Bogus
• Section: 143(3); 142(1); 68

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘SMC’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD ]BEFORE MS.SUCHITRA R. KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.620/Ahd/2025 Asstt.Year : 2017-18 Mohd Naushad Ansari Prop: Gulsan Sev Foods 51, Pujara Ni Chali Nr.Sarangpur Bridge Kamdar Medan – Gomtipur Ahmedabad 380 021 PAN: AIWPA 6480 G Vs. The ITO, Ward-5(3)(3) Anandnagar Road Ahmedabad. (Applicant) (Responent) Assessee by : Shri M.K. Patel, AR Revenue by : Shri Amit Pratap Singh, Sr.DR सुनवाई क तारीख/Date of Hearing : 28/07/2025 घोषणा क तारीख /Date of Pronouncement: 30/07/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: This appeal by the assessee is directed against the order dated 29.01.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], confirming the addition of Rs.28,54,000/- made by the Assessing Officer under section 68 of the Act in respect of cash deposits made in the bank accounts of the assessee during the demonetisation period. The assessment was completed under section 143(3) of the Act by the Income Tax Officer, Ward 5(3)(3), Ahmedabad [hereinafter referred to as “Assessing Officer or AO”], vide order dated 29.12.2019. 2. Facts of the Case Printed from counselvise.com ITA No.620/Ahd/2025 2 2.1 The facts of the case, as emanating from the record, are that the assessee is an individual engaged in the business of manufacturing and trading of food items under the proprietorship concern \"Gulshan Sev Foods.\" The assessee filed his return of income for Assessment Year 2017– 18 on 05.01.2018 declaring a total income of Rs. 4,49,250/-. The case was selected for scrutiny under the Computer Aided Scrutiny Selection (CASS). Accordingly, notice under section 143(2) was issued on 22.09.2018 and served upon the assessee. During the course of the assessment proceedings, various notices under section 142(1) were issued on 14.08.2019, 09.11.2019, and 15.11.2019, calling for specific details as mentioned in para 5 of the order. The assessee, in response, submitted a letter dated 2812.2019 enclosing the cash book for A.Y. 2017–18 (Annexure A), bank books (Annexure B), ledger accounts of purchase parties (Annexure C), ledger accounts of sales parties and sales register (Annexure D), and a comparative cash book for F.Y. 2015–16 and F.Y. 2016–17 (Annexure H). The assessee submitted that no stock register was maintained for the relevant year. 2.2 The assessee explained that the cash deposited during the demonetisation period was accumulated out of past cash sales, personal cash savings, and money kept aside for family contingencies including his younger brother’s marriage. He further narrated that his father, who was operating the business in his absence, passed away in Saudi Arabia on 20.08.2016 during a Haj pilgrimage, and that due to these exceptional family circumstances, cash remained in hand. The Assessing Officer, however, rejected the assessee’s explanation, observing that the assessee failed to explain the sources of the said cash deposits during the demonetisation period. Relying on judicial precedents including Roshan D. Hathi v. CIT (107 ITR 938) and Kelekhan Mohd. Hanif v. CIT (50 ITR 1), the AO held that the assessee failed to discharge the onus under section 68 of the Act and made an addition of Rs.28,54,000/- treating it as unexplained cash credit. The said amount was taxed under section 115BBE of the Act, and penalty proceedings under section 271AAC(1) were separately initiated. Printed from counselvise.com ITA No.620/Ahd/2025 3 2.3 Aggrieved by the above addition, the assessee preferred an appeal before the CIT(A), NFAC. During the appellate proceedings, the assessee reiterated that the cash deposits were fully recorded in the books of account as cash sales and were supported by the financial statements, cash book and bank statements. He also submitted the audit report in Form 3CB and 3CD and reiterated that the books of account had not been rejected by the Assessing Officer under section 145(3). However, the CIT(A), NFAC confirmed the addition observing that the assessee had failed to produce independent evidence in support of the alleged cash sales or cash in hand. The CIT(A) relied on the balance sheet as on 31.03.2017 to note that the closing cash in hand was only Rs. 1,02,963/-, and observed that the claim of deposit of Rs. 28.54 lakhs lacked credibility. The CIT(A) further held that the assessee failed to discharge the burden of proof under section 68 and confirmed the addition made by the AO. 3. Aggrieved by the said appellate order, the assessee is in appeal before us raising the following grounds: 1. That on facts, and in law, the learned NEAC has grievously erred in confirming the addition made u/s 68 of the Act in respect of cash deposited in the appellant's bank account and in taxing the same u/s 115BBE of the Act. 2. That on facts, and in law, it ought to have been held that the entire cash deposit is in respect of cash sales made by appellant and duly reflected as cash sales in appellant's accounts. 3. That on facts, and in law, the addition made amounts to double addition as the entire cash deposit is already reflected as cash sales in appellant's accounts. 4. The appellant craves liberty to alter, amend any ground of appeal. 4. During the course of hearing, the learned Authorised Representative (AR) appearing on behalf of the assessee reiterated the factual background of the case and drew our attention to the detailed findings recorded by the Assessing Officer himself, wherein it is noted that the assessee had furnished the cash book, bank book, purchase and sale register, purchase ledger, and certain confirmations, in compliance with the various notices issued under section 142(1) of the Act. The AR submitted that despite such documentary record being placed on file, the Assessing Officer concluded Printed from counselvise.com ITA No.620/Ahd/2025 4 that the assessee had failed to satisfactorily explain the source of the cash deposits made during the demonetisation period, without assigning any cogent reasons for disregarding the evidence filed. 4.1 The learned AR further submitted that the assessee had furnished the audit report in Form 3CB and 3CD, and it is not the case of the Assessing Officer that the books of account maintained by the assessee were either defective or incomplete or that the same were rejected by invoking the provisions of section 145(3) of the Act. In the absence of rejection of books, it was contended that the entries recorded in the regular books of account ought to have been accepted, particularly when the cash deposits in the bank accounts had corresponding entries in the cash book, and the sales were duly reflected in the trading account. 4.2 The AR specifically invited our attention to page no. 23 of the assessee’s paper book, being the copy of the assessee’s reply dated 21.12.2019, wherein a detailed comparative summary of cash inflow and outflow for F.Y. 2015–16 and F.Y. 2016–17 was placed on record, evidencing a consistent pattern of cash deposits being made in the bank accounts during the course of business. It was further submitted that the nature of the assessee’s business, being retail trade in food items, inherently involved cash transactions and regular banking of sale proceeds, and the cash deposited during the demonetisation period was no different in nature or pattern. The AR submitted that the explanation was unjustly disregarded, and that there was no material brought on record to support the conclusion that the cash deposits were unexplained or that the entries in the books were fictitious or inflated. The AR also contended that the entire amount of cash deposited was reflected in the regular books of account and considered in the computation of taxable income, and therefore, the addition made under section 68 results in double taxation of the same sum. 5. The learned Departmental Representative (DR) relied upon the orders of the lower authorities. Printed from counselvise.com ITA No.620/Ahd/2025 5 6. We have carefully considered the rival submissions, perused the assessment order, the appellate order of the CIT(A), and the material placed in the paper book filed before us. The issue in the present appeal revolves around the addition made by the Assessing Officer under section 68 of the Act in respect of cash deposits aggregating to Rs. 28,54,000/-, which were treated as unexplained cash credits, and consequently brought to tax under section 115BBE of the Act. The Assessing Officer recorded that the assessee, who is engaged in the business of manufacturing food items from wheat flour (namely sev and other related items), had deposited cash in various bank accounts during the period from 09.11.2016 to 31.12.2016. The explanation offered by the assessee was that the cash deposits represented receipts from regular cash sales made in the course of business, duly recorded in the books of account maintained in the regular course, and supported by audited financial statements filed with the return of income. The AO, however, rejected the explanation on the ground that the assessee failed to prove the genuineness of such cash sales and failed to produce documentary evidence in support of the same. 6.1 From the perusal of the reply dated 21.12.2019 filed by the assessee before the Assessing Officer (placed at page 23 onwards of the paper book), it is evident that the assessee had furnished extensive quantitative and financial details in support of its explanation. The assessee furnished month-wise details of opening cash in hand, cash sales, cash deposits, and cash withdrawals for each month from April 2016 to November 2016, which substantiate that the assessee was regularly depositing cash in the bank throughout the year and the pattern of such deposits was consistent with earlier financial years. The data tabulated in the assessee’s reply (page 23– 24 of the paper book) reveals that for F.Y. 2015–16, the assessee had deposited cash of Rs. 62,79,375/- in the bank, while for F.Y. 2016–17 (upto 08.11.2016), the total cash deposit stood at Rs. 83,61,950/-. Similarly, comparative data of cash demonstrating a consistent and growing scale of business operations was also submitted to Assessing Officer during the Printed from counselvise.com ITA No.620/Ahd/2025 6 course of assessment proceedings. The assessee had also furnished comparative ratios of percentage increase in cash sales and cash deposits over the preceding year, detailed month-wise cash flows, and bank-wise breakup of old and new currency deposits, which go to support the claim that the impugned cash was not a sudden or one-off influx of unaccounted income but rather a continuation of regular business practice. It is not the case of the Department that any part of the cash sales was unverifiable or fictitious or that the corresponding stock position or gross profit rates were inconsistent with past trends. 6.2 We further note that the books of account maintained by the assessee were duly audited and supported by Form 3CB and 3CD, and it is not in dispute that the same were never rejected by invoking section 145(3) of the Act. In such circumstances, where books of account are maintained in the regular course of business and are not rejected, the entries made therein, including those in the cash book and ledger, cannot be brushed aside without any contrary evidence. In the absence of rejection of books, the sales recorded in books supported by cash receipts cannot be disregarded merely on the basis of suspicion. 6.3 We also find merit in the assessee’s contention that the entire amount of cash deposited was reflected in the regular books of account and considered in the computation of taxable income, and therefore, the addition made under section 68 results in double taxation of the same sum. In absence of any specific finding by the AO that the sales were fictitious or that the cash deposits were not backed by cash on hand, invoking section 68 of the Act was uncalled for. 6.4 We also find that the reliance placed by the Assessing Officer and upheld by the CIT(A) on judicial precedents is misplaced in the present factual matrix particularly when assessee has made detailed submission. Therefore, the ratio of the aforesaid cases cannot be mechanically applied to disregard such detailed evidentiary material. In a fact-intensive enquiry Printed from counselvise.com ITA No.620/Ahd/2025 7 under section 68, precedents must be applied contextually and not in isolation from the evidentiary record before the authority. 6.5 In view of the foregoing discussion, and in the absence of any material to demonstrate that the cash sales were bogus or that the books of account were not reliable, we find that the explanation offered by the assessee is satisfactory and supported by material evidence. The addition made under section 68 and taxed under section 115BBE is therefore unsustainable in law and on facts. 6.6 Accordingly, we hold that the addition of Rs.28,54,000/- made by the Assessing Officer and confirmed by the CIT(A) is liable to be deleted. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 30th July, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA R. KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 30/07/2025 Printed from counselvise.com "