NAVDEEP MEDICAL STORE,AHMEDABAD V. ITO WARD 6(1)(1), AHMEDABAD, AHMEDABAD

ITA 1322/AHD/2025

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The case involves Navdeep Medical Store, a partnership firm engaged in retail medicine sales, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming an addition of Rs. 29,78,000 as unexplained cash deposits under section 69A of the Income Tax Act, 1961. The Income Tax Officer had initially reopened the assessment for the year 2017-18 based on the belief that the assessee had made unexplained cash deposits amounting to Rs.1,87,92,700. However, it was later clarified that the actual deposits were only Rs.29,78,000, which were regular business receipts. The tribunal found that these deposits were recorded in the assessee's audited books and represented routine business activities, especially during the demonetization period when such transactions were legally permissible for medical purposes.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787138 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 15-06-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHAKAR VERMA
• Assessee Lawyers: GAURANG KHAKHHAR
• Keywords: Business income; Reassessment proceedings; Income from undisclosed sources; Reopening of assessment; Reason to believe; Tangible material
• Section: 147; 148

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. No.1322/Ahd/2025 (Assessment Year: 2017-18) Navdeep Medical Store, Shop No. 2&3, Tulsi Kunj Society, Opp. Jayesh High School, Bapunagar, Ahmedabad-380024 [PAN : AAKFN3767 F] Vs. Income Tax Officer, Ward-6(1)(1), Ahmedabad (Appellant) .. (Respondent) Appellant by : Shri Gaurang Khakhhar, AR Respondent by: Shri Sudhakar Verma, Sr. DR Date of Hearing 09.10.2025 Date of Pronouncement 17.11.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), /National Faceless Appeal Centre, Delhi, vide order dated 21.04.2025 relevant to the Assessment Year 2017-18. 2. The assessee has raised the following grounds of appeal: 1.1) The ITO, Ward 6(1)(1), Ahmedabad has erred in issuing the notice under section 148 without there being any reason to believe that the income of the assessee had escaped assessment just on the basis of alleged incorrect information available with the department. Printed from counselvise.com ITA No. 1322/Ahd/2025 Asst. Year : 2017-18 - 2– 1.2) The reassessment under section 147 is void ab initio and bad in law as the same was initiated at the satisfaction/instance of the other authority is without any independent evaluation by the learned AO. 1.3) Ld. A.O. has wrongly mentioned following facts in reason for reopening and, thus, there was wrong reason to believe that the income of the assessee had escaped assessment and, thus, the reopening is bad in law. Particular As per Reason for Reopening Correct Facts Date of filing ITR 9th July, 2017 26th October, 2017 Total Income 11,64,900/- 1,60,530/- Cash Deposit 1,87,92,700/- 29,78,000/- Number of year end from Relevant year More than 4 year Less than 4 year 2.1) Notwithstanding the above said ground of appeal, the addition of Rs. 29,78,000 on account of cash deposits is not justified at all because such amount having been recorded already in the turnover of the assessee towards credit side of Trading Account and further making the addition on account of 'cash deposits' would amount to double addition. 2.2) The confirmation of addition by the Commissioner (Appeals) in respect of cash deposits out of regular sales of the assessee as per audited books of accounts is against the facts and circumstances of the case and the learned Commissioner (Appeals) has erred in confirming the addition as made by the assessing officer only on surmises and conjectures. 2.3) That the learned Commissioner (Appeals) has failed to appreciate that due to the nature of business, where the sales of Medicine in retail and cash deposits during the year are regular feature, being out of declared sales in the audited books of accounts. 3.1) The Ld. CIT (A) has erred in confirming the Cash Deposit addition of Rs. 29,78,000/- u/s 69A by passing Ex-parte Appellate Order without adjudicating the grounds of appeal on merits of the case. 3.2) The Ld. CIT (A) has erred in confirming the addition of Rs. 29,78,000/- on the ground of non-compliance of Hearing Notices issued without appreciating the fact the Appellant was not aware of such Notices. 4) That the order passed by the Ld. CIT u/s 250 of the I.T. Act, 1961 was arbitrary, bad in law and unjust. 5) That the assessee craves leave to urge such other ground or grounds before or at the time of hearing of appeal. Printed from counselvise.com ITA No. 1322/Ahd/2025 Asst. Year : 2017-18 - 3– 3. The assessee is a partnership firm engaged in the business of running a retail medical store. The case was reopened on the basis of information that the assessee had made cash deposits of Rs.1,87,92,700/- during the relevant year. During reassessment proceedings, it was found that the actual cash deposits amounted to Rs.29,78,000, and not Rs.1,87,92,700/-. The Assessing Officer, however, treated these cash deposits as unexplained money and made an addition of Rs.29,78,000 under section 69A of the Act. 4. We have heard both the parties and perused the materials available on record. It is an undisputed fact that the assessee is engaged in the retail business of medicines. The total turnover of the assessee during the year amounted to Rs.3.40 crores against purchases of Rs.3.07 crores, and it had closing stock of Rs.62.87 lakhs. The cash deposits in the bank account, totalling Rs.29,78,000, form part of the total sales of ₹3.40 crores. On examination of the bank statement, it is evident that deposits were made regularly from April to March mostly ranging from Rs.30,000/- to Rs.1,00,000/- at a time. It is further noted that higher deposits occurred during November to early December 2016, i.e., during the demonetization period, when sale of medicines against Specified Bank Notes (SBNs) was legally permitted for medical purposes. Considering the business turnover, the stock position, and the regularity of cash deposits, it is clear that the same represents routine business receipts. The reopening of assessment was based on incorrect information that the assessee had deposited Rs.1.87 crores, whereas the actual deposits were only Rs.29.78 lakhs. No independent tangible material has been brought on record by the Assessing Officer Printed from counselvise.com ITA No. 1322/Ahd/2025 Asst. Year : 2017-18 - 4– to prove that the deposits were unexplained or represented unaccounted income. On the contrary, the deposits are duly recorded as part of regular business sales. Therefore, no addition is warranted under section 69A of the Act. 5. In the result, the appeal of the assessee is allowed. The order is pronounced in the open Court on 17.11.2025. Sd/- Sd/- (SUCHITRA KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT (True Copy) Ahmedabad; Dated 17.11.2025 MV 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, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "