PARSHOTTAMBHAI SHAMJIBHAI GAJJAR,AHMEDABAD V. THE ITO, WARD-4(2)(4), AHMEDABAD

ITA 588/AHD/2025

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The case involves Parshottambhgai Shamjibhai Gajjar, a small-time milk vendor, who appealed against the order of the CIT(A) which upheld an addition of Rs.13,69,080 to his income under section 69A of the Income Tax Act, 1961, due to unexplained cash deposits during the demonetization period. The assessee argued that these deposits were from regular business transactions and provided evidence such as bank passbooks and sale statements to support his claim. The Tribunal, after examining the evidence and considering the assessee's business model, concluded that the deposits were explained and deleted the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712099 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH KUMAR AGRAWAL
• Assessee Lawyers: JAIMIN SHAH
• Keywords: Set aside; Business income
• Section: 144; 143(3); 142(1); 234B

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.588/Ahd/2025 Asstt.Year : 2017-18 Parshottambhgai Shamjibhai Gajjar 75, Shastrinagar Nr. Anandbaug Society Ghatlodia Ahmedabad. PAN : BHTPG 0081 N Vs. The ITO, Ward-4(2)(4) Now Ward-4(2)(3) Ahmedabad. (Appellant) (Respondent) Assessee by : Shri Jaimin Shah, CA Revenue by : Shri Umesh Kumar Agrawal, Sr.DR सुनवाई की तारीख/Date of Hearing : 23/07/2025 घोषणा की तारीख /Date of Pronouncement: 25/07/2025 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 20.01.2025 passed by the Ld. Additional / Joint Commissioner of Income Tax (Appeals), Office of the Commissioner of Appeal, Siliguri [hereinafter referred to as “CIT(A)”] under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), arising out of the assessment order passed under section 143(3) read with section 144 of the Act by the Income Tax Officer, Ward 4(2)(4), Ahmedabad [hereinafter referred to as “Assessing Officer or AO”] dated 22.11.2019 for the Assessment Year 2017–18. Printed from counselvise.com ITA No.588/Ahd/2025 2 Facts of the Case 2. The assessee, an individual engaged in the business of milk product sales and commission, had filed his return of income for the year under consideration on 20.03.2018, declaring total income of Rs.2,68,450/- and agricultural income of Rs.2,22,530/-The return was selected for scrutiny under CASS for the reason of “Large Cash Deposit during demonetization period.” Accordingly, notice under section 143(2) of the Act was issued on 24.09.2018, followed by notices under section 142(1) on multiple dates including 28.05.2019, 05.08.2019 and 31.08.2019. The assessee failed to comply with these notices or submit any explanation in response to the show cause notice issued under section 142(1) dated 14.10.2019, culminating in an ex-parte assessment under section 144 read with section 143(3) dated 22.11.2019. In the said assessment order, the AO recorded that during the demonetization period (9th November 2016 to 30th December 2016), the assessee had made cash deposits aggregating to Rs.16,79,030/- in his bank account No. 471102001000970 maintained with Citizens Co-operative Bank Ltd., Rajkot. After verifying the record and noting the assessee's failure to explain the source of such deposits, the AO treated a sum of Rs.13,69,080/- as unexplained money under section 69A of the Act. The said amount was brought to tax under section 115BBE, and the total assessed income was computed at Rs.16,38,130/- as against the returned income of Rs.2,69,048/-. Penalty proceedings under sections 271AAC and 272A(1)(d) were also separately initiated. 3. Aggrieved, the assessee filed an appeal before the CIT(A). However, the CIT(A) dismissed the appeal vide order dated 20.01.2025 on the ground of persistent non-compliance by the assessee. It was noted that notices were issued on five occasions—dated 23.01.2021, Printed from counselvise.com ITA No.588/Ahd/2025 3 23.02.2022, 04.05.2022, 04.10.2024 and 18.10.2024—and except on one occasion where adjournment was sought, there was no meaningful response or submission filed. It was concluded that the assessee failed to demonstrate any justification for the cash deposits or submit any plausible material. Hence, the addition under section 69A of Rs.13,69,080/- was upheld. However, the CIT(A) noticed a computational discrepancy in the AO’s assessment order. It was recorded that while the total deposits during demonetization period were Rs.16,79,030/-, the AO had only added Rs.13,69,080/- under section 69A without explanation for the differential amount. The CIT(A), while endorsing the AO’s action on merits, directed that the AO may verify the correct amount and rectify the demand notice accordingly. 4. Being aggrieved by the said order, the assessee has preferred the present appeal before us raising following grounds of appeal: 1. That the Ld. CIT(A) has erred both in law and on facts while dismissing the appeal of the appellant without considering the material available on record and without considering the facts of the appellant and hence the order passed by CIT(A) sustaining the heavy addition u/s 69A for Rs.13,69,080/- is prejudicial to the interest of the appellant and requires to be set aside. 2. That the appellant's assessment for the immediate preceding previous year i.e A.Y. 2016-17 was done u/s 143(3) of the act, under the same circumstances, however without considering the same Ex-parte order passed by ITO & CIT(A) is required to be reconsider and as such the matter may please be set aside. 3. That the Ld. A.O. has erred in law and on facts while issue of notice u/s 143(2) of the Act, 1961 and as assessment proceedings itself is bad in law and required to be quashed. 4. That the appellant is a milk vendor and filed his return regularly, he is used to deposit cash regularly, however without considering the facts of the case addition made u/s 69A for Rs.13,69,080/- is require to be deleted. Printed from counselvise.com ITA No.588/Ahd/2025 4 5. That the appellant has filed his return u/s 139(1) of the Income Tax Act, 1961 considering all the cash deposits, further the appellant business is covered under the list of essential items and therefore the unwanted addition made u/s 69A of the Act for Rs. 13,69,080/- is required to be deleted. 6. That the appellant has neither given incorrect information nor given inaccurate particulars of Income and therefore penalty proceedings initiated u/s 271AAC and u/s 272(1) of the I.T. Act, 1961 requires to be dropped. 7. The appellant has neither committed default of Sec. 210 nor any default of advance payment of taxes and therefore unwanted interest charged u/s 234A 234B and 234C requires to be deleted. 8. That the Ld. A.O. has erred in law while imposed 25% surcharge on Tax while calculating tax liability of the appellant and as such surcharge of Rs. 2,05,4521-require to be deleted. 9. Your appellant craves leave to add, amend, deleted or alter any of the grounds till the appeal is finally heard and decided. 5. The learned Authorised Representative (AR), appearing on behalf of the assessee, contended that the assessee is a small-time milk vendor, engaged in retail sale of milk and milk products of the Amul brand, purchased from Krishna Enterprise, Ahmedabad. The assessee earns nominal commission on the resale of such products, and in the normal course of his business deposits the daily sale proceeds in his bank account maintained with Citizens Co-operative Bank Ltd. (A/c No. 471102001000970). These deposits, the AR pointed out, were immediately utilised to make payments to Krishna Enterprise towards supply of fresh stock, which was necessary for business continuity. In support of this contention, the AR placed on record a copy of the bank passbook evidencing the pattern of regular cash deposits and subsequent debit transactions to Krishna Enterprise. In addition, sample sale statements issued by Krishna Enterprise to multiple dealers, including the assessee, were filed to establish that such transactions were part of a regular supply- Printed from counselvise.com ITA No.588/Ahd/2025 5 distribution chain. It was emphasized that Krishna Enterprise is a known wholesale distributor of milk products in Ahmedabad, and the assessee has been operating under the same business model over several years. 6. The AR submitted that the return of income for A.Y. 2016–17 was scrutinised under section 143(3) and in that year also, the assessee had deposited cash from the same business into the very same bank account. The return was accepted without any adverse inference or addition. A copy of the assessment order dated 10.12.2018 passed under section 143(3) for A.Y. 2016–17 was filed in evidence. The AR contended that the department having accepted the genuineness of business and source of cash deposits in the preceding year, without any material change in facts, could not have drawn a contrary conclusion for the year under consideration. It was further submitted that the assessment proceedings were concluded ex parte under section 144 only due to the assessee’s inability to respond to notices issued through e-proceeding mode, and not due to deliberate non-compliance. The assessee, being a small vendor with limited literacy and no professional guidance at the relevant time, could not appreciate the procedural requirements. The AR also clarified that the material now furnished (Krishna Enterprise records) was not available during the assessment or appellate proceedings, and therefore could not be submitted earlier. In fact, an adjournment application was filed before the CIT(A) seeking time to collect and furnish this evidence, but the appeal came to be dismissed ex parte. The AR strongly contended that the provisions of section 69A are not attracted in the present case since the source of cash deposits is reasonably explained with corroborative evidence. The AR therefore pleaded that in the interest of justice, the addition of Rs.13,69,080/- made under section 69A be deleted. Printed from counselvise.com ITA No.588/Ahd/2025 6 7. On the other hand, the learned Departmental Representative (DR) supported the orders of the lower authorities and submitted that there is no infirmity in the action of the Assessing Officer in making the addition under section 69A of the Act. It was contended that during the course of assessment and appellate proceedings the assessee failed to furnish any explanation or documentary evidence in support of the substantial cash deposits made in his bank account during the demonetization period. The assessment was, therefore, rightly completed under section 144 of the Act based on material available on record. 8. We have carefully considered the rival submissions, perused the orders of the lower authorities, and examined the material placed on record. The core issue in the present appeal pertains to the addition of Rs.13,69,080/- made by the Assessing Officer under section 69A of the Act on account of cash deposits made in the assessee’s bank account during the demonetization period, which was upheld by the learned CIT(A) in ex parte appellate proceedings. 9. At the outset, we note that the assessee is a small-time milk vendor engaged in retail sale and distribution of milk and milk products, particularly those of the Amul brand, sourced from Krishna Enterprise, Ahmedabad. This fact stands corroborated by the assessment order for the immediately preceding assessment year i.e., A.Y. 2016–17, wherein the Assessing Officer had accepted the returned income under section 143(3) without making any addition, despite the business being conducted under similar facts and circumstances. The pattern of cash deposits in the very same bank account and the nature of business activity has not undergone any material change in the year under appeal. Printed from counselvise.com ITA No.588/Ahd/2025 7 10. During the course of hearing before us, the learned Authorised Representative placed on record copies of sale records issued by Krishna Enterprise, which pertain to the subsequent year but clearly evidence the assessee’s role as a dealer in the supply and distribution chain of milk products. These records indicate that Krishna Enterprise was dispatching goods to various small dealers, including the assessee, for onward sale to retail consumers. Though the documents relate to a later year, they serve as corroborative evidence supporting the assessee’s business model and the explanation furnished for the source of cash deposits. 11. We also find merit in the submission that the bank passbook, now placed on record, contains a regular pattern of cash deposits followed by near-immediate outward remittance to Krishna Enterprise. This establishes a clear link between the receipt of cash from daily retail sales and the utilisation of such funds for stock replenishment. In our view, this commercial cycle reasonably and satisfactorily explains the source of cash deposited in the bank, and therefore, the provisions of section 69A are not attracted. 12. We further take cognisance of the discrepancy pointed out by the CIT(A) in his order regarding the total cash deposits. The Assessing Officer noted a deposit of Rs.3,45,000/- on 09.12.2016 in the table reproduced in the assessment order. However, as per the bank passbook placed before us, the actual cash deposit on that date was only Rs.34,500/-. This clearly suggests either a typographical or interpretational error on part of the lower authorities, and it also justifies the shortfall observed by the CIT(A) in the AO’s quantification. Thus, the so-called inconsistency relied upon to confirm the addition Printed from counselvise.com ITA No.588/Ahd/2025 8 stands reasonably reconciled and explained by contemporaneous bank records. 13. It is also pertinent to note that the explanation and supporting documents now placed before us were not available before the Assessing Officer or the CIT(A) at the relevant time, and the assessee had also sought adjournment before the CIT(A) to collect and furnish these records. In the totality of circumstances, where the assessee is a person of modest means, engaged in small-scale trading activity, and lacking professional assistance during the assessment and appellate stage, the failure to furnish explanation at the initial stage appears to be procedural in nature and not indicative of absence of substance. 14. It is well settled that section 69A applies only where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and offers no explanation about the nature and source thereof, or the explanation offered is not satisfactory in the opinion of the Assessing Officer. In the present case, the assessee has, during the course of appellate proceedings before us, explained the nature and source of the cash deposits as arising from day-to-day business receipts in the course of retail distribution of milk products. This explanation is supported by material evidence such as the bank passbook showing inflow and outflow in favour of Krishna Enterprise, and sample dispatch records of Krishna Enterprise evidencing the assessee’s role as a dealer. Merely because this evidence was not furnished at the stage of assessment or before the CIT(A), it does not disentitle the assessee from producing the same during the course of appellate proceedings before us, especially when no contrary material has been brought on record by the Revenue to rebut such explanation. Printed from counselvise.com ITA No.588/Ahd/2025 9 In such circumstances, the conditions precedent for invoking section 69A are not satisfied. 15. In light of the above discussion, we are of the considered view that the cash deposits in the assessee’s bank account are satisfactorily explained as arising from daily sales proceeds in the course of business and are supported by a reasonable commercial trail. The conditions required for invoking section 69A are therefore not met. Accordingly, the impugned addition of Rs.13,69,080/- made under section 69A of the Act and confirmed by the CIT(A) is not sustainable in law or on facts and deserves to be deleted. 16. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 25th July, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA R. KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 25/07/2025 Printed from counselvise.com "