RICKY NAKHAT,KOLKATA V. I.T.O., WARD - 32(2), KOLKATA

ITA 2482/KOL/2024

AI Insights

The case involves an appeal by Ricky Nakhat against the order of the National Faceless Appeal Centre, Delhi, which confirmed the addition of \\u20b969,57,500 to the assessee's income as unexplained investment under Section 69A of the Income-tax Act, 1961, due to cash deposits during the demonetization period. The Assessing Officer had initially added this amount as unexplained investment, which was contested by the assessee, arguing that these were business receipts already recorded in the books. The Tribunal agreed with the assessee, noting that the addition constituted double taxation and that Section 69A was incorrectly applied, as the cash deposits were duly recorded and taxed as business income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712966 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: JMK Exports vs. ACIT, ITO vs. Joydeb Kundu
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMULDEEP KAUR
• Assessee Lawyers: SIDDARTH AGARWAL
• Keywords: Set aside; Business income; Unexplained investment; Rejection of books of accounts
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.2482/KOL/2024 (Assessment Year: 2017-18) Ricky Nakhat 40B/2, Nakhat House, Bakul Bagan Road, Bhawanipur, Kolkata-700025, West Bengal Vs. ITO, Wad 32(2) 10B, Middleton Row, Kolkata-700071, West Bengal (Appellant) (Respondent) PAN No. AGRPN8878Q Assessee by : Shri Siddarth Agarwal, AR Revenue by : Shri Amuldeep Kaur, DR Date of hearing: 20.05.2025 Date of pronouncement : 30.07.2025 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 08.10.2024 for the AY 2017-18. 02. The only issue raised by the assessee is against the order of ld. CIT (A) confirming the addition of ₹69,57,500/- as made by the AO u/s 69A of the Income-tax Act, 1961 (the Act) in respect of cash deposit during demonetization period. 03. The facts in brief are that the assessee filed the return of income on 04.11.2017, declaring total income of ₹9,64,510/-, which was Printed from counselvise.com Page | 2 ITA No.2482/KOL/2024 Ricky Nakhat; A.Y. 2017-18 processed u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny through Computer Assisted Scrutiny Selection (CASS) on account of abnormal increase in cash deposits during demonetization period as compared to normal period. Accordingly, the notice u/s 143(2) of the Act and other notices along with questionnaire were issued and duly served upon the assessee. The assessee complied with the said notices by filing the balance sheet, profit and loss account, ITR, etc. Thereafter, the ld. AO issued show cause notice on the assessee asking as to why the cash deposited into bank of ₹69,57,500/-, details whereof is given at page no.2 and 3 of the assessment order ,should be added to the total income of the assessee as unexplained investment, which was replied by the assessee and finally entire amount of cash deposits was treated as unexplained investment u/s 69A of the Act and added to the income of the assessee in the assessment framed u/s 143(3) of the act dated 26.11.2019. 04. In the appellate proceedings, the ld. CIT (A) called for the remand report from the ld. AO and accordingly, the remand report was submitted on 26.02.2024. The ld. CIT (A) after taking into account the remand report and the reply of the assessee came to the conclusion that the assessee has failed to provide sufficient authentic documentary evidences to explain the cash deposits and therefore, justified the addition made by the ld. Assessing Officer. 05. The ld. AR vehemently submitted before us that the order passed by the ld. AO is patently wrong and against the provisions of the Act. The ld. AR submitted that though the assessee could not file all the Printed from counselvise.com Page | 3 ITA No.2482/KOL/2024 Ricky Nakhat; A.Y. 2017-18 evidences before the ld. AO however, copies of audited balance sheet, profit and loss account and ITR, computation of income, etc. were filed and it was submitted that cash deposits were out of the business receipts. The ld. AR submitted that the assessee is engaged in the business of tour and travel and books of accounts of the assessee have been audited and no adverse inference was drawn by the auditor from the books of accounts. The ld. AR submitted that even the ld. AO during the course of assessment proceedings examined the balance sheet and other documents furnished by the assessee and has not rejected the books of accounts disbelieving the operational results shown therein. The ld. AR submitted that the assessee has already included the amount of cash deposited of ₹69,57,500/- in the books of accounts and were shown as revenue from operation. The ld. A.R submitted that the AO has applied the provisions of Section 69A of the Act while making the addition which deals with unexplained money not recorded in the books of account maintained by the assessee for any source of income and assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery or other valuable articles or the explanation offered by the assessee is not satisfactorily then the money and value of bullion, jewellery or other valuable article may be deemed to be the income of the assessee for financial year. However, this is not the case of the instant year. The ld. A.R argued that in fact the sales were duly recorded in the books of account and the profit earned during the year from the business was offered to tax and due taxes were paid. Therefore, at the very first place the invocation of section 69A is wrong as the same is not applicable to the case of the assessee. Therefore the Ld .A.R prayed Printed from counselvise.com Page | 4 ITA No.2482/KOL/2024 Ricky Nakhat; A.Y. 2017-18 that the addition so made under the wrong provisions of Act by misconstruing the provisions of law may be deleted by setting aside the order of Ld. CIT(A). Alternatively the Ld. A.R submitted that even if the addition is made by AO under wrong section, then the same cannot be corrected by making the addition in the different sections which may be the correct as per the Act. The Ld. A.R submitted that undoubtedly the provisions of Section 69A were not applicable to the present case. In defense of arguments the Ld. A.R relied on the decision of Co-ordinate Bench in the case of JMK Exports vs. ACIT in ITA NO. 1428/Del/2021 for AY 2017-18 dated 26.03.2024. Further he submitted that sales were not doubted by the AO and therefore how there can be a double addition first by way of profit on such sales and thereafter by adding the entire amount of cash sales deposited during demonetization period by placing reliance on the decision of Co- ordinate Bench in the case of ITO vs. Joydeb Kundu in ITA No. 8/Kol/2021 for AY 2017-18 dated 16.05.2023. The Ld. A.R therefore prayed that in view of aforesaid proposition and the case laws the order of Ld. CIT(A) may be set aside and the AO may be directed to delete the addition. 06. After hearing the rival contentions and perusing the materials available on record, we find that in this case the amount stated to be deposited in the bank accounts during demonetization period was treated as business receipt by the assessee which has been accepted by the AO as well as by the ld. CIT (A). Accordingly, the net profit was calculated as per the profit and loss account which is also been accepted and books were not rejected by either of the authorities below. Thereafter the ld. AO has added ₹69,57,500/- as unexplained Printed from counselvise.com Page | 5 ITA No.2482/KOL/2024 Ricky Nakhat; A.Y. 2017-18 investment u/s 69A of the Act to the total income of the assessee which in our opinion has resulted in doble taxation of the same amount. The ld. CIT (A) has confirmed the order of ld. AO without giving any cogent finding on this issue and therefore, the appellate order cannot be sustained. The case of the assessee find force from the decision of ITO vs. Joydeb Kundu in ITA No. 8/Kol/2021 for AY 2017-18 dated 16.05.2023 in which it is held that where the assessee has shown cash deposit into the banks as sale/ business receipts in the books of accounts and the books of accounts were not rejected then the same amount cannot be added u/s 69A of the Act as it amounts to double taxation of the same amount. 07. More 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.] 08. 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, Printed from counselvise.com Page | 6 ITA No.2482/KOL/2024 Ricky Nakhat; A.Y. 2017-18 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. The case of the assessee is squarely covered by the decision of the coordinate bench JMK Exports vs. ACIT in ITA NO. 1428/Del/2021 for AY 2017-18 dated 26.03.2024. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. 09. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 30.07.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 30.07.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata Printed from counselvise.com "