S R AGRO TECH,BEHROR V. ITO, WARD, BEHROR

ITA 1304/JPR/2024

AI Insights

The case involves M/s. S.R. Agro Tech, a partnership firm dealing in agro equipment, which appealed against the additions made to its income by the ITO, Ward-Behror, for the assessment year 2017-18. The additions included Rs. 31,39,000 for unexplained cash deposits during the demonetization period and Rs. 5,00,000 as a trading addition. The ITO's additions were based on the premise that the cash deposits were unexplained and that the firm's books of accounts were not reliable. The CIT(A) upheld these additions, leading to the appeal before the ITAT. The ITAT, after reviewing the submissions and evidence, found that the additions were not justified and allowed the appeal, directing the deletion of the additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711873 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Rakesh Kumar Goel, Ghaziabad vs ITO Ward-2(2), Sobha Devi Dilipkumar Vs. ITO, CIT V/s. Surjeet Singh Mahesh Kumar, Lalchand Bhagat Ambica Ram Vs CTI, Lakshmi Rice Mills Vs. CIT, DCIT Vs. M/s Karthik Construction Co., M.C. Hospital vs. PCIT, Raja & Co Vs Assessing officer ward Baramulla
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: SURESH KUMAR GUPTA
• Keywords: Business income; Business expenditure; Rejection of books of accounts
• Section: 144; 143(3); 142(1); 234B; 145

Judgement Text

" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’’SMC” JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihyla-@ITA No.1304/JPR/2024 fu/kZkj.k o\"kZ@AssessmentYear : 2017-18 M/s. S.R. Agro Tech G 27(D),Sotanala Industrial Area Behror, Alwar 301 701 cuke Vs. The ITO Ward-Behror Behror LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.: ACRFS 4370 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :Shri Suresh Kumar Gupta, CA jktLo dh vksjls@Revenue by: Shri Gautam Singh Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 10/07/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: : 25/07/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal filed by the assessee is directed against the order of the ld. CIT(A) dated 28-08-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 raising therein following grounds of appeal. ‘’1. That, on the facts and circumstance of the case, Ld. Commissioner of Income Tax Appeals-National Faceless Appeal Centre (NFAC) in short (CIT Appeals) was not justified in confirming an addition of Rs. 31,39,000/- in respect of cash deposited in bank account and Rs. 5,00,000/- account of trading addition made by Printed from counselvise.com 2 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR Ld. Income Tax Officer Ward Behror (in short ITO) without appreciating the books of account maintained by the assesses. 2. That, on the facts and circumstance of the case, Ld. Commissioner of Income Tax Appeals-National Faceless Appeal Centre (NFAC) in short was not justified in confirming an addition of Rs. 31,39,000/- in respect of cash deposited in bank account and Rs. 5,00,000/- account of trading addition made by Ld. Income Tax Officer Ward Behror and dismissing the appeal of applicant without giving reasonable opportunity of hearing by Hon'able appellate authority to the. 3. That, on the facts and circumstances of the case Ld. CIT appeals was not justified in confirming the addition made of interest charged by ld. ITO u/s 234B and 234C 2.1 Brief facts of the case are that in this case the return declaring total income of Rs.(-)18,68,187/- for the assessment year 2017-18 had been filed by the assessee on 31-10-2017. The case of the assessee was selected under complete Scrutiny through CASS with remarks’’(i) cash deposit during the demonetization period and (ii) lower amount disallowed u/s 40(a)(ia)’’. Notice u/s 143(2) of the Act by ITO Ward 1(1) Alwar was issued on 23-08-2018 fixing the case for hearing on 30-08-2018. Further notice/s 142(1) was issued on 12-09-2018 along with query letter fixing the case for hearing on20-09-2018. However, the case was transferred to ITO ward 1(1), Alwar to ITO, Ward Behror. Thus, due to change of incumbent, notice u/s 142(1) was issued on 21-05-2019 along with query letter fixing the case for hearing on 5-06-2019 but no compliance was made by the assessee. Thereafter various notices were issued but no compliance was Printed from counselvise.com 3 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR made. Thereafter show notice u/s 144 of the Act was issued on 13-11-2010 fixing the case for hearing on 18-11-2019. In compliance with this notice, the assessee filed online written submission which was received by the ld. AO and relevant documents/ details were examined on test check basis by the AO and replies were placed on record. In this case, it is noticed that the AO made two additions i.e. trading addition of Rs.5.00 lacs and addition on account of unexplained money u/s 69A amounting to Rs.31,39,000/-. The narration as made by the AO in the assessment order as to the additions are as under:- ‘’1. Trading Addition:- During the year under consideration, the assessee has debited a sum of Rs. 124630/- on account of conveyance expenses, Rs. 87,914/- on account of office expenses, Rs. 19465/- on account of printing & stationery expenses, Rs. 326288/- on account of repair and maintenance expenses, Rs 1451042/- on account salary expenses, Rs27.548/- on account of telephone expenses, Rs. 27,320/- on account travelling expenses Rs. 830210/-on account freight charge. Rs. 1356943/- on account consumable store, Rs1872320/- on account custom duty charge, Rs 614326/ on account of import expenses. Accordingly, the asseessee was required to furnish details of these expenses during assessment proceedings. The assessee furnished details of these expenses but on verification during assessment proceedings, it is seen that the bills & vouchers of these expenses are not complete and most of the expenses have been booked on self-made vouchers. The assessee did not maintain any log register & call register for telephone. Beside the personal element on the expenses incurred on telephone expenses cannot be denied. The reply of the assessee is not fully acceptable and looking to the above defects in the books of accounts the provision of the section 145(3) is invoked and a lump sum trading addition of Rs. 5,00,000/- is made to the total income of the assessee taking in to account all possible leakage on trading front. Accordingly, trading addition of Rs. 5,00,000/- is made to the total income of the assessee on estimate bases for the year under consideration. [Addition of Rs.5,00,000/-] Printed from counselvise.com 4 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR ‘’During the course of assessment proceedings the assessee firm was asked to produce justification the cash deposit in his bank account varies dates Rs. 1,40,000/- on 07.12.2016, Rs. 6,00,000/- on 29.12.2016 Karnataka Bank Ltd, Rs. 24,95,000/- on 10.11.2016 Union Bank of India, Rs. 2399000/- on 20.12.2016 Karur Vysaya Bank, Rs. 2500000/- on 11.11.2016 Karur Vysaya Bank during the demonetization period in this regards the assessee filed P&LA, Balance sheet, bank account details, bank account statements, bills and addition fixed assets but not produced any justification/ explanation /written reply regarding cash deposits. I have carefully considered produce documents/details by the assessee but not fully justified the cash deposits. The assessee is not a Govt entity and was not authorized to receipt cash (SBN Notes) during the period of demonetization. He has violated the rules of demonetization. In view above facts, the assessee has not proved that cash received are comes out till demonetization period. It is crystal clear that assessee has received old currency note (SBN) by some other person and deposit in the bank account in the different dates. The assessee has not produced cash flow statementduring the course of assessment proceedings period of demonetization period old currency not is not legal tender. Hence, assessee submission completely not acceptable and I have disallowed of Rs 31,39,000/- (Rs. 1,40,000/- deposited on 07.12.2016, Rs. 6,00,000/- on 29.12.2016 and Rs 23,99,000/- deposited on 20.12.2016) as undisclosed income an addition of Rs. 31,39,000/- added to the total income of the assessee. The Total Income assessed is taxed u/s 115 BBE of the Act at the rate of 60%. Further, penalty proceedings u/s 271 AAC of the Act in respect of unexplained income is initiated. As discussed in the body of the Order. [Addition of Rs. 31,39,000/-] 2.2 In first appeal, the ld. CIT(A) has dismissed the appeal of the assessee holding that in spite of various notices, the assessee had not furnished any reply,and the appeal is held to be without merit and the same was dismissed. The narration as made by the ld. CIT(A) in his order at para 6.2 to 7 is reproduced as under:- ‘’6.2 It can be seen that theassesee in response to the various notices issued to him has not furnished any reply nor has he sought adjournment and has not given any factual or legal details to come to conclusion different from that of AO. 6.3 Even otherwise, it was for assessee to furnish cogent evidence in support of its grounds of appeal. This has not been done. Onus cannot be cast on this Printed from counselvise.com 5 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR office to be an adjudicator and also a lawyer for the assessee when assessee it itself lax and uninterested in pursuing of his own appeal. 7. As a result, the appeal is held to be without merit and the same is hence dismissed. 2.3 During the course of hearing, the ld . AR of the assessee has filed following detailed written submission in connection with both the additions i.e. Rs.5,00,000/- and Rs.31,39,000/- and submitted that the assessee had produced all the relevant details/ records before the AO but he has passed the assessment order on the basis of presumption and assumption without considering the facts of the case and thus the additions so made by the AO needs to be quashed; ‘’OBSERVATIONS OF THE LD. AO AND SUBMISSIONS OF APPELLANT: 1. In Para 1 (page no. 2 of 6) of the order the Ld. AO has made trading addition as bills of Expenses are self made and making addition of Rs. 500000/- after invoking provision u/s 145 (3) of It Act, 1961. Submission of the Applicant Within the framework of law the A.O may proceed under Section 145(3) under any of the following circumstances: a) Where assessing officer is not satisfied about the correctness or completeness of the accounts, or b) Where method of accounting cash or mercantile has not been regularly followed by the assessee, or c) Accounting Standards as notified by the Central Government have not been regularly followed by the assessee Printed from counselvise.com 6 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR Though the broad parameters have been laid down in the Section itself under which the provisions are required to be invoked for rejection of books of account in a particular case, vet, a definite ground work is sine-quanon on part of the Assessing Officer before resorting to the provisions of section 145(3) of the income Tax Act 1961. This is well deliberated by The Honorable bench of ITAT, third Member Bench in the matter of Raja & Co Vs Assessing officer ward Baramulla. The Honorable bench has held rejection of books of accounts not justified as the reasons recorded for rejection of such books of accounts are not meeting the criteria as laid down in section 145(3) of the Income Tax Act 1961. The assessing officers usually after Rejection of Books of Account under Section 145(3) conduct Assessment in the manner under Section 144 of the Income Tax Act 1961. In a case where the provisions of Section 145(3) are attracted, although the assessment is made in the manner provided under Section 144, nevertheless the assessment is made under Section 143(3) of the Act. A clear cut distinction between Best Judgement Assessment and in the manner provided under Section 144 is required to be understood while resorting to the provision of Section 145(3). Under Section 145(3) the assessment is required to be made in the manner under Section 144 of the Act only. However, it is well known fact that in the case of Best Judgement where resort is taken to Section 144, the Assessing Officer exercising his jurisdiction cannot act arbitrarily or capriciously. The assessing officer must proceed on judicial considerations in the light of relevant material that may be brought on record The Hon'ble Allahabad High Court in the case of CIT V/s. Surjeet Singh Mahesh Kumar (1994) 210 ITR 83 has held that in every case of Best Judgement, the element of guess work cannot be eliminated so long as best judgement has a nexus with material on record and discretion in that behalf has not been exercised arbitrarily or capriciously. Shri Harish Patel, Bhopal vs The Deit 1(1), Bhopal on 2 January, 2019 Appeals) erred in confirming for invoking the provisions of Section 145 (3) of the Income Tax Act by making Hypothetical and arbitrary estimation Appeals) erred in confirming for invoking the provisions of Section 145 (3) of the Income Tax Act by making Hypothetical and arbitrary estimation In the Instance case Ld AO made trading addition at hypothetical and arbitrary estimation so addition liable to be deleted. 2. The Ld. AO in para 2( page no. 2 of 6) of the order Ld AO oberserd that that assessee has received old currency notes (SBN) by some other person and deposit in the bank account in the different dates. Applicant submission as under: Printed from counselvise.com 7 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR 1.The Ld.AO grossly erred in making the addition of Rs.31,39,000/- u/s 69A being the cash deposited in bank account during the demonetization period, as the same is beyond the scope of provision itself, whereby amount is duly recorded in books of accounts and source of such amount is fully explained, hence addition is against the specific provision of Act. 2. The Ld. AO further erred in not appreciating that the sale/purchases etc. are supported with invoices, bank account, Financials etc. mass documents on record proving the genuinity of transactions and cash deposit, whereby such cash deposit is also inline of subsequent years, beside addition is made without any iota of evidence/material against the assessee and in support of flimsy allegations made, therefore addition is against all the cannons of law 3. Without prejudice to above, Ld. AO inherently wrong in making the addition being the same amounts to double taxation is as much as all the sources of deposit like sales etc. have been declared and taxed thus to add the deposit again is against the basic tenets of law.\" In the case of Rakesh Kumar Goel, Ghaziabad vs ITO Ward-2(2) (2) ITAT Delhi explicitly held as under: It is clear that Sec. 69A of the Act is applied when the assessee is found to be owner of any money which is not recorded in the books of account. However, in the case of the assessee, it has maintained hooks of accounts duly audited in accordance with section 44AB of the Income Tax Act which was also furnished with the return of income filed by the assessee. The assessee has demonstrated from the purchase books, sale books cash book supported with relevant invoices that source of cash deposited was out of the cash sales made during the A.Y relevant to the assessment year under consideration. The Id. Counsel has also placed reliance on a number of judicial pronouncements on the proposition that addition u/s 69A of the Act cannot be made Le. Lalchand Bhagat Ambica Ram Vs CTI (1959) 37 ITR 288 (SC); Lakshmi Rice Mills Vs. CIT (1974) 97 ITR 258 (PAT): DCIT Vs. M/s Karthik Construction Co. ITA No. 2292/Mum/2016. After considering the facts as discussed above, we find the AO has failed to justify in applying section 69A to the case of the assessee when the assessee itself declared the cash sales in its return of income duly recorded in the audited books of accounts maintained by the assesse. Therefore, the CIT(A) has correctly held that provision of Sec. 69A of the Act cannot be applied in respect of cash deposited which have been duly recorded in the books of account and had already been declared income in the return of income filed by the assessee. Therefore, the grounds of appeal of the revenue are dismissed.\" Printed from counselvise.com 8 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR Similarly, in the case of Sobha Devi Dilipkumar Vs. ITO (supra) the Vishakhapatnam Bench of the Tribunal held as under: ‘’4. At the outset, the Ld. Authorized Representative submitted that the assessee being involved in money lending business, on the monies lent, the assessee has received an amount of Rs.3,63,609/- as interest income and the principal amount was given as loan during the previous year relevant to the assessment year 2017-18 to various persons and the same fact was recorded in the books of account which has been furnished before the Ld. Revenue Authorities. However, the assessee made cash deposits during the demonetization period and therefore the Ld AO treated the amount of cash deposits as unexplained money u/s 69A of the Act. The Ed. AR further submitted that the assessee has disclosed the investments in the books of accounts and the computation of income which was offered for taxation and therefore the question of invoking the provisions of section 69A does not arise. The Ld. AR relied on the decision of this Bench of the Tribunal in the case of ITO v. Sri Tatiparti Satyanarayana in [IT Appeal No. 76 (Viz.) of 2021, dated 16-3-2022] to state that when the investments are disclosed by the assessee in the books of accounts, there is no application of the provisions of section 69A of the Act. The Ld. AR further submitted that the L.d. CIT(A)- NFAC, on similar set of facts, considered the assessee's son's case (Ankit Dilip Jain) but the Ld. CIT(A)-NFAC has not considered the assessee's case. Therefore, the Ld. AR pleaded that the addition made by the Ld. AO and confirmed by the Ld. CIT(A)- NFAC may be deleted. Allahabad High Court in the case of Smt. Sadhana Jain Vs. CIT(supra) held as under: - \"The provisions of section 69A are explicit and come into play when in a particular assessment year the assessee is found to be the owner of any money. bullion, jewellery or other valuable article and such money bullion, jewellery and other article is not recorded in the books of account and the assessee is unable to give any explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuation articles.\" The Chennai Bench of the Tribunal in the case of PCIT Vs. M.C. Hospital (supra) held that it is a settled principle of law that entries recorded in the books of account cannot be brought to tax u/s 69A of the Act. Assessee version on merits, that: Printed from counselvise.com 9 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR a) Additions u/s 69A cannot be made of an amount recorded in book of accounts for any source of income. b) After accepting the sales by accepting declared income on same, same cannot be added again as no source. c)Raising doubt on sales after accepting the same is against the basic tenets of law and not permissible. d) Neither there is any material against the assessee or in support of addition, more so when none of the evidences and sources placed found false with some material. 3. Sir, the Ld. AO has passed the assessment order on the basis of presumption/assumption without considering the facts of the case. The Appellant has made extensive submissions and presented all documentary evidences in support of its claim whereas the Ld. AO has simply made allegations without any evidence / or bringing anything adverse on record. PRAYER 4. Sir, based on the above submissions we would like your honor to allow the appeal and grant us full relief.’’ 2.4 On the other hand, the ld. DR supported the orders of authorities below and submitted that the assessee has partly filed the details before the ld. AO and before ld. CIT(A) did not file any records and thereby he supported the of the ld. CIT(A). 2.5 We have heard both the parties and perused the materials available on record. It is noticed from the records that the assessee is a Partnership Firm dealing in Agro Equipment products and having Income from business and filed its return of income for AY 2017-18 on 31.10.2017 declaring a total loss of Rs. 18,68,187/-.It is further noted that the case of the assessee Printed from counselvise.com 10 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR was selected for scrutiny under CASS with remarks i) Cash deposit during the Demonetisation period and ii) lower amount disallowed u/s 40(a) (ia)\". From the available records, it is noted that during the year the assessee deposited Rs. 31,39,000/- cash of Rs. 500/-and Rs. 2000/- Note in Banks during the demonetization period i.e. 09.11.2016 to 31.12.2016. The above-mentioned cash had been deposited by the assessee out of the cash in hand available with assessee. It is pertinent to mention that the available cash in hand was in the books of accounts of the assessee. The notice described the cash deposited during the period of monetization is unexplained Money and the AO invoked Section 145(3) by making trading addition of Rs.5.00 lacs in the hands of the assessee.In first appeal, the ld.CIT(A) has confirmed the action of the AO for the reason that the assessee had not furnished any reply in spite of various notices. The Bench also noted that during the assessment proceedings assesse had very well explained that cash deposited during the period of demonetization was out of the cash in hand reflected in the books of account and expenses debited in P&L account were of all business expenditure and books of accounts are audited by qualified independent Chartered Accountant. The Bench also noted that the sale/ purchase etc. were supported with invoices, bank account, financial etc. and documents on record were placed before Printed from counselvise.com 11 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR the AO to prove the genuineness of the transactions. It is also notable that addition u/s 69A cannot be made of an amount recorded in books of accounts for any source of income and after accepting the sales by accepting declared income on same, the same cannot be added again as no source. The Bench also noted that there is no material placed on record by the AO as to the addition made by AO that money deposit is not of the business income and in addition to what is reflected in the books. Hence, we do not concur with the findings of the lower authorities as to the addition of Rs.31,39,000/- in the hands of the assessee . As regards the addition of Rs.5.00 lacs made by the AO by holding that the bills of expenses are self- made and he invoked the provisions of Section 145(3)of the Act. It is noted that the AO made lumpsum addition of Rs.5.00 lacs to the income of the assessee taking into account all possible leakage on trading front. It is noted that the books of accounts of the assessee were audited and books are maintained as per mercantile system of accounting. Hence, it is not justified on the part of the AO to make trading addition on hypothetical basis and the addition should be made on concrete basis based on the record and evidence to be placed on record no lump addition can be made without finding any specific default in the audited books of accounts. Hence, in view of this matter, we do not concur with the findings of the Printed from counselvise.com 12 ITA NO. 1304/JPR/2024 S.R. AGRO TECH VS ITO, WARD-BEHROR lower authorities and the trading addition made of Rs.5.00 lacs is directed to be deleted. Thus, the appeal of the assessee is allowed. 3.0 In the result, the appeal of the assessee is allowed Order pronounced in the Open Court on 25-07-2025. Sd/- Sd/- ¼ jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur Tk;iqj@Jaipur fnukad@Dated:- 25/07/2025 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- M/s. S.R. Agro Tech, Alwar 2. izR;FkhZ@ The Respondent- The ITO, Ward-Behror 3. vk;dj vk;qDr@ Theld CIT 4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZ QkbZy@ Guard File (ITA No. 1304/JPR/2024) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar Printed from counselvise.com "