SAI ENTERPRISES,HYDERABAD. V. INCOME TAX OFFICER, WARD - 11(3) , HYDERABAD.

ITA 22/HYD/2025

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Sai Enterprises appealed against the order of the Commissioner of Income-Tax (Appeals), which upheld the A.O.'s decision treating Rs. 86,37,018 deposited during the demonetization period as unexplained cash under Section 69A of the Income Tax Act, 1961. The A.O. had initially treated these deposits as undisclosed business turnover due to lack of satisfactory explanation from the assessee. The Income Tax Appellate Tribunal (ITAT) found merit in the assessee's claim that these were business receipts and required further verification, thus restoring the matter to the A.O.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774924 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2017-2018
• Appeal Filed On: 06-01-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Search and seizure; FORM 26AS
• Section: 143(3)

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ए’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER आयकरअपीलसं./I.T.A.No.22/Hyd/2025 (निर्धारण वर्ा/ Assessment Year: 2017-18) Sai Enterprises, C/o.Ashok Nagar, Hyderabad. PAN : ACVFS9803L Vs. The Income Tax Officer, Ward –11(3), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri K.A. Sai Prasad, C.A. राजस्व का प्रतततितित्व/ Department Represented by : Shri Posu Babu Alli, Sr.DR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 21.07.2025 घोर्णध की तधरीख/ Date of Pronouncement : 03.09.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee firm is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated Printed from counselvise.com 2 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. 09.12.2024 which in turn arises from the order passed by the Assessing Officer (for short “A.O.”) u/s 143(3) of the Income Tax Act, 1961 (for short “the Act”) dated 22.12.2019 for A.Y. 2017-18. The assessee firm has assailed the impugned order on the following grounds of appeal before us: “1. The Learned First Appellate Authority, is not justified in conforming addition of Rs.86,37,018/- being the cash deposited during demonetization period as unexplained cash money u/s.69A made by the Ld. Assessing Officer. 2. The Learned First Appellate Authority, erred in conforming addition of Rs.86,37,018/-u/s.69A ignoring the fact that the appellant is into mobile top-up recharge business and is entitled to accept demonetized currency during demonetization period. 3. The Learned First Appellate Authority, in the facts and circumstances of the case, is not justified in not appreciating the appellant's claim that cash of Rs.86,37,018/-deposited during the demonetization period represents business receipts and hence addition made u/s.69A needs to be deleted. 4. The Learned First Appellate Authority, in the facts and circumstances of the case, erred in conforming the addition of Rs.16.18.161/- being the income estimated at 2% on the other gross receipts of Rs.8,14,66,551/-. 5. The appellant reserves his right to add, amend, delete or substitute any ground or grounds during the course of the hearing.” 2. Succinctly stated, the assessee firm for the first time had filed its return of income for A.Y. 2017-18 on 25.04.2017, declaring an income of Rs. 9,300/-. Subsequently, the case of the assessee firm was selected for scrutiny assessment for verifying Printed from counselvise.com 3 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. “Large-value cash deposits during the demonetization period and Business return filed for the first time”. 3. During the course of assessment proceedings, the A.O. observed that the assessee firm during the subject year had credits aggregating to Rs. 9,01,03,569/- in its bank account. Also, the A.O. observed that the assessee firm during the demonetization period, i.e., 09.11.2016 to 30.12.2016, had made cash deposits in its bank account aggregating to Rs. 86,37,018/-. On being queried, the assessee firm claimed that it was a distributor of Idea Mobile Commerce Services Limited; Hermes I Tickets Private Limited and others to make payments to billing companies and merchant entities for the purchase of products/services, against which it received a marginal rate of commission on the total collections that were deposited in its bank account. The A.O. observed that the assessee firm had disclosed gross sales of Rs. 5,58,480/-, which represented the commission earned on the aforesaid transactions as per its “Form 26AS”, against which it had disclosed a net profit of Rs. 9,300/-. The A.O. reduced from the total credits of Rs. 9,01,03,569/- (supra), viz. (i) the cash deposits made by the assessee firm during Printed from counselvise.com 4 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. the demonetization period: Rs. 86,37,018/-; and (ii). gross receipts that were disclosed in its Profit & Loss account: Rs. 5,58,480/-, and held the balance amount of Rs. 8,09,08,071/- as the undisclosed business turnover of the assessee firm. Thereafter, the A.O. computed the income element in the aforesaid business turnover of Rs. 8,09,08,071/- (supra) @ 2%, and determined the same at Rs. 16,18,161/-. Apart from that, the A.O., in the absence of any explanation forthcoming from the assessee firm regarding the source of the cash deposits made in its bank account during the demonetization period, held the entire amount of Rs. 86,37,018/- (supra) as having been sourced out of its unexplained money under Section 69A of the Act. Accordingly, the A.O. vide his order passed under Section 143(3) of the Act, dated 22.12.2019, determined the income of the assessee firm at Rs. 1,02,64,479/-. 4. Aggrieved, the assessee firm carried the matter in appeal before the CIT(A), but without success. For the sake of clarity, the observations of the CIT(A) are culled out as under: “7. Adjudication: Printed from counselvise.com 5 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. 7.1 During the assessment proceedings, the AO found that the total credits in the bank accounts were at Rs.9,01,03,569/- and also found that the assessee made cash deposits of Rs.86,37,018/- during the demonetisation period. As the assessee did not explain the sources of cash deposits made during the demonetisation period, the AO treated the sum of Rs.86,37,018/- as Unexplained Money u/s.69A of the Act. The AO computed the undisclosed business turnover by subtracting the demonetisation cash deposits of Rs.86,37,018/- and the total income of Rs.5,58,480/- offered in ITR from the total credits of Rs.9,01,03,569/- and arrived at the undisclosed business turnover as Rs.8.09,08,071/- (Rs.9,01,03,569 Rs.86,37,018 Rs.5,58,480) and thereon computed the income at 2% of Rs.8,09,08,071/- as undisclosed business profit. 7.2 In the course of appellate proceedings, the appellant/assessee made only the claim that the cash deposited during the demonetisation period is not unexplained but its business turnover. If that were the case, all such deposits would have been transferred to mobile service providers appearing as debit transfers in the bank statement of the assessee. However, the assessee has not provided any evidence substantiating its claim that the cash deposited in the demonetisation period was immediately transferred to the mobile service providers. In the absence of any evidence, the claim of the assessee is rejected and addition made by the AO u/s.69A is upheld. 7.2.1 Whereas in respect of addition made by the AO @ 2% of the business turnover of Rs.8,09,08,071/- I am in complete agreement with the Ld. AO as the commission @2% in this line of business is reasonable. 7.3. In view of the above, the grounds of appeal are rejected and the appeal is dismissed. 8. As a result, appeal filed by the appellant against the order passed u/s. 143(3) of the I.T. Act for A.Y. 2017-18 is treated as DISMISSED.” 5. The assessee firm aggrieved with the order of the CIT(A), has carried the matter in appeal before us. 6. We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities, and the material available on record. Printed from counselvise.com 6 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. 7. Shri K.A. Sai Prasad, C.A. the learned Authorized Representative (for short “Ld.AR”) for the assessee firm, at the threshold of hearing of the appeal, submitted that the authorities below had grossly erred in treating the cash deposits of Rs. 86.37 lacs (approx.) made during the demonetization period in the bank account of the assessee firm as having been sourced out of its unexplained money under Section 69A of the Act. Elaborating on his contention, the Ld. AR submitted that the subject cash deposits were the collections made by the assessee firm in the normal course of its business as that of a distributor of Idea Mobile Commerce Services Limited, Hermes I Tickets Private Limited and others, which amounts after being deposited in its bank account were transferred to the said respective principal parties. The Ld. AR to buttress his aforesaid claim had taken us through the transactions in the bank accounts of the assessee firm during the demonetization period, viz., (i). Bank A/c No.00000035536068802 with SBI, Branch: Kukatpally Branch; and (ii). Bank A/c No.916020059871828 with Axis Bank. The Ld. AR submitted that the cash deposits made in the respective bank accounts were immediately transferred to the aforementioned Printed from counselvise.com 7 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. principal parties. It was thus, the Ld. AR's claim that as the subject cash deposits were, like those of the remainder year, part of the collections of the assessee firm as a distributor/agent of the aforementioned principal parties, therefore, there was no justification for the A.O. to have held the same as having been sourced out of its unexplained money under Section 69A of the Act. 8. Per contra, Shri Posu Babu Alli, learned Senior Departmental Representative (for short “Ld. DR”) relied upon the orders of lower authorities. It was submitted by the Ld. DR that as the assessee firm has failed to discharge the onus that was cast upon it to explain the source of the subject cash deposits made in its bank account during the demonetization period, therefore, both the authorities below had in the absence of any plausible explanation, held the same as having been sourced out of the assessee firm's unexplained money under Section 69A of the Act. 9. We have thoughtfully considered the contentions advanced by the learned Authorized Representatives of both parties in the backdrop of the orders of the lower authorities. Printed from counselvise.com 8 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. 10. We find on a perusal of the record that it is the claim of the assessee firm that it is a distributor/agent of Idea Mobile Commerce Services Limited, Hermes I Tickets Private Limited and others, and had rendered its services to facilitate customers to make payments to billing companies and merchant entities for the purchase of products/services. It was claimed by the assessee firm that for the services rendered, it received a marginal percentage of commission on the collections that were deposited in its bank accounts and transferred to the aforementioned principal parties. Although it is the claim of the assessee firm, that the cash deposits of Rs. 86.37 lacs (supra) made in its bank accounts during the demonetization period were the business collections (like the remainder year), that were immediately transferred to the principal parties, viz. Idea Mobile Commerce Services Limited, Hermes I Tickets Private Limited and others, but, we are afraid that the same, in the absence of supporting documentary evidence, cannot be summarily accepted. We, though, are of a firm conviction that a conjoint perusal of debit/credit entries in the respective bank accounts of the assessee firm during the demonetization period, which have a Printed from counselvise.com 9 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. same trend as those for the remainder year, prima facie, inspires confidence in the claim of the assessee that the same were also its business collections/receipts on which it had received commission income, but once again, the said claim of the assessee firm requires to be supported by documentary evidence/material. 11. We thus, based on our aforesaid observations, are of the considered view that the matter in all fairness requires to be restored to the file of the A.O., who is directed to verify the claim of the assessee that the cash deposits of Rs. 86.37 lacs (supra) formed part of its business collections/receipts. Needless to say, the A.O. shall, in the course of the set-aside proceedings, afford a reasonable opportunity of being heard to the assessee firm, which shall remain at liberty to substantiate its claim based on fresh documentary evidence, if any. Printed from counselvise.com 10 ITA No.22/Hyd/2025 Sai Enterprises, Hyderabad. 12. Resultantly, the appeal filed by the assessee firm is allowed for statistical purposes. Order pronounced in the Open Court on 3rd September, 2025. Sd/- (मंजूनाथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 03.09.2025. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Sai Enterprises, C/o. Katrapati & Associates, 1-1- 298/2/B/3, Sowbhagya Avenue Apartments, 1st Floor, Ashok Nagar, Street No.1, Hyderabad. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward – 11(3), Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad Printed from counselvise.com "