VIJAKUMAR JAGANNATH AGARWAL,AHMEDABAD V. INCOME TAX OFFICE, GUJ-C-1-104, CIRCLE 2(1)(1), AHMEDABAD

ITA 1985/AHD/2024

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The case involves Vijaykumar Jagannath Agarwal, who appealed against the order of the Commissioner of Income Tax (Appeals), which upheld the addition of Rs. 30,26,460 to his income for the Assessment Year 2017-18 under Section 69A of the Income Tax Act, 1961. This addition was based on unaccounted cash deposits during the demonetization period. The assessee argued that these deposits were from legitimate cash sales and household savings, supported by books of account and Aadhaar details, which were not accepted by the AO and CIT(A) due to the absence of PAN details. The Tribunal found that the AO and CIT(A) did not adequately verify the transactions and directed further investigation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472258 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: Lakhmichand Baijnath v. CIT (1959) 35 ITR 416 (SC), Durga Fire Work v. ITO (ITA No. 383/Del/2024, ITAT Delhi), Shivam Industries v. ACIT (ITA No. 1612/Del/2021, ITAT Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: MITUL A. RUPARAYL
• Keywords: Business income; Onus to prove
• Section: 142(1); 143(2); 133(6); 69A

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “सी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ C ” BENCH, AHMEDABAD \u0015ी टी.आर. से\u0018\u0019ल क ुमार, \u0011ाियक सद\u001b एवं \u0015ी मकरंद वसंत महादेवकर, लेखा सद\u001b क े सम!। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1985/Ahd/2024 िनधा \u000fरण वष\u000f /Assessment Year : 2017-18 Vijaykumar Jagannath Agarwal B-79, Sumel Business Park Behind New Cloth Market Ahmedabad – 380 002 बनाम/ v/s. The Income Tax Office Gujarat C-1-104 Circle-2(1)(1) Ahmedabad – 380 015 \u0013थायी लेखा सं./PAN: AAZPA 8345 B (अपीलाथ$/ Appellant) (%& यथ$/ Respondent) Assessee by : Shri Mitul A. Ruparayl, CA Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 17/02/2025 घोषणा की तारीख /Date of Pronouncement: 19/02/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi [“CIT(A)”] dated 27/09/2024, for the Assessment Year (A.Y.) 2017-18, wherein the CIT(A) upheld the addition of Rs. 30,26,460/- made by the Assessing Officer (“AO”) under Section 69A of the Income Tax Act, 1961 (“the Act”). 2. Following grounds of appeal are raised by the assessee before us: ITA No.1985/Ahd/2024 Vijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1 Asst. Year : 2017-18 2 “1. The order passed by the Commissioner of Income Tax (Appeal), (NFAC), Delhi is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now. 2. The Commissioner of Income Tax (Appeal), (NFAC), Delhi has grossly erred in confirming the addition of Rs.30,26,460/- on account of unaccounted cash deposit during demonetization period by invoking the provisions of section 69A of the Act. There were cash deposits during demonetization period by the Appellant of Rs.30,26,400/- over two bank accounts (Rs.27,76,460/- in the bank account no.5911466143 and Rs.2,50,000/- in the bank account no.2101540013053). The Appellant has submitted with the arguments that Rs.27,76,640/- cash were generated from cash sales for which he duly submitted books of account, audit report, sales invoices, bank statements, cash book ledger and aadhaar details of the third party to prove the genuineness of the transactions and have also documented in the books of account and have offered for taxation and regarding Rs.2,50,000/-, the Appellant stated on record that such cash monies were of the house hold savings done by her wife over the period of their life. 3. In continuation with what is stated above, the Commissioner is banking on the view of JAO who is of the view that regarding Rs.27,76,640/-, the Appellant has not provided Pan Cards and considers PAN details the only critical tool to examine the genuineness and other aspects of the transactions. The AO made an addition only on the basis that Pan details were not provided and have clearly dismissed in accepting aadhaar details and the CIT(A) has backed the decision of the AO. 4. The Appellant reserves his right to submit all the details in connection with the addition as fresh evidence as per Rule 46A of the Income Tax Rules, 1962 at the time of hearing this appeal. Being aggrieved by the dismissal of aadhaar details and therefore making the addition under section 69A of the Act, the Appellant prefers to appeal on the accompanied grounds. 5. The Appellant craves, leave to add, to alter, to modify, to amend or to withdraw/delete any of the grounds of appeal at any time in or before the final hearing of appeal.” Facts of the Case: 2. The assessee is engaged in the textile trading business and had deposited Rs. 27,76,460/- in the bank account of his proprietorship firm, M/s. Rajesh Textile (Kotak Mahindra Bank), and Rs. 2,50,000/- in his personal ITA No.1985/Ahd/2024 Vijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1 Asst. Year : 2017-18 3 savings account (Nutan Nagrik Bank) during the demonetization period (08.11.2016 to 30.12.2016). The case was selected for scrutiny assessment under CASS. Multiple notices were issued under Sections 143(2) and 142(1) of the Act, but the assessee failed to comply on several occasions. The assessee's bank statements reflected large cash deposits during the demonetization period, which were significantly higher than the usual deposits in earlier years. The AO made the addition under Section 69A on the grounds that the assessee failed to provide PAN details of customers who allegedly made cash purchases. The AO rejected the Aadhaar details provided for buyers, stating that PAN was necessary to verify the identity and genuineness of transactions. As the assessee could not establish the source of cash deposits, the deposits were treated as unexplained money under Section 69A. 3. The assessee filed an appeal before the CIT(A) arguing that the cash deposits were generated from legitimate cash sales, which were duly recorded in the books of accounts, the books of accounts were audited, the amount relating to cash deposits was offered for taxation, and tax was paid. The CIT(A), however, upheld the AO’s decision, stating that the assessee failed to provide PAN details of customers even during remand proceedings. The CIT(A) also noted that Aadhaar details alone were not sufficient to verify the genuineness of transactions. CIT(A) held that the assessee failed to discharge his burden of proof under Section 69A of the Act, therefore the AO was justified in making the addition under Section 69A of the Act. 4. During the course of hearing before us, the Authorized Representative (AR) of the assessee contended that AO and CIT(A) accepted the books of ITA No.1985/Ahd/2024 Vijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1 Asst. Year : 2017-18 4 accounts, cash ledger, and bank statements without pointing out any discrepancies therefore adding cash deposits as unexplained money results in double taxation, as the same amount has already been included as sales in the profit & loss account. The AR further contended that the customers of assessee are small and therefore could not produce the PAN cards, however, Aadhaar cards with addresses were provided, discharging the primary burden of proof. The assessee, by way of written submission, relied on some judicial precedents in his support which are: i. Lakhmichand Baijnath v. CIT (1959) 35 ITR 416 (SC). ii. Durga Fire Work v. ITO (ITA No. 383/Del/2024, ITAT Delhi). iii. Shivam Industries v. ACIT (ITA No. 1612/Del/2021, ITAT Delhi). 4.1. Regarding the cash deposit of Rs. 2,50,000/- the AR contended that such cash deposit in the personal savings account of the assessee held with Nutan Nagrik Bank during the demonetization period represents household savings accumulated over several years by the family members and is not unexplained money. The pointed out the CBDT Instruction No. 03/2017 dated 21.02.2017, which provides a Standard Operating Procedure (SOP) for verification of cash deposits during demonetization. The guidelines state that for individuals above 70 years of age, cash deposits up to Rs. 5.0 lakh require no further verification if claimed to be household savings. 5. The Departmental Representative (DR) contended that the assessee failed to provide PAN details of customers even during remand proceedings, which was a key requirement for verification. The DR further contended that ITA No.1985/Ahd/2024 Vijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1 Asst. Year : 2017-18 5 Aadhaar details alone cannot be considered sufficient proof of genuineness of transactions. 6. We have considered the rival submissions and material available on record. We note that the assessee has recorded the cash deposits as sales in the audited books of account, and no discrepancies were found by AO or CIT(A). Failure to provide PAN alone cannot be the sole reason to treat the sales as unexplained money, particularly when Aadhaar details were submitted. The AO, even during remand proceedings, did not attempt any verification under Section 133(6) or other means to investigate the genuineness of transactions. 6.1. The assessee has relied upon the following judicial precedents, which support his case. In Case of Lakhmichand Baijnath v. CIT (1959) 35 ITR 416 (SC), the Hon’ble Supreme Court held that amounts credited in business books are presumed to be business receipts unless proven otherwise by the Revenue. In the present case, the Revenue has not disproved the assessee’s explanation or challenged the audited books of account. In case of Durga Fire Work v. ITO (ITA No. 383/Del/2024, ITAT Delhi), the Co-ordinate bench ruled that cash deposits recorded in audited books cannot be treated as undisclosed income under Section 69A. In present case the AO accepted the books of account yet rejected the transactions solely due to the absence of PAN, which goes against this ruling. In case of Shivam Industries v. ACIT (ITA No. 1612/Del/2021, ITAT Delhi), the co-ordinate bench held that if books are audited and not rejected, Revenue cannot make an addition under Section 69A. In the present case the assessee’s books were audited and accepted therefore, the addition is not justified. Considering the judicial ITA No.1985/Ahd/2024 Vijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1 Asst. Year : 2017-18 6 precedents and the facts of the case, we find that the AO has failed to conduct proper verification before making the addition. 6.2. In case of cash deposit of Rs.2,50,000/- assessee explained that the deposit of Rs. 2,50,000/- was out of household savings accumulated over several years. The AO made an addition under Section 69A of the Act, treating the amount as unexplained, citing a lack of documentary evidence. The CIT(A) has not dealt with this issue in his order. We have considered the argument of the AR and find that The quantum of deposit is small (Rs. 2,50,000/-) and falls within the permissible exemption limit as per CBDT guidelines for senior citizens. The Revenue has not brought any material evidence to disprove the assessee’s explanation. The AO made the addition solely based on suspicion, without conducting an inquiry under Section 133(6) or analyzing the assessee’s past financial records. 6.3. Given the above findings, as regards the addition of Rs. 27,76,460/- representing cash deposits in the bank account of M/s. Rajesh Textile we deem it appropriate to restore the matter to the file of the AO with the directions to verify the genuineness of the parties whose Aadhaar details have been provided by the assessee. Conduct independent inquiries, including issuing notices under Section 133(6) of the Act to verify the buyers, instead of dismissing the transactions outright for lack of PAN details. 6.4. As regards the addition of Rs. 2,50,000/- deposited in the assessee’s personal savings account, we find merit in the argument that the CBDT Instruction No. 03/2017 dated 21.02.2017 specifically provides for exemption from further verification for senior citizens (above 70 years) for deposits up ITA No.1985/Ahd/2024 Vijakumar Jagannath Agarwal vs. Income Tax Office, Guj-C-1 Asst. Year : 2017-18 7 to ₹5.0 lakh, if claimed as household savings. However, since the AO has not examined the financial records, past cash withdrawals, or spending patterns of the assessee, we deem it appropriate to restore this issue for reconsideration. The AO is directed to examine past cash withdrawals, financial history, and pattern of savings to determine whether the deposit could reasonably be attributed to accumulated household savings. The AO is also directed to ensure that the CBDT guidelines are followed in letter and spirit before drawing any adverse inference against the assessee. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 19th February, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 19/02/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)-Income Tax Department 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत \"ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad "