Income Tax Appellate Tribunal - Patna
Assistant Commissioner Of Income Tax, ... vs Kamlesh Kumar, Nawada on 18 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"PATNA BENCH", PATNA
(VIRTUAL HEARING AT KOLKATA)
SHRI DUVVURU RL REDDY, VICE PRESIDENT
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA No. 369/PAT/2024
Assessment Year : 2017-18
Assistant Commissioner of Vs. Kamlesh Kumar,
Income Tax, Circle -1, Patna, Emambara Gali, Gola
Fourth Floor, Lok Nayak Bhavan, Road, Nawada-805110
Dak Bunglow Chauraha, [PAN: AODPK1100J]
Patna - 800001
APPELLANT RESPONDENT
Assessee by : Shri A.K. Rastogi, Sr. Adv.
Revenue by : Sh. Manab Adak, JCIT
Date of hearing : 21.01.2026
Date of Pronouncement : 18.03.2026
ORDER
PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
This is an appeal filed by the revenue against the order passed u/s 250 of the Income Tax Act, 1961 (hereafter "the Act") by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereafter "the Ld. CIT(A)] dated 23.02.2024, DIN & order No. ITBA/NFAC/S/250/2023-24/1061370544(1) on the following grounds:
"1. Whether on the facts and circumstances of the case, the Ld. CIT (A), NFAC has erred in deleting the addition of Rs.98,72,500/- merely on that the appellant has maintained books of accounts and A.Ο could not find any defect 2 ITA No. 369/Pat/2024 Kamlesh Kumar in the books of accounts that are audited u/s 44AB of the Act, in spite of the fact that the assessee had failed to explain nature and source of cash deposited made in bank accounts during demonetization period.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in finding that sales and cash deposits are more or less in same ratio for previous two years and succeeding two years along with the year under consideration, in spite of the fact that as per comparative details of cash deposits of previous year and year under consideration the cash deposit made during demonetization period is 2250% higher than the cash deposits made during the same period in previous year.
3. Whether on the facts and circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 98,72,500/- merely on that cash sale on 01/11/2016 was recorded at Rs. 87,63,580/- and no such high cash sale was recorded prior or after such date during the year cannot be the ground for addition in absence of any further inquiry of such sale, in spite of the fact that onus is on the assessee to prove genuineness of transactions and the assessee has also not filled up the coloumn of cash deposited during 09/11/2016 to 31/12/2016 in his ITR for the year under consideration.
4. Any other ground that may be urged at the time of hearing.
2. Briefly stated the facts of the case are that the assessee is an individual derives income from wholesale business of foodgrains and rice mill. The assessee has filed his return of income on 13.07.2017 declaring income of Rs. 12,64,500/-. The case was selected for scrutiny under CASS . Accordingly, notice u/s 143(2) of the Act dated 22.09.2018 was duly served to the assessee. Subsequently, other statutory notices were issued to the assessee. The assessee furnished reply details information document were asked and relevant information were furnished by the assessee . It was noticed that the assessee has deposited cash of Rs. 98,72,500/- during demonetisation period in his six bank accounts and the AO has made comparative chart for the previous financial year 2015- 16 for the same period and he observed that the cash deposits during demonetisation period was 2250% higher than the cash deposits in the previous corresponding period. He further noted that the assessee has shown cash sales of Rs. 87,63,580/- on 01.11.2016. However, during the financial year 2016-17, the assessee had not made high cash sales either prior to this date or post this date. It addresses that recently he has been made for adjustment which reveals that manipulate 3 ITA No. 369/Pat/2024 Kamlesh Kumar submission has been made by the assessee. This is quite unreasonable and inaccessible while filing the return, the assessee has filed 'Nil' income in the column provided regarding cash deposit during demonetisation period and provision of section 69A of the Act was invoked by the AO and which were unexplained, therefore, the entire cash deposits during the demonetisation was treated as unexplained money u/s 69 of the Act and added back to the income of the assessee and the AO invoked section 115BB of the Act.
3. Aggrieved from the above order, the assessee filed appeal before the Ld. CIT(A) and made detailed written submissions incorporating the total turnover from AY 2015-16 to AY 2019-20 and relying on same case laws. The Ld. CIT(A) after going from the submissions made and accumulated figures for the previous year and current year are the demonetisation period for the whole year. He observed that the AO has noted that on 01.11.2016 the assessee has made cash sales of Rs. 87,63,580/- but he has not made any third-party investigation to establish such observation that it is manipulate turnover and did not make any enquiry the AO could have verified on such high cash sales, therefore, there cannot be the basis for making addition. The assessee furnished details of cash sales, cash deposits into bank account and he allowed the appeal of the assessee.
4. Aggrieved from the order of the Ld. CIT(A), the revenue is in appeal before the ITAT.
5. The Ld. DR relied on the orders of the AO and submitted that there is extraordinary cash sales on 01.11.2016. The assessee is not specified the conditions precedents in section 69A of the Act and the AO is justified with the comparative chart prepared which has not been controverted by the Ld. CIT(A) as well as the assessee, the AO is also observed that the assessee has accepted a cash sales on 01.11.2016 there is no pre 4 ITA No. 369/Pat/2024 Kamlesh Kumar and post of demonetisation as such huge cash sales, therefore, the genuineness of transaction could not proved by the assessee and requested that the order of the AO may be upheld.
6. On the other hand, the Ld. Counsel relied on the order of Ld. CIT(A) and submissions made before the lower authorities. He has filed a written synopsis which is as under:
"Preliminary objection on maintainability of appeal :
The department has assailed deletion of addition of Rs.98,72,500/- by CIT(A), National Faceless Appeal Centre (NFAC), Delhi. The Assessing Officer has invoked provisions of Section 115BBE in respect of addition of Rs.98,72,500/- made u/s 69A of the Act. The provisions of Section 115BBE stipulates tax rate of 60%. The relevant provision is reproduced hereunder:
"Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D.
115BBE. [(1) Where the total income of an assessee,-
(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or
(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 694, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of-
(i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and
(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (1).] (2) ............................"
The tax liability @60% on the deletion made by Ld. CIT(A), NFAC amounting to Rs.98,72,500/- comes to Rs.58,47,975/- which is less than Rs.60 lakhs prescribed by the CBDT vide Circular No.09/2024 dated 17/09/2024. However, the Assessing Officer in Form No.36 filed along with Memo of Appeal has shown tax effect of Rs.76,26,506/-, details of which are not given either in the demand notice or in the assessment order. It seems that the Assessing Officer has charged some interest and/or may have levied surcharge while mentioning the sum of Rs.76,26,506/- in Form No.36. As far as interest is concerned, it is submitted that the interest is not required to be calculated for working out the tax effect as per Circular No.03/2018 dated 11/07/2018 (para-4). In case the Assessing Officer has levied surcharge, the same is not 5 ITA No. 369/Pat/2024 Kamlesh Kumar permissible as per mandatory provision quoted above which requires income tax calculated @60%. The plain reading of the provisions of Section 115BBE makes it clear that it does not stipulate charging of surcharge over and above 60%.
The provisions of Section 115BBE and the provisions of Section 113 are covered under Chapter XII which is "DETERMINATION OF TAX IN CERTAIN SPECIAL CASES". Thus, these provisions are special provisions and thus exclude the general provision as held by Hon'ble Supreme Court in the following judgments:
AIR 1964 SC 207-South India Corpn. (P) Ltd. v. Secy., Board of Revenue "18. With this background let us now consider the following two questions raised before us (1) Whether Article 372 of the Constitution is subject to Article 277 thereof; and (2) whether Article 372 is subject to Article 278 thereof. Article 372 is a general provision; and Article 277 is a special provision. It is settled law that a special provision should be given affect to the extent of its scope, leaving the general provision to control cases where the special provision does not apply. The earlier discussion makes it abundantly clear that the Constitution gives a separate treatment to the subject of finance, and Article 277 saves the existing taxes etc. levied by States, if the conditions mentioned therein are complied with. While Article 372 saves all pre-Constitution valid laws. Article 277 is confined only to taxes, duties, cesses or fees lawfully levied immediately before the Constitution. Therefore, Article 372 cannot be construed such a way as to enlarge the scope of the saving of taxes, duties, cesses or fees. To state it differently, Article 372 must be read subject to Article
277. We have already held that an agreement can be entered into between the Union and the States in terms of Article 278 abrogating or modifying the power preserved to the States under Article 277.
19. That apart, even if Article 372 continues the pre-Constitution laws of taxation, that provision is expressly made subject to the other provisions of the Constitution. The expression "subject to" conveys the idea of a provision yielding place to another provision or other provisions to which it is made subject. Further Article 278 opens out with a non obstante clause. The phrase "notwithstanding anything in the Constitution" is equivalent to saying that spite of the other articles of the Constitution, or that the other articles shall not be an impediment to the operation of Article 278. While Article 372 is subject to Article 278, Article 278 operates in its own sphere in spite of Article 372.
The result is that Article 278 overrides Article 372; that is to say, notwithstanding the fact that a pre-Constitution taxation law continues in force under Article 372, the Union and the State Governments can enter into an agreement in terms of Article 278 in respect of Part B States depriving the State law of its efficacy. In one view Article 277 excludes the operation of Article 372, and in the other view, an agreement in terms of Article 278 overrides Article 372. In either view, the result is the same, namely, that at any rate during the period covered by the agreement the States ceased to have any power to impose the tax in respect of "works contracts".
AIR 1979 SC 1098 - State of Gujarat v. Patel Ramjibhai Danabhai "26. Thus, Section 33(6) is, in terms, restricted in its application to the case of an unregistered dealer whose modus operandi to evade tax involves ab initio 6 ITA No. 369/Pat/2024 Kamlesh Kumar disregard of the law. It does not apply to a registered dealer who has escaped assessment or has been under-assessed or assessed at a lower rate or has been wrongly allowed any deductions or has concealed any material particulars relating to sales or purchases or has knowingly furnished incorrect returns. The case of such a registered dealer will fall under Section 35 and not under Section 33(6). Section 33(6) is a special provision confined to a particular class of tax evaders, namely, unregistered dealers; while Section 35 is a general provision to deal with cases of escaped assessment or under assessment. Generalia specialibus non derogant is a cardinal principle of interpretation. It means that the general provisions must always yield to the special provisions. Construed in accordance with this fundamental principle, the special class of unregistered dealers covered by Section 33(6) must be taken to have been excluded from the purview of the general provisions in Section 35. Thus considered, it is clear that in the case of an unregistered dealer who evades tax by committing the double default specified in Section 33(6), action can be taken only under that section and not under Section 35."
Further, the provisions of Section 115BBE unlike Section 113 does not authorize levy of any surcharge and, thus, no surcharge is leviable in view of the judgment of Hon'ble Supreme Court rendered in the context of Section 113 in the case of CIT (Central)-1, New Delhi Vs. Vatika Township Pvt. Ltd reported in (2014) 367 ITR 466 (SC), the relevant portion reads as under:-
Page-484
"27. Before we proceed to answer the question, it would be necessary to keep in mind the scheme of block assessment introduced in Chapter XIV-B to the Finance Act, 1995, with effect from July 1, 1995. As already mentioned in brief by us, Chapter XIV-B of the Act which deals with block assessment lays down a special procedure for search cases. The main reason for adding these provisions in the Act was to curb tax evasion and expedite as well as simplify the assessments in such search cases. Undisclosed incomes have to be related in different years in which income was earned under block assessment. This is because in such cases, the "block period" is for the previous years relevant to 10/6 assessment years and also the period of the current previous year up to the date of the search, ie, from April 1, 2000, to January 17, 2001, in this case. The essence of this new procedure, therefore, is a separate single assessment of the "undisclosed income", detected as a result of search and this separate assessment has to be in addition to the normal assessment covering the same period. Therefore, a separate return covering the years of the block period is a pre-requisite for making block assessment. Under the said procedure, the Explanation is inserted in section 158BB, which is the computation section, explaining the method of computation of "undisclosed income" of the block period. It is now well accepted that this Chapter is a complete code in itself providing for self- contained machinery for assessment of undisclosed income for the block period of 10 years or 6 years, as the case may be. In the case of regular assessments for which returns are filed on yearly basis, section 4 of the Act is the charging section. However, at what rate the income is to be taxed is specified every year by Parliament in the Finance Act. In contradistinction, when it comes to payment of tax on the undisclosed income relating to the block period, rate is specified in section 113 of the Act. It remains static at 60 per cent. of the undisclosed income which is the categorical stipulation in section 113 of the Act. Section 158BA(2) of the Act clearly states that the total undisclosed income relating to the block period 7 ITA No. 369/Pat/2024 Kamlesh Kumar "shall be charged to tax" at the rates specified under section 113 as income of the block period irrespective of the previous year or years. Under section 113 of the Act, the undisclosed income is chargeable to tax at the rate of 60 per cent.
..............."
Page-496 & 497 "(e) There is yet another very interesting piece of evidence that clarifies the provision beyond any pale of doubt, viz., understanding of the Central Board of Direct Taxes itself regarding this provision. It is contained in Central Board of Direct Taxes Circular No. 8 of 2002, dated August 27, 2002, with the subject "Finance Act, 2002-Explanatory Notes on provision relating to Direct Taxes". This circular has been issued after the passing of the Finance Act, 2002, by which amendment to section 113 was made. In this circular, various amendments to the Income-tax Act are discussed amply demonstrating as to which amendments are clarificatory/retrospective in operation and which amendments are prospective. For example, the Explanation to section 158BB is stated to be clarificatory in nature. Likewise, it is mentioned that amendments in section 145 whereby the provisions of that section are made applicable to block assessments is made clarificatory and would take effect retrospectively from the 1st day of July, 1995. When it comes to amendment to section 113 of the Act, this very circular provides that the said amendment along with amendments in section 158BE, would be prospective, i.e., it will take effect from June 1, 2002.
(f) The Finance Act, 2003, again makes the position clear that sur charge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in the second proviso to sub-section (3) of section 2 of the Finance Act, 2003**. This proviso reads as under:
"Provided further that the amount of Income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in paragraph A, B, C, D or E, as the case may be, of Part III of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the Income-tax Act."
Addition of this proviso in the Finance Act, 2003, further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect of the surcharge, having been created for the first time by the insertion of the proviso to section 113, is clearly a substantive provision and, hence, is to be construed prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Furthermore, an amendment made to a taxing statute can be said to be intended to remove "hardships" only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from June 1, 2002.
40. The aforesaid discursive of ours also makes it obvious that the conclusion of the Division Bench in Suresh N. Gupta treating the proviso as clarificatory 8 ITA No. 369/Pat/2024 Kamlesh Kumar and giving it retrospective effect is not a correct conclusion. The said judgment is accordingly overruled.
41. As a result of the aforesaid discussion, the appeals filed by the Income-tax Department are hereby dismissed. The appeals of the assessees are allowed deleting the surcharge levied by the Assessing Officer for this block assessment pertaining to the period prior to June 1, 2002."
Thus, charging of surcharge by the Assessing Officer for the purposes of working out the tax effect would be contrary to the mandatory provisions of the Act and since in the present case the tax effect is less than Rs.60.00 lakhs, the departmental appeal is not maintainable and is fit to be dismissed in limine.
Submission on Ground Nos.1 to 4 of the Departmental Appeal The assessee has submitted a written submission before the Ld. CIT(A), NFAC (copy placed at pages 1 to 57 of PB) wherein it has been contended that:
(1) post demonetization and in the year 2017, e-queries have been received which have duly been complied with by filing compliance on ITD portal on Cash Transaction 2016 Tab (copy at pages 50 to 57 of PB) wherein the source of deposit during demonetization were explained to be out of cash in hand as on 08/11/2016 which in turn is covered out of sales up to that date i.e. 08/11/2016. Copy of cash book placed at pages 19 to 37 of PB at pages 19 & 24 showing opening balance of cash as on 09/11/2016 at Rs.89,02,722/-
& Rs.9,72,572/-totaling to Rs 98,75,294/-;
(2) the cash book has been produced before the Assessing Officer besides details/information/document as requisitioned as would be evident from the assessment order and particularly at page-3 (last line) wherein the Assessing Officer has noticed the fact of production of cash book, the relevant portion reads "Also from the cash book produced by the assessee";
(3) the Assessing Officer has not pointed out any defect in the books of accounts so produced rather to the contrary, the purchases, sales and expenditure as per audited set of accounts of the two proprietary concerns were accepted by the AO;
(4) the assessee is in the business of wholesale trading of food grains and rice mill for the last 10 years and the year under consideration is not the first year of business;
(5) the Rols over the years have been filed along with audited set of accounts which reflects the entire financial transaction of the respective year including the year under consideration which was summarized in a chart at page-3 of WS before the CIT(A), NFAC and is reproduced hereunder:
Particulars AY AY 2016-17 AY 2017-18 AY 2018-19 AY 2019-20 year under 2015-16 consideration 9 ITA No. 369/Pat/2024 Kamlesh Kumar Sale 1,49,96,807 2,60,46,460 14,18,67,505/- 21,83,10,155/- 12,10,15,526/-
Purchase 1,47,20,421/- 2,52,16,341/- 13,80,49,992/- 21,23,35,432/- 12,07,46,012/-
Closing 34,85,085/- 49,09,343/- 58,08,610/- 64,24,295/- 97,84,926/- Stock Closing 1,11,331/- 3,28,933/- 21,604/- 3,869/- 10,465/- cash-in-
hand Total deposit 1,41,39,845/- 2,12,95,920/- 14,65,09,960/- 20,46,20,170/- 11,74,41,397/-
in Bank
account out
of sale
proceeds
and receipt
from debtors
...............
(6) the food grains are subject to levy under VAT Act and the VAT returns for the year under consideration showing a turnover of Rs.14.18 crores was also brought on record (at page-41 to 49 of PB);
(7) the provisions of Section 69A are not applicable ass the source of deposits is out of trading transaction i.e. sale of food grain and rice;
(8) the judicial pronouncement are distinguishable on facts and that the case of the assessee is covered by judgment of jurisdictional High Court in the case of Lakshmi Rice Mills Vs CIT reported (1974) 97 ITR 258 which was a case of demonetization and the Hon'ble Court has held that "It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time."; and (9) the Assessing Officer has made the addition merely on the basis of suspicion, surmises and conjunctures as against the documentary evidences such as audited set of accounts, books of accounts, VAT Return, etc. produced by the assessee.10 ITA No. 369/Pat/2024
Kamlesh Kumar The Ld. CIT(A), NFAC noticing the above said facts has been pleased to negate all the findings of the A.O. in para 5.3 at page 24 of its order which are summarized hereunder:
(1) it is undisputed that the appellant produced cash books besides details/information/ documents as requisitioned before the Ld. A.O. during assessment proceeding and no defect could be pointed out by him;
(2) the A.O. has accepted the purchases, sales and other expenditures as per audited set of accounts of two proprietary concern;
(3) the A.O.'s perception drawn from comparative cash deposit from the year under consideration vis-à-vis preceding years figures and examination of cash book that the assessee has shown a cash sales of Rs.87,63,580/- on 01/11/2016 and during F.Y 2016-17, he has never made such a high cash sales prior to this date or post this date and thus, concluded that cash sales of Rs.87,63,580/- on 01/11/2016 is an adjustment by way of manipulation and considered unreasonable and unacceptable in my opinion is wholly unfounded in absence of any third party verification to establish such observation.
Thereafter, the Ld. CIT(A) has deleted the addition, the relevant portion from the order of Ld. CIT(A) is reproduced hereunder:
Para 5.4 at page 24 & 25 of its order "On the contrary the appellant has demonstrated with details of sales and cash deposits in bank accounts for the previous two years and succeeding two years along with the year under consideration and find that the sales and cash deposits are more or less in same ratio for all the five years. The Id AO observation that on 01-11-2016 case sale was recorded at Rs.87,63,580/-and no such high cash sale was recorded prior or after such date during the year. But that finding alone cannot be the ground for addition in absence of any further inquiry of such sale. Ld AO could not find any defect in the books of accounts that are audited u/s 44AB of the Act. Case laws relied upon by the id AO does not support the finding of the AO. The submission made by the appellant find merit and hence considering the discussion made above, I am declined to hold the view of the AO and accordingly delete the addition of Rs.98,72,500/-, The ground of appeal raised on the issue are, thus, allowed."
It is respectfully submitted that the view taken by the Ld. CIT(A), NFAC is in consonance with the order of the Hon'ble Tribunal, Patna Bench, Patna wherein under similar circumstances, addition made u/s 69A on account of cash deposit during demonetization covered out of trading receipt have been deleted. Kind reference is invited to one such order in the case of Sushil Kumar Choudhary vs. DC/ACIT in ITA No.269/Pat/2023 for A.Y.2017-18 dated 27/11/2024 (copy attached at pages 58 to 61 of PB).
In the circumstances, it is submitted that the order of the Ld. CIT(A), NFAC may kindly be affirmed and the departmental appeal may kindly be dismissed."
7. Considering the rival submission and perusing the entire material available on record and orders of authorities below. Here the e dispute is 11 ITA No. 369/Pat/2024 Kamlesh Kumar regarding the cash deposited during demonetisation period of Rs.
98,72,500/- in SBNs. We noted from the comparative chart provided by the assessee that the turnover for the year under consideration is Rs. 14,18,67,505/- which has been accepted by the AO and the cash deposited by the assessee during demonetisation is also part of the turnover which has not been doubted by the AO. We also noted that on 01.11.2016 the assessee has cash sales of Rs. 87,63,580/- which is a major part of the cash deposits. If the AO had any doubt of the genuineness of the transaction of the cash sales shown, he could have verified independently but he did not do so and the revenue is raising issue before us which is not correct. During the course of assessment proceeding, the assessee has furnished the information as required by the AO, he has not pointed out any deficiency in the submission of the assessee and merely making statistical analysis as comparative chart is not conclusive to make disallowance u/s 69A of the Act. He should have gone with the conclusive prove he should have asked to the assessee to furnish the genuineness of high cash sales on 01.11.2016. Accordingly, after carefully gone through the order of the lower authorities, we do not find any infirmity in the order of the Ld. CIT(A). Accordingly, we dismiss the appeal of the revenue.
8. In the result, appeal of the revenue is dismissed in above terms.
Order pronounced on 18.03.2026
Sd/- Sd/-
(Duvvuru RL Reddy) (Laxmi Prasad Sahu)
Vice President Accountant Member
Dated: 18.03.2026
AK, Sr. P.S.
12
ITA No. 369/Pat/2024
Kamlesh Kumar
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. Pr. CIT
4. CIT(A)
5. CIT(DR)
//True copy//
By order
Assistant Registrar, Kolkata Benches