Kanaiyalal Hemendra Vyas Sudhrai Colony Vs ITO (ITAT Rajkot)
Entire Cash Turnover Can’t Be Taxed as Income: Rajkot ITAT Sets Aside ₹83.72 Lakh 69B Addition & Orders Fresh Examination
Rajkot ITAT, Rajkot Bench, in Kanaiyalal Hemendra Vyas Vs ITO (ITA Nos.306 & 307/RJT/2023; AYs 2010-11 & 2011-12; order dated 18-12-2025), set aside the additions of ₹83,72,533 made u/s 69B on account of cash deposits in bank accounts and remanded the matters to the AO for fresh adjudication on merits.
The assessee, engaged in trading of agricultural commodities (onion, wheat, garlic, etc.), had maintained audited books of account and deposited business cash receipts in multiple bank accounts. The AO reopened the assessment u/s 147 and treated the entire cash deposits as unexplained money, primarily on the ground that sales/purchase bills did not contain complete party details, addresses and quantities, and also relied on a statement u/s 131 suggesting the assessee acted as a commission agent. The CIT(A), NFAC summarily confirmed the additions.
The Tribunal held that gross cash deposits/turnover cannot, by themselves, be treated as income, and that the nature of activity—trader vs commission agent—was not properly examined. It observed that the AO did not examine the complete books of account, nor determine whether expenses, purchases and business margins were to be allowed if the receipts were business-related. While upholding the validity of reopening, the ITAT found that the addition on merits was unsustainable without a proper factual inquiry.
In the interest of justice, the ITAT set aside the orders of the lower authorities and directed the AO to re-examine the issue afresh, after granting due opportunity to the assessee to furnish complete customer-wise details (names, addresses, quantities) and to establish the true nature of business and corresponding deductions. Both appeals were allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT RAJKOT
