Sasalakunte Kasimsab Alipeer Vs ITO (ITAT Bangalore)
A wine-shop proprietor admitted a 10% gross profit rate during a survey but did not file a revised return. The AO added ₹12.50 lakh on the strength of that statement. He also questioned cash deposited during demonetisation, despite the proprietor’s explanation that it came from recorded cash sales. The Bangalore Tribunal deleted both disputed additions after examining the trading account, the excise licence and the cash-flow details. :chatgpt-content-reference{index=”0″}
The survey statement and the assessment
The assessee operated a wine shop in Davanagere. He filed his return for AY 2017–18 declaring income of ₹8,50,680. A survey under section 133A was conducted on 28 February 2018, after the close of the relevant financial year.
During the survey, the assessee referred to a 10% gross profit rate, compared with the 8.73% rate stated in the return. The survey declaration also referred to income from items such as soft drinks, soda and snacks. The total additional disclosure recorded by the Department was ₹12.50 lakh. Although the assessee undertook to revise his return, he did not do so. The AO consequently added the disclosed amount. The order records these facts while also stating that the assessee paid ₹40 lakh as tax. :chatgpt-content-reference{index=”1″}
The assessee’s explanation was that the rate mentioned in the survey did not justify a separate addition. His annual trading account showed sales of ₹3,74,26,810 and gross profit of ₹36,97,202, giving an actual gross profit rate of 9.88%—substantially the same as the 10% mentioned during the survey. A further ₹12.50 lakh addition, he argued, would tax an amount already reflected in the business results.
The CIT(A) directed the AO to verify whether the disclosed income had already been accounted for, but did not grant outright relief. The Tribunal found that the necessary figures were already in the annual accounts placed before the appellate authority.
A statement needed support from the business records
The Tribunal examined the trading account, including the recorded sales, opening stock, closing stock and purchases. It accepted that those figures yielded a 9.88% gross profit rate. The difference from the survey’s 10% benchmark was too slight to support the ₹12.50 lakh addition made solely by reference to the statement.
The Tribunal also considered the suggestion of income from other items. The assessee’s Karnataka excise licence authorised the sale of liquor and beer in sealed bottles and prohibited the sale of other items, including soft drinks. It also prohibited opening bottles for service on the premises. No evidence of unaccounted sales had been found during the survey.
In those circumstances, the Tribunal held that there was no basis to sustain the ₹12.50 lakh addition. It considered a further remand unnecessary when the annual accounts containing the relevant gross profit figures were already available. The AO was directed to delete the amount.
The ruling turns on the combination of a survey statement and contemporaneous records. The Tribunal did not hold that a survey statement must be ignored in every case. It found that this particular addition lacked independent support and failed to account for the profit already shown in the trading account.
Cash deposits during demonetisation
The second issue concerned cash deposited in the assessee’s bank account during the demonetisation period. The assessee maintained that the money came from cash on hand and sales recorded in his liquor business. The AO was dissatisfied, in part because the old currency notes were deposited in several instalments rather than all at once.
The assessee explained that heavy queues at banks led him to deposit the notes on different dates within the permitted period. More significantly, he produced the books of account and cash movement details. His cash sales from 1 April to 8 November 2016 were recorded at ₹2,11,47,474. The order also refers to cash sales after 8 November, bank deposits, withdrawals and opening and closing cash balances in statements furnished during the proceedings.
The CIT(A) had acknowledged that cash receipts were higher than in the preceding year, but confirmed the addition because, in his view, a day-to-day cash book and adequate reconciliation had not been produced. The Tribunal noted that the paper book contained month-wise cash-flow details showing the movement of cash and that these details had also been available to the CIT(A).
Having considered those records and the nature of the assessee’s cash-based trade, the Tribunal found no reason to sustain the disputed cash-deposit addition. It directed deletion of ₹13,27,500. The operative portion records that books had been produced and verified, gives cash sales of ₹2,11,47,474 up to 8 November 2016, and records month-wise cash-flow data before deleting the addition. :chatgpt-content-reference{index=”2″}
Author’s comments
The two additions failed for related reasons: the Department did not adequately connect its inference to the actual business records. A survey declaration of a 10% margin could not justify taxing another ₹12.50 lakh when the trading account already reflected 9.88% gross profit and there was no evidence of the alleged unaccounted sales. Similarly, deposits made in stages during demonetisation did not become unexplained merely because the assessee had not taken the entire cash balance to the bank on one day. The recorded sales and cash movement had to be considered.
There are inconsistent cash-deposit figures in the narration of the order, including references to ₹16.17 lakh and ₹13.27 lakh. The Tribunal’s operative finding on Ground No. 3, however, expressly deletes the addition of ₹13,27,500. That is the amount to cite as the relief granted on this ground.
The practical value of the decision lies in its focus on a reconciled trading account and cash trail. Where the books support both the reported margin and the availability of cash, a survey statement or the timing of bank deposits cannot be examined in isolation. The assessee’s appeal was recorded as partly allowed, with both substantive additions challenged before the Tribunal deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
01. The Assessee filed this appeal against the appellate order dated 22 December 2025, passed by the Commissioner of Income Tax (Appeals)-2, Panaji (the learned CIT(A)), for Assessment Year 2017–18. The learned CIT(A) dismissed the Assessee’s appeal against the assessment order passed under section 143(3) of the Income-tax Act, 1961 (the Act), which determined the Assessee’s total income at ₹3,428,180, in contrast to the returned income of ₹850,680.
02. The Assessee has raised the following grounds of appeal:
1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT[A]/NFAC ought to have deleted the addition of Rs. 12,50,000/- made on account of the alleged survey declaration instead of restoring the matter with certain directions to the learned A.O. under the facts and in the circumstances of the appellant’s case.
3. The learned CIT[A]/NFAC erred in upholding the addition of Rs. 13,27,500/- made in respect of the cash deposits made during the period of demonetization treating the same as unexplained money u/s. 69A of the Act under the facts and in the circumstances of the appellant’s case.
3.1. The learned CIT[A]/NFAC ought to have appreciated that the appellant had explained the source of the cash deposits made from out of cash on hand and sales made in the liquor shop being run by the appellant in respect of which there was huge cash sales made during the entire financial year and therefore, the addition made ought to have been deleted.
4. Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-B and 234-D of the Act, under the facts and in the circumstances of the appellant’s case.
5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
03. Grounds Nos. 1 and 5 are general, whereas Ground No. 4 is consequential. Accordingly, these grounds are dismissed.
04. Briefly stated, the Assessee is an individual carrying on the business of a wine shop. He filed his return of income on 28 October 2017, declaring a total income of ₹850,680. The return was selected for scrutiny, and notices were issued. The Income Tax Department conducted a survey under section 133A of the Income-tax Act on 28 February 2018, during which the Assessee admitted a gross profit rate of 10%, compared with 8.73% declared in the return. He also offered income from the sale of soft drinks, soda, and snacks. The total disclosure was ₹12.5 lakh, including a gross profit addition of ₹472,039. Although the Assessee undertook to file a revised return and pay tax on the additional income, he paid only ₹40 lakh as tax and did not file the revised return. The Assessing Officer therefore made an addition of ₹12,50,000 in accordance with the Assessee’s disclosure. The Assessing Officer further noted that, during demonetisation, the Assessee deposited ₹1,617,000 in his State Bank of India account. The Assessee explained that the deposits came from the closing cash balance available on 8 November 2016. The Assessing Officer observed that the demonetised ₹500 and ₹1,000 notes were deposited in 14 instalments between 10 and 28 November 2016, aggregating ₹1,617,000. The Assessee stated that the deposits were made on different dates because of heavy bank queues and because old notes could be deposited until 31 December 2016, allowing him to deposit them at his convenience. Finding that the Assessee had not satisfactorily explained the nature and source of the amount, the Assessing Officer made a total addition of ₹3,027,500. Accordingly, an assessment order under section 143(3) of the Act was passed on 27 December 2019, determining the Assessee’s total income at ₹3,428,180.
05. Aggrieved by the additions of ₹1,250,000 and ₹3,027,500, the Assessee appealed to the learned CIT(A). Regarding the addition of ₹1,250,000, the Assessee contended that he had admitted a gross profit rate of 10% during the survey, compared with 8.73% disclosed in the return, while the actual gross profit rate for the year was 9.88%; therefore, the addition was unwarranted. In paragraph 4.6 of the appellate order, the learned CIT(A) directed the Assessing Officer to verify whether the Assessee’s claim was consistent with the survey declaration. If the additional income of ₹1,250,000 had already been accounted for and offered to tax, no separate addition was to be made; if it had not been included, or had been included only partly, the addition was to be sustained to that extent. As to the demonetised currency deposited during the demonetisation period, the learned CIT(A) noted that the Assessee’s cash sales from 1 April 2016 to 8 November 2016 were approximately ₹1 crore higher than in the corresponding period of the preceding year. Although this supported the Assessee’s contention that higher cash inflows generated the cash available on 8 November 2016, the Assessee had not produced a day-to-day cash book, cash-flow statement, or reconciliation linking the increased cash sales to the closing cash balance on that date. In the absence of supporting documents, the learned CIT(A) held that the availability of cash for deposit could not be verified and confirmed the addition of ₹1,617,000 as unexplained cash credit. The Assessee’s appeal was accordingly dismissed in respect of both additions, subject to the verification directed for the addition of ₹1,250,000.
06. Aggrieved by this decision, the Assessee is in appeal before us, challenging the learned CIT(A)’s confirmation of additions of ₹1,250,000 and ₹3,027,500, the latter relating to cash deposited during the demonetisation period and assessed under section 69C of the Income-tax Act.
07. The learned advocate, Narendra Sharma, submitted a paper book containing 51 pages. His first argument was that the addition of ₹ 1,250,000 made by the learned assessing officer on account of the disclosure during the course of the survey is unwarranted, for the reason that no evidence was available during the course of the survey that was relied on by the tax department for making the addition. He argued that, whether a statement was made by the assessee during the survey, it has no evidentiary value in the absence of corroborative evidence found during the course of the survey. He submitted that the assessee has already disclosed a profit ratio of 9.88%, which is recorded by the learned CIT – A, and is approximately the same as the estimated 10% gross profit admitted by the assessee. As the gross profit disclosed during the course of the survey, on which the addition of ₹ 1,250,000 was based, is approximately the same as the gross profit shown by the assessee, this would amount to a double addition, and therefore the learned lower authorities were not correct in making this addition.
08. With respect to the addition of ₹ 1,327,000, being the cash deposited during the demonetisation period, his argument was that the assessee has disclosed cash sales of 50,18,497 during the period from 9 November 2016 to 31 December 2016. Further, the total cash sales from 1 April 2016 to 8 November 2016 are shown at ₹ 21,147,474. The assessee’s books of account are audited, and the annual accounts are placed before the learned lower authorities. Therefore, such a huge sale is not consistent with the opening balance available with the assessee on 8 November 2016 for depositing ₹ 13,27,000. The learned CIT – A has agreed with everything; however, in paragraph No. 5.9, he did not link the increased cash sales with the loss of cash balance as on 8 November 2016. The learned authorised representative referred to the annual accounts of the assessee placed in the paper book, wherein he submits that the assessee is carrying on the business of liquor, and the total sales shown by the assessee are ₹ 37,426,810. The books of account are audited and are produced before the learned lower authorities. In the absence of any evidence, the cash on hand available with the assessee on 8 November 2016 could not be disbelieved, and therefore the orders of the learned lower authorities deserve to be quashed.
09. The learned departmental representative, Shri Sandeep Kumar, Additional Commissioner of Income Tax, supported the orders of the learned lower authorities
10. We have carefully considered the rival contention and perused the orders of the learned lower authorities.
11. Ground No. 2 challenges the addition of ₹1,250,000 based on the Assessee’s declaration during the survey. As recorded in the assessment order, the Assessee operates a wine shop. After the Assessee filed the return of income on 28 October 2017, a survey under section 133A was conducted on 28 February 2018. During the survey, the Assessee admitted a gross profit rate of 10%, compared with 8.73% declared in the return. Because no revised return was filed after the survey, the Assessing Officer added ₹1,250,000 to the Assessee’s total income. Before the learned CIT(A), the Assessee contended that the 10% declaration related to liquor sales and was based on an erroneous calculation made during the survey. The Assessee submitted that sales were ₹37,426,810 and gross profit was ₹3,697,202, yielding an actual gross profit rate of 9.88%. Since this was substantially the same as the 10% rate disclosed during the survey, no further addition was warranted. Although the learned CIT(A) accepted this contention, the addition was not deleted. Before us, the Assessee relied on the annual accounts at page 4 of the paper book, which record sales of ₹37,426,810, closing stock of ₹746,500, opening stock of ₹654,892, and purchases of ₹33,821,260. These figures establish a gross profit rate of 9.88%. The Assessee also submitted that liquor sales are regulated by the Excise Department and subject to the maximum retail price fixed by the Government of Karnataka; the 10% benchmark adopted during the survey reflected the margin available to liquor dealers under State policy. The trading account likewise shows a gross profit rate of 9.88%. Further, the Assessee holds an excise licence issued by the Government of Karnataka authorising only the sale of liquor and beer in sealed bottles and prohibiting the sale of other items, including soft drinks. The licence also prohibits opening bottles for service on the premises. Therefore, there could be no sale of empty bottles or other items forming the basis of the declaration. Moreover, no evidence of unaccounted sales was found during the survey. In these circumstances, we find no basis to sustain the addition of ₹1,250,000. The learned CIT(A), despite having the profit and loss account showing a gross profit rate of 9.88%, directed the Assessing Officer at page 7 of the appellate order to verify the matter. No further verification was necessary because the annual accounts were already before the appellate authority. The Assessing Officer also made an addition solely on the basis of the statement, without considering that the Assessee’s actual gross profit rate of 9.88% was substantially the same as the 10% rate declared during the survey. Accordingly, Ground No. 2 is allowed, and the Assessing Officer is directed to delete the addition.
12. Ground No. 3 challenges the addition of ₹13,27,500 to the Assessee’s total income. During the assessment proceedings, the Assessee explained that the deposited cash came from cash available on 8 November 2016 and produced books of account, which were verified. The Assessing Officer nevertheless rejected the explanation because the cash had been deposited in 13 instalments. The Assessee stated that heavy bank queues during that period required the old notes to be deposited in stages before 31 December 2016. The Assessee’s cash sales from 1 April 2016 to 8 November 2016 were ₹21,147,474, while the books recorded total turnover of ₹37,426,810. The Assessee also furnished month-wise details of opening cash on hand, cash sales, bank deposits, bank withdrawals, and closing cash on hand, placed at pages 21–26 of the paper book. As of 9 November 2016, the opening cash balance was ₹284,169. Cash sales from 9 November to 31 December 2016 were ₹5,318,497, and post-demonetisation bank deposits totalled ₹5,060,204. These details appear at page 38 of the paper book, were furnished before us, and were also available to the learned CIT(A). Although the learned CIT(A) accepted that gross cash receipts were higher than in earlier years and acknowledged the availability of cash on hand, the addition was confirmed for want of a day-to-day cash book and cash-flow statement. However, the paper book itself contains the month-wise cash-flow data at page 38. We therefore find no reason to sustain the addition of ₹13,27,500. Accordingly, Ground No. 3 is allowed.
13. In the result, appeal filed by the Assessee is partly allowed.
Order pronounced in the open court on 28th September, 2026.
