Atish Ashok Nahar Vs ITO (ITAT Pune)
Cash in Grandfather’s Tijori: Diary Entries Taxed at 8%, Not in Full
The controversy
A diary containing cash transactions was found during a survey of an ice-cream trader. The assessee explained that the entries recorded daily business collections taken home, kept in his grandfather’s tijori, and subsequently withdrawn for business use or deposited in the bank.
The Assessing Officer rejected the explanation and treated the entire disputed amounts as income. The Pune Tribunal, however, accepted that the entries related to business proceeds and movement of cash.
Since a complete transaction-wise reconciliation was unavailable, the Tribunal estimated income at 8% under section 44AD, deleting the balance additions for both assessment years.
Survey and the impounded diary
The assessee traded in ice cream and related milk products under the name M/s. Nahar Enterprises.
A survey under section 133A was conducted at his premises on 28 September 2017. During the survey, a Navneet diary was impounded containing transactions pertaining to assessment years 2015-16 and 2016-17.
The diary did not specifically describe the nature of each transaction. The Assessing Officer considered the entries inadequately explained and made additions of ₹10,60,000 for assessment year 2015-16 and ₹39,55,400 for assessment year 2016-17.
The CIT(A) upheld the additions through separate orders dated 24 June 2025. The assessee challenged those orders before the Tribunal.
The family’s cash-handling practice
The assessee explained that his grandfather had originally started the business and remained the head of the family.
As a regular practice, the cash collected at the shop during the day was taken home and placed in the grandfather’s tijori. When required, money was taken from the tijori for business expenditure or bank deposits, depending upon business needs.
According to the assessee, the diary recorded these movements of business cash. The entries therefore did not necessarily represent separate income arising each time cash changed location or was deposited into the bank.
The assessee also maintained that the transactions formed part of the regular business records and that certain deposits could be correlated with the bank statements furnished during the proceedings.
Entire receipts or only the profit component?
The assessee’s grounds challenged the addition of the entire amounts without considering the underlying purchases, sales and nature of business.
It contended that, if estimation was considered necessary, the appropriate approach would be to apply a reasonable profit rate rather than treat the whole of the business proceeds as taxable income.
Before the Tribunal, counsel acknowledged the absence of sufficiently specific particulars in the diary and offered income at 8% of the disputed amounts.
The legal issue raised in the appeals was not pressed and was dismissed accordingly. The Tribunal therefore decided the substantive dispute on the character of the diary transactions and the appropriate amount to be taxed.
The Tribunal accepted the business connection
The Tribunal examined the explanation, the assessee’s business activity and the supporting bank statements.
It noted that the assessee had explained the family’s established practice of keeping daily collections in the grandfather’s tijori and subsequently using that cash for business purposes.
The explanation had also been placed before the Assessing Officer. Certain cash redeposits were stated to correspond with entries in the bank account.
On the material before it, the Tribunal was satisfied that the diary entries represented business transactions, including cash deposits into the bank and movement of cash in hand.
However, the assessee had not furnished complete particulars enabling a corresponding entry to be identified for every transaction.
Income restricted to 8%
Having accepted the business nature of the disputed amounts, the Tribunal held that income could, at most on these facts, be estimated at 8% under section 44AD.
For assessment year 2015-16, 8% of ₹10,60,000 amounted to ₹84,800. The remaining addition of ₹9,75,200 was deleted.
For assessment year 2016-17, 8% of ₹39,55,400 amounted to ₹3,16,432. The balance addition of ₹36,38,968 was deleted.
The Tribunal reversed the CIT(A)’s findings to that extent and partly allowed both appeals.
Thus, against aggregate additions of ₹50,15,400, the amounts sustained totalled ₹4,01,232, with aggregate relief of ₹46,14,168.
Author’s comments
The decision highlights the need to identify what a cash entry actually represents. Collection at the shop, transfer to a home safe and subsequent bank deposit may involve the same money, rather than three separate receipts.
Nevertheless, the Tribunal did not accept the assessee’s explanation to the extent of deleting every addition. The missing transaction-wise reconciliation led it to sustain an estimated profit component.
The ruling is therefore useful where the evidence establishes a business nexus, but should not be treated as a general entitlement to an 8% assessment for every unexplained diary entry. The character of the transactions must first be supported.
It also demonstrates the value of a daily cash reconciliation linking shop collections, cash held at home, withdrawals for business purposes and bank deposits. Such records can prevent uncertainty over repeated movements of the same funds.
The tijori explained where the cash was kept; the business records helped explain where it came from. Tax was ultimately restricted to the estimated profit.
FULL TEXT OF THE ORDER OF ITAT PUNE
1. The captioned appeals at the instance of assessee pertaining to Assessment Years 2015-16 and 2016-17 are directed against the separate orders dated 24.06.2025 of CIT(A), Pune-12 emanating out of respective Assessment orders passed u/s.147 of the Income Tax Act, 1961 (in short ‘the Act’).
2. Assessee has raised following common grounds of appeal (except the figures) for the assessment years under appeal which reads as under :
“1. On the facts and in the circumstances of the case and in law, the Assessing Officer has erred in making addition of Rs. 10,60,000/- to the total income of the applicant as business income without appreciating the nature of business and other details provided to the assessing officer during the course of assessment proceedings. Hence, the applicant hereby prays that the addition made by the assessing officer and conformed by CIT(A) of Rs. 10,60,000/- may please be deleted.
2. On the facts and in the circumstances of the case and in law, the Assessing Officer has erred in making addition of Rs. 10,60,000/- to the total income of the applicant as business income without giving proper opportunity to be heard. The show cause notice seeking information dated 17.03.2022 posted on 19.03.2022 and details to be submitted on 21.03.2022 which was received by the appellant physically on 22.03.2022 at 03.44 PM and assessment order had been passed on 23.03.2022. Hence, the applicant hereby prays that the addition made by the assessing officer and conformed by CIT(A) of Rs. 10,60,000/- may please be deleted.
3. On the facts and in the circumstances of the case and in law, the Assessing Officer has erred in making addition of Rs. 10,60,000/- to the total income of the applicant as business income without considering the sales purchase and proper method would have been to estimate income by applying a reasonable Gross Profit rate, if at all, rather than making addition the full amount as business income. The addition made is excessive and arbitrary, and if any estimation is to be made, the same should be on the basis of past Gross Profit rate or industry norms. Hence, the applicant hereby prays that the addition made by the assessing officer and conformed by CIT(A) of Rs. 10,60,000/- may please be deleted.
4. The appellant hereby reserves the right to add, alter, amend or delete any grounds of appeal.”
3. At the outset, ld. Counsel for the assessee requested for not pressing the legal issue raised in the impugned appeals and the same are dismissed as ‘not pressed’.
4. So far as merits of the case are concerned, they revolve around the common issue of addition for unexplained income from other sources at Rs.10,60,000/- for A.Y. 2015-16 and Rs.39,55,400/- for A.Y. 2016-17.
5. Facts of the case in brief commonly for A.Y. 2015-16 and A.Y. 2016-17 are that the assessee is an individual and survey action u/s.133A of the Act carried out on 28.09.2017 at the premises of Atish Ashok Nahar. Assessee is a trader in Ice cream and running the business under the name and style of M/s. Nahar Enterprises. A Diary was impounded which contains certain transactions which remained unexplained. During the course of assessment proceedings assessee stated that these are the amount of cash sale on daily basis brought for keeping in the Tijori of Late Grand Father and every day they used to carry the cash from shop to house and after periodic accumulation cash deposited in the bank account of the company and they are part of regular business transactions. However, ld. Assessing Officer was not satisfied and he concluded the assessment making addition of Rs.10,60,000/- and Rs.39,55,400/- for A.Y. 2015-16 and 2016-17 respectively. Subsequently, assessee filed appeal before ld.CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal.
6. Ld. Counsel for the assessee has made detailed submissions in support of his contention that the transactions appearing in the diary found during the course of search action are basically business transactions and even though they are part of the regular books of account but in the absence of specific details being mentioned in the diary, the assessee agrees to offer income @8% on the alleged amount which is part of regular business transactions but mentioned by the Assessing Officer as unexplained income.
7. I have heard the rival submissions and perused the record placed before me. I note that the assessee is engaged in the business of Ice Cream and related milk products and runs the business under the name and style of M/s. Nahar Enterprises. Assessee has e-filed the return of income for A.Y. 2015-16 declaring income of Rs.4,86,830/-in the original return of income filed on 30.09.2015 and even in response to notice u/s.148 of the Act the assessee declared same income. During the course of survey, Navneet diary was impounded at the business premises and there were transactions appearing in the diary which pertains to the impugned assessment years. There is no specific mention about the nature of transaction but during the course of proceedings, ld. Counsel for the assessee has submitted that grand father of the assessee is head of the family who has initially started the business and as a regular habit/procedure the cash collected during the day was brought back to home and kept in the Tijori of his Late Grand Father and thereafter when the cash required it is taken from Tijori and used for business purposes or deposited in Bank as per business need. Even in the reply submitted by the assessee before the Assessing Officer, it has been stated that some of the cash has been deposited back in the bank account and they are commensurate with the cash deposit entries also. In support, bank statements have also been filed. I am therefore satisfied that the transactions appearing in the diary impounded during the course of survey are the business transactions and the same are regarding the cash deposit in the bank and some are the movement of cash in hand. However, in absence of complete details as required for the purpose of corresponding entry of each and every transaction I find that the alleged transactions are part of business proceeds and therefore at the most deemed income u/s.44AD of the Act can be estimated @8% of the alleged sum. Accordingly for A.Y.2015-16 the estimated income is calculated at Rs.84,800/- and for A.Y. 2016-17 is calculated at Rs.3,16,432/- respectively. Remaining amount of addition at Rs.9,75,200/- and Rs.36,38,968/- for A.Y. 2015-16 and 2016-17 respectively stands deleted. Finding of ld.CIT(A) is reversed and relevant grounds of appeal raised by the assessee are partly allowed.
8. In the result, both the appeals filed by the assessee are partly allowed as per terms indicated hereinabove.
Order pronounced on Fifth October, 2026
