Case Law Details
Magnus Cars Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal, Mumbai Bench, in Magnus Cars vs ITO, deleted the addition of ₹27.40 lakh made under Section 69A, holding that cash deposits were duly explained as advances received from customers for booking motor vehicles.
The assessee, a partnership firm engaged in car dealing, had deposited ₹43.50 lakh in cash across bank accounts. The Assessing Officer treated a major portion as unexplained money on the ground that some customers did not respond to notices, despite partial acceptance of certain deposits. The CIT(A) granted limited relief but upheld the balance addition.
Before the Tribunal, the assessee substantiated that the cash represented booking advances received prior to demonetisation and furnished confirmations, PAN details, and supporting purchase invoices of vehicles delivered to customers. It was also highlighted that such receipts were recorded in the books and formed part of regular business transactions.
The Tribunal observed that the assessee had consistently explained the nature and source of deposits, and the Revenue failed to conduct proper verification from customers or dealers. It held that mere non-response from third parties cannot justify addition when documentary evidence supports the claim.
Accordingly, the ITAT directed deletion of the entire addition under Section 69A and allowed the appeal in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by assesseeis directed against the order of Ld. CIT(A) / NFAC dated 25.06.2025 for A.Y. 2017-18. The assessee has raised following grounds of appeal;
i. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in conforming the action of Ld. Assessing Officer (in short ‘AO’) of passing the assessment order by confirming an addition of Rs. 27,40,000/- as unexplained money under Section 69A of the Income Tax Act, 1961 w.r.t to advance received from customers as third parties have not responded to notice issued.
ii. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the action of AO of passing the assessment order by stating that creditworthiness of the cash deposits cannot be justified just because the third parties to whom the notice is served have not provided response. Mere independence on replies from third parties cannot be the ground to make an addition under Section 69A.
2. Brief facts of the case are that the assesseeis a partnership firm engaged in the business of dealing in motor vehicles, filed its return of income for AY 2017-18 on 28.12.2017 declaring income of Rs. 1,44,590/-. The case was selected for scrutiny to verify the genuineness of high value of cash receipt. During the assessment, the Assessing Officer (in short ‘AO’) recorded that the assessee made cash deposit of Rs. 43,50,000/- in two bank accounts namely Bassein Catholic Co Op Bank Ltd. and New India Cooperative Bank Ltd. In Bassein Catholic Co Op Bank Ltd., the assessee deposited Rs. 34,00,000/- and in New India Cooperative Bank Ltd. Rs. 9,50,000/-. The AO asked the assessee to explain its activities and substantiate source of cash deposit. In para 5 of the assessment order recorded that the assessee failed to explain its business activities. The AO also compared month wise cash deposit in FY 2015-16 and FY 201617. The AO issued final show cause notice to substantiate the cash deposit. The assessee in response to such show cause notice filed reply dated 27.12.2019 and contended that assessee has received cash amount for facilitating the purchases motor cars. The assessee furnished name of seven such person who has given amount for purchase of cars. The AO, on perusal of details and invoices accepted the cash in respect of two persons namely Sanajy M Kasar and JayprakashPatil Rs. 7,10,000/- and 3,00,000/- respectively aggregating of Rs. 10,10,000/-. However, the cash deposit/receipt in respect of other persons namely PrafulBanduRaut, Dinesh Gadge, Ratan R Sharma, Vinit Vijay Naik and BalshiramNarsale was not accepted. The AO, accordingly, added Rs. 33,40,000/- as undisclosed cash and tax the same under Section 115BBE.
3. Aggrieved by the additions in the assessment order, the assessee filed appeal before Ld. CIT(A). Before CIT(A), the assessee submitted that assessee is a partnership firm engaged in the business of dealing in motor vehicles of reputed car companies under the name and style of ‘Magnus Cars’. During assessment, the assessee explained the source of cash deposit received from customer prior to demonetisation period for booking of cars. The assessee also file with confirmation from parties. It was stated that amounts of receipts were reported in the ITR filed by the assessee. All details were furnished on ITD portal. Owing to the nature of business of assessee, the assessee usually had to deposit cash of receipt of particular day, after few days and some time in various tranches being substantial cash involved. The AO has not examined the explanation furnished vide reply dated 19.12.2019 and 27.12.2019 wherein party wise details were furnished. The cash deposit by assessee was part of business proceeds. The correctness of books of account was not disputed.
4. The Ld. CIT(A) on considering the submission of assessee allowed partial relief to the assessee in respect of cash received from the Dinesh Gadge of Rs. 6,00,000/- and remaining amount was upheld by holding remaining parties have not furnished documentary evidence for purchase of motor cars through assessee. Further aggrieved, the assessee has filed present appeal before tribunal.
5. I have heard the submission of learned authorised representative (Ld. AR) of the assessee and the learned senior departmental representative (Ld. Sr. DR) for the revenue.The Ld. AR of the assessee submits that the assessee is a partnership firm engaged in the business of dealing of sales of motor vehicles of reputed car companies. During the assessment, the assessee explained that cash deposit in both the bank accounts represent advances received from customers. The advances were received prior to demonetisation period for booking of cars. To substantiate such fact, the assessee furnished confirmation of concerned parties. The bank accounts wherein cash was deposited is disclosed in the return of income. The assessee filed details of cash deposits on ITD portal being specified the cash transaction of more than two Lakhs. As per his business model, the assessee usually deposit cash after few days of booking. The AO failed to appreciate the explanation of assessee. The addition confirmed by Ld. CIT(A) to the extent of Rs. 16,44,000/- is a part of cash advances received from the customers on account of booking of cars, which are duly supported in the entry in books of account. The assessee has furnished copy of identification of the persons including their PAN, confirmation and delivery of officials purchased through assessee. The assessee has filed such detail in respect of purchaser namely Vinit Vijay Naik, Balshiram Narsale, Praful Bandu Raut and Dinesh Gadge. The AO has not verified such facts from the customers. Copy of all such evidences is also placed on record.
6. On the other hand, the Ld. Sr. DR for the revenue supported the order of lower authorities. The Ld. Sr. DR submits that the assessee failed to explain the source of cash deposit. The plea raised before lower authorities that such cash deposit was part of booking of vehicles was not furnished before lower authorities. The assessee was not authorised to accept the cash in the form of Specified Bank Note (SBN) after 08.11.2016. Impugned cash deposits are after 8th November 2016.
7. I have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. I have also seen various documentary evidences filed on record. I find that right from the beginning, the assessee has taken plea that cash deposit was part of business receipt as it was received for booking of motor cars. The assessee never claimed that such cash was received after demonetisation of old currency note in the form of Rs. 500 or 1000. The claim of assessee was that the assessee has received such cash before demonetisation and was deposited for the purpose of procuring vehicle on behalf of their customers. The assessee furnished the name of all such customers. The AO has not made any verification of facts from such person or from the authorised dealer of various vehicle manufacturing companies. The AO accepted cash deposit which was claimed to have deposited on behalf of the Sanjay M Kasar and Jayprakash Patil of Rs. 4,10,000/- and 3,00,0000/-. Further the Ld. CIT(A) accepted cash deposit on behalf of the Dinesh Gadge of Rs. 6,00,000/-. Thus, dispute remains with respect to remaining cash which was allegedly received on account of booking of vehicles from Praful Bandu Raut, Vinit Vijay Naik, Balshiram Narsale. Before tribunal, the assessee has filed copy of tax invoices issued by Fortpoint Automotive (Cars) Pvt. Ltd., Bhiwandi in the name of Vinit Vijay Naik wherein he has purchased Maruti Breeza Car on 22.12.2016. Copy of PAN Card, tax invoice is placed on record. The assessee also furnished confirmation of account by Vinit Vijay Naik. For cash received from Balshiram Narsale, the assessee has filed copy of PAN, tax invoices from Shivam Autozone India Pt Ltd. in the name of Balshiram Narsale against purchase of Maruti Dzire Car. Against the booking of Praful Bandu Raut, the assessee has filed PAN Card, tax invoices from Excell Autovista Pvt. Ltd, Bhiwandi from purchase of Maruti Celerio Car VXI Model. For booking of Ratan Ramchandra Sharma, the assessee has furnished PAN Card of Ratan Sharma, tax invoices from Shivam Autozone India Pvt. Ltd., Kandivali(W), Mumbai for purchase of Maruti Ciaz and confirmation of account.
8. Thus, I found that the assessee has duly explained the source of all cash deposit. The AO made addition without verification of fact. In view of the aforesaid factual discussion, I do not find any justification for making such addition. Thus, I direct the AO to delete the entire addition under Section 69A of Rs. 27,40,000/-. In the result, the grounds of appeal raised by the assessee are allowed.
9. In the result, the appeal of the assessee is allowed.
Order was pronounced on 20/04/2026 in open Court.
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