M D Sons Vs ITO (ITAT Bangalore)
Fifty Hawkers, Six Dates & Identical ₹20,000 Deposits—Perfect Symmetry Proves Imperfect Evidence u/s 68
The controversy
The assessee, M D Sons, was a partnership firm engaged in distributing cigarettes, food products & snacks manufactured by ITC Ltd. For AY 2017-18, it declared total income of ₹2.31 crore on a turnover exceeding ₹478 crore.
The assessment was selected for scrutiny following a survey conducted on 24 January 2017. The surviving disputes before the Bangalore ITAT concerned cash advances allegedly received from hawkers and the deduction of March 2016 salary paid in April 2016.
The assessee also challenged the validity of notice u/s 143(2) on the ground that it had been issued in the old format rather than the revised format prescribed by CBDT. That issue had already been referred to a Special Bench, which rejected the additional ground in M D Sons v. Income-tax Officer [2026] 188 taxmann.com 703.
₹60 lakh allegedly collected from 50 hawkers
The assessee recorded cash advances of ₹20,000 each from 50 persons on 24 March 2017, aggregating to ₹10 lakh.
Precisely the same pattern was repeated on 25, 27, 28, 30 & 31 March 2017. Thus, each person allegedly advanced ₹20,000 on six different dates, resulting in ₹1.20 lakh per hawker and aggregate cash receipts of ₹60 lakh within the closing days of the financial year.
