Indrakumar Sukla Vs ITO (ITAT Surat)
Milk Retailer Faces ₹10 Crore Cash Addition: ITAT Orders a Fresh Assessment and Another Hearing
From Presumptive Income to a ₹10.13 Crore Assessment
The assessee, a retailer of milk and milk products at Silvassa, filed his return declaring total income of ₹4,97,560, with business income offered under section 44AD.
The return was initially accepted. Subsequently, information available on the Department’s Insight Portal indicated substantial deposits in the assessee’s bank account, leading to reassessment proceedings.
The assessee did not respond during those proceedings. The Assessing Officer therefore completed an ex parte assessment under section 147 read with sections 144 and 144B, determining total income of ₹10,13,53,415.
The principal addition was ₹10,08,37,480 under section 69A, treating cash deposits in the State Bank of India account as unexplained money. A further ₹18,375 was added as interest income.
The assessee’s appeal before the CIT(A) was also dismissed following non-compliance. Before the Tribunal, however, he obtained restoration of the matter for fresh adjudication by the Assessing Officer.
Cash Deposits Claimed to Be Milk-Business Receipts
In the statement of facts reproduced in the order, the assessee described himself as a small-time retailer whose business involved selling milk and milk products procured from Valsad District Co-operative Milk Producers’ Union Ltd.
His explanation was that the disputed deposits represented business receipts from milk sales, involving rapid cash rotation and redeposits.
He contended that the reassessment had been completed without properly appreciating the nature of the business or examining the source of the deposits.
The grounds also challenged the treatment of the deposits under section 69A, the application of section 115BBE, the validity of reopening and the fairness of the best-judgment assessment.
These were the assessee’s contentions. The Tribunal did not record a final finding that the entire deposits were explained business receipts.
Non-Compliance Before Both Authorities
The reassessment order dated 19 December 2024 was passed after the Assessing Officer received no response from the assessee to the notices issued during the proceedings.
The assessee then appealed to the CIT(A)/NFAC. According to his statement of facts, that appeal was filed with a delay of 36 days, which the CIT(A) condoned.
Nevertheless, the first appellate authority dismissed the appeal by its order dated 18 November 2025, primarily on account of non-prosecution, and upheld the assessment.
Thus, when the matter reached the Tribunal, both the assessment and first appellate proceedings had concluded without effective representation by the assessee.
The Department relied on that history while requesting appropriate compliance directions if another opportunity was granted.
Different Email Address Cited as the Reason
Before the Tribunal, the authorised representative submitted that the assessee could not pursue the first appeal because hearing notices had been sent to an email address different from the one specified in Form 35.
This explanation was placed before the Bench along with the submissions concerning the business and the substantial addition.
The representative further stated that the assessee possessed all relevant details and documents and was ready to make an effective representation before the Assessing Officer.
He sought restoration at the assessment stage and assured the Tribunal that the assessee would participate properly.
The order records the email mismatch as counsel’s submission; it does not separately determine the legal validity of service on that basis.
Revenue Does Not Oppose Restoration
The Departmental Representative did not oppose the request for restoration.
However, he pointed out that the assessee had remained non-compliant during both the assessment and appellate proceedings, compelling the lower authorities to pass ex parte orders.
The Revenue therefore requested directions ensuring strict compliance by the assessee in the restored proceedings.
This position allowed the Tribunal to address the need for a fresh examination while also preserving the Assessing Officer’s ability to proceed if the assessee again failed to cooperate.
AO Must Decide Afresh Without Earlier Conclusions
Considering the submissions and the principles of natural justice, the Tribunal restored the matter to the Assessing Officer for fresh adjudication.
It observed that no prejudice would be caused to the Revenue by allowing the matter to be examined again.
The Assessing Officer was directed to provide the necessary hearing opportunity and pass an appropriate order uninfluenced by the earlier assessment order.
The restoration was expressly made at the assessee’s risk and responsibility. He was directed to remain vigilant, attend the hearings and avoid unnecessary adjournments.
If he failed to comply, the Assessing Officer would remain free to proceed in accordance with law.
The appeal was allowed for statistical purposes.
Author’s Comments
The decision provides an opportunity to examine a substantial cash-deposit addition against the actual business records. It does not finally delete the addition or approve the assessee’s section 44AD computation.
The restored proceedings will require a clear reconciliation of sales receipts, cash movements, withdrawals and redeposits, supported by the available documents. Describing deposits as business receipts is the starting explanation; establishing their connection with the business remains the practical task.
The email-address submission also highlights the importance of checking appellate communication details and monitoring proceedings.
The operative relief is clear: a fresh assessment with a hearing, coupled with an express obligation on the assessee to cooperate. The merits of section 69A, section 115BBE and the other challenges remain for examination.
FULL TEXT OF THE ORDER OF ITAT SURAT
Feeling aggrieved by the order of first-appeal dated 18.11.2025 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of the assessment-order dated 19.12.2024 passed by learned Assessment Unit of Income-tax Department [“Ld. AO”] u/s 147 r.ws. 144 & 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2020-21, the assessee has filed this appeal.
2. The background facts leading to present appeal are such that the assessee-individual filed his return of AY 2020-21 u/s 139 declaring a total income of Rs. 4,97,560/-. In the return so filed, the assessee declared business income under presumptive section 44AD. The return was accepted. Subsequently, taking into information available on Insight Portal of Income-tax Department indicating that the assessee had made a very high deposit in bank a/c, the Ld. AO re-opened asessee’s case u/s 147 through a notice dated 26.03.2024 u/s 148A followed by notices u/s 142(1) and 144. Ultimately, finding no response from assessee, the Ld. AO completed ex-parte assessment u/s 144 re-assessing total income at Rs. 10,13,53,415/-. Aggrieved, the assessee matter in first-appeal but again the Ld. CIT(A) passed ex-parte dismissing first-appeal due to non-prosecution by assessee, the Ld. CIT(A) upheld AO’s order. Still aggrieved, the assessee has come in next appeal before us.
3. At first, we re-produce the Statement of Facts and Grounds of Appeal filed by assessee:
“STATEMENT OF FACTS
1. The Appellant is an individual and a small-time retailer of milk and milk products at Silvassa, Union Territory of Dadra & Nagar Haveli, and is regularly assessed to income tax. The Appellant derives income only from the business of sale of milk and milk products procured from Valsad District Co-operative Milk Producers’ Union Ltd.
2. The Appellant filed his return of income for Assessment Year 2020-21 on 18.11.2020 declaring a total income of ₹4,97,560/-, after offering presumptive income under section 44AD of the Income-tax Act, 1961 (“the Act”). The return was processed under section 143(1) of the Act.
3. Subsequently, a notice under section 148 of the Act dated 26.03.2024 was issued and reassessment proceedings were initiated. The reassessment was completed ex parte by the Learned Assessing Officer, ITO Ward-2, Valsad, under section 147 read with sections 144 and 144B of the Act vide order dated 19.12.2024, assessing the total income at ₹10,13,53,415/-.
4. In the reassessment order, the Learned Assessing Officer made, inter alia, the following additions:
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- Addition of ₹10,08,37,480/- under section 69A of the Act treating cash deposits in the State Bank of India as unexplained money;
- Addition of ₹18,375/- as income from other sources on account of interest income;
- Levy of tax on the alleged unexplained income under section 115BBE of the Act and initiation of penalty proceedings under sections 271AAC and 272A(1)(d) of the Act.
5. The reassessment was completed without proper appreciation of the nature of the Appellant’s business, without granting effective opportunity of being heard and without considering that the cash deposits represented business receipts from sale of milk and milk products, involving rapid cash rotation and redeposits.
6. Aggrieved by the reassessment order, the Appellant preferred an appeal before the Learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC). The appeal was filed with a delay of 36 days, which was condoned by the Learned CIT(A).
7. The Learned CIT(A), however, vide order dated 18.11.2025 passed under section 250 of the Act, dismissed the appeal and confirmed the reassessment order primarily on the ground of alleged non-compliance and without adjudicating the issues on merits or considering the factual explanation regarding the source and nature of cash deposits.
8. The Learned CIT(A) erred in law and on facts in upholding the reopening under section 147, the addition under section 69A, and the application of section 115BBE, despite settled judicial principles that business receipts cannot be treated as unexplained money merely for want of books, and that best judgment assessment must be fair, reasonable and based on material.”
“GROUNDS OF APPEAL:
1. On the facts and in law, the Learned Commissioner of Income-tax (Appeals) erred in confirming the reassessment order passed under section 147 read with sections 144 and 144B of the Income-tax Act, 1961, which is bad in law, void ab initio and liable to be quashed.
2. On the facts and in law, the Learned CIT(A) erred in upholding the initiation of proceedings under section 147 of the Act in the absence of valid assumption of jurisdiction and without proper satisfaction as mandated under the Act.
3. On the facts and in law, the Learned CIT(A) erred in confirming the addition of 10,08,37,480/- under section 69A of the Act by treating cash deposits as unexplained money, without appreciating that the deposits represented business receipts from sale of milk and milk products.
4. On the facts and in law, the Learned CIT(A) erred in confirming the addition under section 69A merely on account of non-production of books, ignoring the settled law that business receipts cannot be assessed as unexplained money under section 69A of the Act.
5. On the facts and in law, the Learned CIT(A) erred in upholding a high-pitched and arbitrary best judgment assessment, which is based on conjectures, surmises and incomplete appreciation of facts.
6. On the facts and in law, the Learned CIT(A) erred in confirming the application of section 115BBE of the Act to the impugned addition, which is unsustainable and contrary to law.
7. On the facts and in law, the Learned CIT(A) erred in holding that principles of natural justice were complied with, despite the fact that effective and meaningful opportunity of being heard was not afforded to the Appellant.
8. On the facts and in law, the Learned CIT(A) erred in not adjudicating the grounds raised before him on merits and in passing a non-speaking and mechanical order.
9. The Appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal at the time of hearing.”
4. During hearing before us, Ld. AR for assessee narrated the facts which were substantially on the same lines as mentioned in above re-produced Statement of Facts. The Ld. AR also submitted that the assessee could not prosecute first appeal since the Ld. CIT(A) served notices of hearing upon e-mail id: [email protected] whereas the assessee specified email id: [email protected] in Form No. 35. Finally, Ld. AR submitted that in present case, a high-pitched addition made by Ld. AO which was not warranted. Ld. AR submitted that the taxable income of assessee is required to be computed in accordance with the provisions of Act. He submitted that the assessee is having in his possession, all relevant details and documents and ready to make an effective representation before Ld. AO. He prayed that in the interest of justice, one more opportunity be given to assessee by way of restoring this matter at the level of Ld. AO. He acknowledged that the assessee shall definitely make a proper and effective representation before Ld. AO.
5. The Ld. DR for revenue, though not opposing the prayer of the assessee for restoration, submitted that the assessee had remained non-compliant during the assessment proceedings as well as proceedings of first-appeal, which constrained the lower authorities to pass ex-parte orders. It was, therefore, submitted that while restoring the matter, appropriate directions may be issued to ensure strict compliance by the assessee.
6. Considering the above submissions of parties; having regard to the principle of natural justice and also bearing in mind that no prejudice would be caused to revenue if the present matter is restored at the level of Ld. AO, we restore this matter to the file of Ld. AO for adjudication afresh, at the risk and responsibility of assessee. The Ld. AO shall give necessary opportunity of hearing to assessee and pass an appropriate order uninfluenced by his earlier order. The assessee is also directed to remain vigilant and ensure participation in the hearings as may be fixed by Ld. AO without seeking unnecessary adjournments failing which the Ld. AO shall be at liberty to proceed in accordance with law. Ordered accordingly.
7. In result, this appeal is allowed for statistical purposes.
Order pronounced in open court on 06/10/2026
