आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 12.10.2025 for Assessment Year (AY) 2017-18.

2. Brief facts of the case are that the assessee is a partnership firm engaged in the business of manufacturing/trading of garments. For the Assessment Year under consideration, the assessee filed its return of income on 31.10.2017 declaring a total income of Rs.3,25,800/-.

The case was selected for complete scrutiny under CASS and notice u/s. 143(2) of the Income-tax Act, 1961 (‘Act’ in short) was issued on 26.09.2018. During the course of assessment proceedings, the Assessing Officer observed from the information received from the banks u/s. 133(6) that the assessee had deposited cash in Specified Bank Notes (SBNs) during the demonetisation period aggregating to Rs.29,00,000/-, comprising Rs.25,00,000/- deposited in Bank of Baroda account and Rs.6,32,550/- deposited in HDFC Bank account. The assessee explained that the said deposits were made out of available cash balance as on 08.11.2016 amounting to Rs.39,82,015/- and cash generated from regular business transactions including cash sales and cash withdrawals from bank accounts. The assessee submitted that the source of cash balance was attributable to opening cash balance of Rs.1,27,545/- as on 24.10.2016, cash withdrawals from HDFC Bank aggregating to Rs.21,45,700/- between 24.10.2016 and 08.11.2016 and cash sales aggregating to Rs.18,64,380/- during the period from 25.10.2016 to 05.11.2016. The assessee further submitted that the Assessing Officer had accepted the books of account and returned income and had not rejected the books u/s. 145 of the Act. However, the Assessing Officer rejected the explanation and treated the entire cash deposits of Rs.29,00,000/- as unexplained money u/s. 69A of the Act and taxed the same u/s. 115BBE.The Assessing Officer observed that during the demonetisation period the assessee deposited SBNs amounting to Rs.29,00,000/- in its bank accounts.

The Assessing Officer issued a show-cause notice proposing addition u/s. 69A. In response, the assessee submitted that the cash deposits represented cash sales and available cash balance. However, according to the Assessing Officerthe assessee produced only a partial cash book for the period 01.10.2016 to 08.11.2016 and not the entire cash book, the certificate issued by the Chartered Accountant certifying cash balance of Rs.39,82,015/- as on 08.11.2016 was not acceptable in the absence of proper cash book and supporting evidence and the assessee failed to establish the availability of cash in hand with proper evidence.

The Assessing Officer held that since the assessee could not satisfactorily explain the source of cash deposits made during the demonetisation period, the entire amount of Rs.29,00,000/- represented unexplained money u/s. 69A and was liable to tax u/s. 115BBE of the Act. Accordingly, addition of Rs.29,00,000/- was made to the total income.

3. Aggrieved by the assessment order dated 30.12.2019 passed u/s. 143(3), the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)/NFAC, who confirmed the addition. The CIT(A) confirmed the addition made by the Assessing Officer. The CIT(A) observed that though the assessee claimed to have cash balance of Rs.39,82,015/- as on 08.11.2016, the assessee failed to conclusively substantiate the same with independent and reliable evidence.

The CIT(A) held that the opening cash balance of Rs.1,27,545/- was supported only by petty cash book, which was considered an in-house document and not sufficient independent evidence. The claim regarding cash withdrawals of Rs.21,45,700/- from HDFC Bank was not substantiated with bank statements or supporting documentary evidence.The CIT(A) held that the sales invoices produced by th