Dividing total turnover by 365 days to arrive at daily cash sale is based on conjectures and surmises

Dividing total turnover by 365 days and concluding that assessee could not have made such cash sale on a single day is based purely on conjectures and surmises – ITAT

In a recent judgment Allahabad ITAT has held that the action of the Assessing Officer (AO) in making addition u/s 69A by dividing the total turnover of the assessee by 365 days and observing that it was not possible for the assessee to have made such sale on a single day was based on conjectures and surmises.

ABCAUS Case Law Citation:
5248 (2026) (10) abacus.in ITAT

In The instant case, the Assessing Officer (AO) vide an ex-parte order passed u/s 143 of the Income Tax Act, 1961 (the Act) mad addition u/s 69A towards cash deposited in assessee’s bank account treating it as unexplained deposits. The order passed by the AO was upheld by the JCIT(Appeals).

Before the Tribunal the assessee submitted that he had duly filed VAT returns and that the amounts deposited in the bank account represented the sale proceeds of the assessee. He contended that the relevant documentary evidence substantiating the sales and the corresponding deposits in the bank account had been furnished before the lower authority. Therefore, the decision of the lower authority was contrary to the facts and documentary evidence available on record.

On the other hand, the Department contended that no error had been committed in making the impugned addition. He further pointed out that the Assessing Officer had observed that even if the total turnover of the assessee were divided over 365 days, the cash deposit could not be justified in the manner claimed by the assessee.

The Tribunal observed that the Assessing Officer made the impugned addition by dividing the total turnover of the assessee by 365 days to arrive at the average daily turnover of Rs. 30,000/- and observing that it was not possible for the assessee to have made a sale of Rs. 2,50,000/- on a particular day.

The Tribunal opined that the finding of the Assessing Officer is based purely on conjectures and surmises. The contention of the assessee that the sale in question was duly reflected in the VAT returns had not been rebutted by the Revenue by bringing any adverse material on record.

The Tribunal held that in the absence of any contrary evidence, the impugned addition cannot be sustained merely on the basis of such assumptions and presumptions.

Accordingly, the Tribunal directed the AO to delete the impugned addition.

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