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Facts
The assessee, engaged in paper trading, had cash deposits during the demonetization period. The Assessing Officer made an addition of Rs.25,47,890/- under Section 68 for unexplained cash deposits, which was confirmed by the CIT(A). The assessee contended that these deposits were from cash sales.
Held
The Tribunal held that the cash deposits were from cash sales which were duly recorded in the audited books of account and were not rebutted by the AO. The addition made under Section 68 was therefore unsustainable.
Key Issues
Whether cash deposits during demonetization, claimed to be from cash sales, can be added as unexplained under Section 68 of the Income Tax Act when the sales are recorded in audited books?
Sections Cited
68
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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, DELHI
(A.Y. 2017-18) Nisheeth Bansal, Khasra No. 694, Land Mark Thana, ...... अपीलाथ�/Appellant Village, Alipur, Delhi 110036 PAN: BBBPB-4619-K बनाम Vs. Assistant Commissioner of Income Tax, ..... �ितवादी/Respondent Circle 35(1), Civic Centre, Minto Road, Delhi 110002 अपीलाथ� �ारा/Appellant by : S/Shri Sanjay Aggarwal & Sumaksh Mahajan, Chartered Accountants �ितवादी�ारा/Respondent by : Ms. Sudha Gupta, Sr.DR सुनवाई क� ितिथ/ Date of hearing : 22/05/2025 घोषणा क� ितिथ/ Date of pronouncement : : 14/08/2025 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 11.07.2024, for Assessment Year 2017-18.
Shri Sanjay Aggarwal, appearing on behalf of the assessee submitted that the short issue in appeal is confirming of addition of Rs.25,47,890/- u/s. 68 of the Income Tax Act,1961(hereinafter referred to as ‘the Act’) on account of alleged unexplained cash deposits during demonetization period. Narrating facts of the case, he submitted that the assessee is engaged in trading of papers. Apart from business income, the assessee draws salary from partnership firm and has also (AY 2017-18) income from property. The Assessing Officer (AO) during assessment proceedings made addition of Rs.25,47,890/- on account of unexplained cash deposits during demonetization. The assessee during assessment proceedings explained that cash deposits are from cash sales and earlier withdrawals from bank. Once the department has accepted sales, the cash deposits in bank which is from sales and has been offered to tax cannot be held to be unexplained. Aggrieved by the addition made by Assessing Officer, the assessee carried the issue in appeal before the CIT(A). The CIT(A) without appreciating the facts, confirmed the addition made by AO. The ld. AR submitted that just prior to declaration of demonetization there was festival season of Diwali. During Diwali season there is upswing in the sales including cash sales, therefore, cash deposits during the month of October and November 2016 was more as compared to the other months. The books of the assessee are duly audited and the Assessing Officer has accepted the same. The total sales of Rs.2,28,78,502/- included sales of Rs.25,47,890/- made in the month of October and November 2016. The ld. AR further submitted that the sales are also corroborated with VAT returns which have been accepted by the Sales Tax/VAT Authorities. He thus, prayed for deleting the addition. The ld. AR has also drawn attention of the Bench to invoices at page 225 to 239 of the paper book to show sample cash sales invoices.
Per contra, Ms. Sudha Gupta representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submits that there were cash deposits to the tune of Rs.18,00,000/- and Rs.16,00,000/- in the month November and December 2016, respectively i.e. immediately after declaration of demonetization. In the rest of year there were no cash deposits except minor cash deposit of Rs.7,500/- in the month of (AY 2017-18) October. She further pointed that as against cash sales of Rs.25,47,890/- the assessee has deposited cash of Rs.34,00,000/-. She further stated that there is no uniform pattern of cash deposits in the bank account from alleged cash sales.
Both sides heard, orders of the authorities below examined. The solitary issue raised by the assessee in appeal is addition of Rs.25,47,890/- u/s. 68 of the Act on account of unexplained cash deposits in the bank account of the assessee during demonetization period. The ld. Counsel for the assessee contended that the cash deposits are from cash sales and the total sales have been duly recorded in the books of assessee and the books are audited. The AO has not pointed any defect in the books. Thus, no addition could have been made on account of cash deposits from cash sales. The facts narrated by the assessee remain un-rebutted. Considering entire facts of the case, I find merit in the submissions of the assessee, hence, addition of Rs.25,47,890/- on account of unexplained cash deposits is directed to be deleted.
In the result, impugned order is set aside and appeal of the assessee is allowed. Order pronounced in the open court on Thursday the 14th day of August, 2025.