RAKESH KUMAR,DELHI vs. ITO, WARD 14(1), DELHI

Q: Which sections of the Income-tax Act were involved?

Section 68, Section 115BBE, Section 144, Section 145

ITA 2746/DEL/2026Status: DisposedITAT Delhi21 September 2026AY 2017-187 pages

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal decided that the cash deposits totaling ₹2,47,91,057 were sufficiently explained. The assessee, engaged in the retail of pharmaceuticals and medicines, had furnished complete financials, VAT returns, and sample invoices. The Tribunal found that neither the Assessing Officer nor the CIT(A) identified any defects in these documents, and crucially, the lower authorities did not invoke Section 145 to reject the books of account. Therefore, the Tribunal held that the books of account must be accepted as they are. The Tribunal concluded that the cash deposits were directly correlatable with the cash sales made during the demonetization period and that the lower authorities erred in treating the documents as self-serving. The addition of ₹2,47,91,057 was deleted, and this ground of appeal was allowed. Regarding the cash withdrawals, personal savings, and family member contributions totaling ₹83,69,770, the Tribunal found that the assessee was able to prove these amounts with supporting documents, including bank accounts and evidence of cash availability. The Tribunal noted that the Assessing Officer's remand report did not negate the evidence, and the CIT(A) had simply rejected the explanation without cogent reasons. The Tribunal accepted the assessee's explanation and evidence as sufficient to prove the claim, and the addition of ₹83,69,770 was deleted. The appeal of the assessee was allowed in full.

What were the facts?

The assessee, Shri Rakesh Kumar, is appealing an order from the CIT(A), NFAC, Delhi, which upheld an addition made by the Income Tax Officer, Ward-35(2), Delhi. The assessment year is 2017-18. The addition pertains to cash deposits totaling ₹2,47,91,057 made during the demonetization period in financial year 2016-17 into three savings bank accounts. The Assessing Officer treated these deposits as unexplained and added them to the assessee's income under Section 68 read with Section 115BBE of the Income Tax Act, 1961. The assessee claimed the deposits were from sales and personal savings. The CIT(A) referred the matter for a remand report, after which the Assessing Officer rejected the assessee's explanation, citing a lack of debit entries for expenses and irregular salary payments. The CIT(A) further rejected the explanation due to a lack of corroborative reconciliation.

What were the issues?

1. Whether the Tribunal had to decide if the cash deposits totaling ₹2,47,91,057 made during the demonetization period were sufficiently explained by the assessee's business sales, in light of the provisions of Section 68 and Section 115BBE of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that a sum of ₹1,64,37,357 was on account of sales deposits. They submitted audited financial statements, VAT returns, and sample sale invoices. The assessee contended that the lower authorities erred in treating these documents as self-serving and that their books of account should be accepted as no defects were found, nor were Section 145 provisions invoked. Revenue's Contention: The revenue, through the Assessing Officer and CIT(A), argued that the cash deposits remained unexplained. The Assessing Officer noted a lack of corresponding expense debits in the profit and loss account and irregular salary payments, suggesting that if sales were in cash and deposited, and cash withdrawals were also re-deposited, then the source of cash for expenses was unclear. The CIT(A) rejected the explanation due to a lack of corroborative reconciliation between cash deposits, sales, stock, and cash balance. 2. Whether the Tribunal had to decide if cash withdrawals of ₹9,23,500, personal savings of ₹2,46,270, and personal savings of family members of ₹72,00,000, totaling ₹83,69,770, were sufficiently explained as deposits into the assessee's bank accounts, in light of the provisions of Section 68 and Section 115BBE of the Income Tax Act, 1961. Assessee's Contention: The assessee provided bank account statements and details of personal savings and family member contributions, including ITRs, computation of income, and declarations for the family members' contributions. They argued that these documents, along with evidence of cash availability, were sufficient to prove their claim. Revenue's Contention: The Assessing Officer rejected the claim, stating that the purpose of cash withdrawals and subsequent redeposits was not explained. For personal savings, the absence of income and expenditure statements for family members was cited. For family member contributions, the revenue argued that only signed confirmations were provided without ITRs or bank accounts, and the source of cash gifts was not established, deeming it a 'colourable device'.