NARAYAN CHANDRA GIRI,DELHI vs. INCOME TAX OFFICER, CIVIC CENTRE NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before Sh. S. Rifaur Rahman, Accountant Member & Sh. Raj Kumar Chauhan, Judicial Member ITA No. 2345/Del/2026 : Asstt. Year: 2017-18 Narayan Chandra Giri, Vs Income Tax Officer, 6576/9, 3rd Gali, Dev Nagar, Ward-51(2), Karol Bagh, New Delhi New Delhi-110005 (APPELLANT) (RESPONDENT) PAN No. AAHPG1138L Assessee by: Sh. Varun Tajena, CA Revenue by: Sh. Tarun Sharda, Sr. DR Date of Hearing: 25.06.2026 Date of Pronouncement: 31.08.2026 ORDER Per Raj Kumar Chauhan, Judicial Member: The appeal of the assessee is directed against the order dated 24.02.2026 of ld. CIT(A)/NFAC, Delhi passed u/s 250 of the Income Tax Act 1961 (hereinafter referred to as “the Act”), wherein the addition made vide assessment order dated 28.12.2019 u/s 68 of the Act to the tune of Rs.52,50,000/- were confirmed and the appeal was dismissed.

2 ITA No. 2345/Del/2026 Narayan Chandra Giri demonetization period as compared to pre-demonetization period relevant to A.Y. 2017-18. Subsequent notice u/s 143(2) of the Act and the notice u/s 142(1) of the Act were issued on various dates as find mentioned in para 3 of the Assessment Order to which reply was not filed by the assessee. Accordingly, show-cause notice was issued to the assessee in that regard and in response to the said show-cause notice, assessee field part details, i.e. primary declaration of cash deposit with income tax department which was primarily the cash deposit in out of cash sales, however, no substantive proof of cash sales was submitted by him. During the assessment proceedings, Assessing Officer observed that the cash deposited during demonetization period was out of cash sales, is not justified in his case because the total cash deposit during the demonetization period by the assessee was Rs.52,50,000/- whereas total cash deposit during pre- demonetization period (01.04.2016 to 08.11.2016) was only Rs.7,25,000/- which according to the Assessing Officer shows that the assessee was hiding such income that was unexplained in his bank accounts. Further, Assessing Officer observed that there was 700% increase in the cash deposit during demonetization period as compared to the pre-demonetization period. Accordingly, show-cause notice dated 13.11.2019 followed by notice u/s 142(1) of the Act dated 30.11.2019 were

3 ITA No. 2345/Del/2026 Narayan Chandra Giri issued to the assessee for submitting complete details. Again, in response to the above notices, the assessee filed part details dated 05.12.2019, 09.12.2019 and 10.12.2019 of month-wise and party-wise purchases made for the year i.e. F.Ys. 2015-16 and 2016-17, alongwith details of top 10 parties from whom the purchases are made and details of top 10 parties to whom the sales were made. The ld. Assessing Officer observed that the assessee has not submitted details of cash register as well as confirmation of creditors and thus failed to explain and substantiate the source of cash deposit during demonetization period and has failed to file any detailed documents regarding explanation of steep increase in cash deposit during the demonetization period as compared to cash deposit during the pre-demonetization period. Accordingly, ld. Assessing Officer treated the total cash deposit made by the assessee during demonetization period of Rs.52,50,000/-as his cash credits and made addition of the said amount u/s 68 of the Act and also separately initiated a penalty proceeding u/s 271AAC of the Act. It was further observed that section 115BBE of the Act is also attracted in the case of the assessee and directing to charge tax @ 60% plus surcharge @ 25% of such tax.

4 ITA No. 2345/Del/2026 Narayan Chandra Giri the demonetization period is not justified in the case as average monthly sales during first two quarters of F.Y. 2016-17 i.e. from 01.04.2016 to 30.09.2016 which is shown at Rs.1,96,800/- and thereafter in the month of October 2016, the cash sales have instantly risen to Rs.26,85,792/- and further in the month of From the month of November 2016, from the first day to 8th November 2016, only 8 days, the case sales have sharply risen to Rs.30,57,672/-. It was therefore observed by the ld. CIT(A) that as per bank statement of appellant, the cash deposited has been made on different dates, which shows the suspicious nature of cash deposited and accordingly, rejected the grounds raised in the appeal and confirmed the addition made by the Assessing Officer.

5 ITA No. 2345/Del/2026 Narayan Chandra Giri specific defect in the purchases, sales register, stock records, cash book or VAT returns. 4. That in absence of rejection of books of account, the recorded sales forming part of business turnover cannot be treated as unexplained cash credit under section 68 of the Act. 5. That the Ld. CIT(A) erred in disregarding the documentary evidence furnished by the appellant, including:  Month-wise cash sales,  Month-wise cash deposits,  VAT returns for all quarters,  Cash book and sales registers, without recording any finding that such documents were false, fabricated or unreliable. 6. That the Ld. CIT(A) erred in upholding the addition merely on the basis of a perceived spike in cash sales during October and early November 2016, without appreciating:  The festival season of Diwali and Dhanteras,  The nature of the jewellery trade,  The extraordinary circumstances prevailing immediately prior to demonetization. 7. That the comparison of monthly sales with earlier months or earlier years, without establishing that the sales were fictitious or unsupported by stock or purchases, cannot constitute valid legal basis for invoking section 68. 8. That the Ld. CIT(A) failed to appreciate that the total turnover for FY 2016-17 (Rs.1,42,42,534/-) was broadly comparable with the preceding financial year (Rs.1,35,47,421/-), thereby negating any allegation of artificial inflation of turnover. 9. That the reliance placed by the Ld. CIT(A) on the decision of the ITAT Patna Bench in the case of Shri Dharmendra Kumar is misplaced and legally unsustainable, as the facts of that case are clearly distinguishable and do not apply to a case where: • Sales are recorded in regular course of business and also reported in Vat return, • No defects are found in stock or purchases, • Books are not rejected under section 145(3).

6 ITA No. 2345/Del/2026 Narayan Chandra Giri 10. That the addition has been made purely on suspicion, conjectures and presumption, without any independent enquiry or evidence to establish that the sales recorded in the books were non-genuine. 2. Levy of Interest under Sections 234B and 234D 11. That the Ld. CIT(A) has erred in confirming the levy of interest under sections 234B and 234D of the Act. 12. That the interest being consequential in nature, once the addition of Rs.52,50,000/- is deleted, the levy of interest automatically deserves to be deleted. 3. General Ground 13. That the impugned order of the Ld. C1T(A) is contrary to facts, contrary to law and is liable to be set aside. 14. That the appellant craves leave to add, amend, alter or withdraw any ground of appeal at or before the time of hearing.” 5. The ld. AR argued that during the assessment proceedings as well as appellate proceedings a comprehensive documentary evidence was furnished which has established that the cash deposits made during demonetization period was out of genuine business receipts was represented as genuine business receipts arising from the recorded cash sales. It is further stated that the entire details, statement containing month-wise, party-wise purchase details, detail of sundry creditors showing their name, address and PAN number, detail of top debtors and month-wise sales for F.Ys. 2015-16 and 2016-17, demonstrating the pattern of business turnover was duly submitted along with comparative figures showing the overall turnover during F.Y. 2016-17, which shows that the comparative turnover during

7 ITA No. 2345/Del/2026 Narayan Chandra Giri these years was broadly consistent with the preceding financial year. The said information has been submitted in tabulator form alongwith written submissions. The written submissions filed along with tabulation evidence is extracted below as under:

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14 ITA No. 2345/Del/2026 Narayan Chandra Giri 6. In support of his arguments, the ld. AR has relied the case of Mumbai Tribunal in the case of Rakesh Jain Vs. DCIT in ITA No. 546/Mum/2024 order dated 04.12.2025 wherein identical addition made on account of cash deposit during demonetization was decided in favour of the assessee wherein various decision has been relied including Delhi Tribunal in the case of Agons Global P. Ltd. Vs. ACIT in ITA Nos. 741 to 746/Del/2019 wherein it has held that “mere addition made on this ground that there is deviation in ratio is not proper. When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incriminating is found contrary then addition u/s 68 of such cash sale would tantamount to double taxation.”

15 ITA No. 2345/Del/2026 Narayan Chandra Giri the ld. CIT(A) in the form of sale and purchase details, party wise and month wise as reflected in table extracted earlier.

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On perusal of above given table, it is seen that during FY On perusal of above given table, it is seen that during FY On perusal of above given table, it is seen that during FY -2015-16 total sales are shown Rs. 1,35,47,421/ l sales are shown Rs. 1,35,47,421/- and during FY -2016 2016-17 17 total total sales sales are are shown shown Rs. Rs. 1,42,42,534/-. Hence, turnover during FY 2015 . Hence, turnover during FY 2015-16 and 16 and FY 2016-17 are approximately similar. Further, cash 17 are approximately similar. Further, cash 17 are approximately similar. Further, cash sales in the whole month of November 2015 are shown sales in the whole month of November 2015 are shown sales in the whole month of November 2015 are shown Rs. 2,66,357/- but cash sales in the month of November but cash sales in the month of November but cash sales in the month of November 2016 till 8th day of 2016 till 8th day of November 2016 (only eight days) are ) are shown Rs. 30,57,672/ shown Rs. 30,57,672/-. In this way the assessee has . In this way the assessee has booked non-existing existing existing sales sales sales in in in its its its books books books pre pre pre- demonetization demonetization demonetization period period period and and and shown shown shown in in in the the the books books books of of of accounts i.e. till 08.11.2016. . till 08.11.2016. Further as per table above, cash sales which risen up Further as per table above, cash sales which risen up Further as per table above, cash sales which risen up just before the demonetization period is not justified in just before the demonetization period is not justified in just before the demonetization period is not justified in his case as average monthly sale during first two his case as average monthly sale during first t his case as average monthly sale during first t quarters quarters of of FY FY 2016-17 17 i.e. i.e. from from 01.04.2016 01.04.2016 to to 30.09.2016 is Page 17 of 30.09.2016 is Page 17 of 20 shown Rs.1,96,800/ 1,96,800/- thereafter in the month of October, 2016 cash sales have thereafter in the month of October, 2016 cash sales have thereafter in the month of October, 2016 cash sales have instantly risen to Rs. 26,85,792/ instantly risen to Rs. 26,85,792/- and further in the and further in the month of November 2016 from 1st day to 8th day of month of November 2016 from 1st day to 8th day of month of November 2016 from 1st day to 8th day of November 2016 ( only eight days ) cash sales have November 2016 ( only eight days ) cash sales have November 2016 ( only eight days ) cash sales have sharply risen to Rs. 3 sharply risen to Rs. 30,57,672/-. As per bank statement of the assessee, the cash As per bank statement of the assessee, the cash As per bank statement of the assessee, the cash deposited has been made on different dates, which shows deposited has been made on different dates, which shows deposited has been made on different dates, which shows the suspicious nature of cash deposited. the suspicious nature of cash deposited. Sl. No. Bank Name Date of de posit Amount Amount 1. UNITED BANK OF INDIA UNITED BANK OF INDIA 10.11.2016 9,00,000 9,00,000 2. UNITED BANK O F INDIA BANK OF INDIA 12.11.2016 9,00,000 9,00,000 3. UNITED BANK OF INDIA UNITED BANK OF INDIA 15.11.2016 9,00,000 9,00,000 4. RBL BANK 17.11.2016 9,00,000 9,00,000 5. RBL BANK 18.11.2016 9,00,000 9,00,000 6. KOTAK MAHINDRA BANK KOTAK MAHINDRA BANK 09.12.2016 2,50,000 2,50,000 7. KOTAK MAHINDRA BANK KOTAK MAHINDRA BANK 13.12.2016 2,50,000 2,50,000 8. YES BANK 17.12.2016 2,50,000 2,50,000 TOTAL 52,50,000 52,50,000

17 ITA No. 2345/Del/2026 Narayan Chandra Giri Therefore, the claim of assessee with regard to the cash deposited arising out of the cash sales made during the year under consideration is not acceptable.” 10. Further, we have noticed that the ld. CIT(A) has disposed of ground Nos. 2 & 4 before him by observing in para no. 6.2.2 onwards as under: “6.2.2 As the Grounds No. 2 to 4 are related, the same are decided together as under. 6.2.3 On perusal of reply of the appellant, the Ld. AO noted that the appellant has shown cash sales during the whole year, whereas he has deposited most amount of cash during the demonetization period only. During the period 01.04.2016 to 31.10.2019, the total cash sales of the appellant are Rs. 42,73,375/-, however, during the whole of FY -2016-17 till before the demonization period, the appellant had deposited only Rs. 7,25,000/-. It was further noted that, during FY -2015-16 total sales are shown Rs. 1,35,47,421/- and during the FY2016-17, total sales are shown Rs. 1,42,42,534/-. Hence, turnovers during the FY 2015-16 and FY -2016-17 are approximately similar. Further, the cash sales in the whole month of November 2015 are shown Rs. 2,66,357/-, however, the cash sales in the month of November 2016 till 8th day of November 2016 (only eight days) are shown at Rs. 30,57,672/-. In this way, the appellant has booked non- existing sales in its books for the pre-demonetization period and shown in the books of accounts i.e. till 08.11.2016. 6.2.4 Further, the cash sales which had risen up just before the demonetization period is not justified in the case as average monthly sales during first two quarters of FY 2016-17 i.e. from 01.04.2016 to 30.09.2016 is shown at Rs. 1,96,800/-, thereafter, in the month of October, 2016, the cash sales have instantly risen to Rs. 26,85,792/- and further in the month of November 2016 from the 1st day to 8th day of November 2016 (only eight days), the cash sales have sharply risen to Rs. 30,57,672/-. 6.2.5 As per the bank statement of the appellant, the cash deposited has been made on different dates, which shows the suspicious nature of cash deposited.

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SI. No. Bank Name Date of deposit Amount 1 UNITED BANK OF INDIA 10.11.2016 9,00,000 2 UNITED BANK OF INDIA 12.11.2016 9,00,000 3 UNITED BANK OF INDIA 15.11.2016 9,00,000 4 RBL BANK 17.11.2016 9,00,000 5 RBL BANK 18.11.2016 9,00,000 6 KOTAK MAHINDRA BAN 09.12.2016 2,50,000 7 KOTAK MAHINDRA BANK 13.12.2016 2,50,000 8 YES BANK 17.12.2016 2,50,000 TOTAL 52,50,000 6.2.6 Therefore, the claim of the appellant with regard to the cash deposited arising out of the cash sales made during the year under consideration is rightly rejected by the Ld. AO. 6.2.7. Recently the following decision of the Hon’ble ITAT are decided in favour of revenue. The Patna bench of the ITAT, in the case of Shri Dharmendra Kumar, ITA No. 709/PAT/2024 (A.Y. 2017-2018) upheld the revenue's stand because the taxpayer could not provide any proper explanation regarding the significant cash deposits made during demonetization. In view of the above, I do not find any fault in the order of the Ld. AO. The appellant has failed to prove the source of cash deposits and hence the Ld. AO has rightly applied the provisions of Sec 68 of the Act. Respectfully following the above judicial precedent, the Grounds No. 2 to 4 of the appeal are, hereby, DISMISSED. The addition made by the Ld. AO is, therefore, upheld.” 11. On perusal of the observation of the AO contained in assessment order and the observation of the ld. CIT(A) contained in the first appellate authority order, we have noticed that the material facts and the documentary evidence produced by the assessee in support of its case as already discussed by us has not been duly considered in a holistic manner by the both ld. authorities. By giving details of cash sales in the form of sale account from 01.04.2016 to 31.03.2017 and filing the necessary document in that regard, the assessee has discharged the primary onus and the

19 ITA No. 2345/Del/2026 Narayan Chandra Giri assessing officer has not brought on record any new things to contradict the material facts and the documentary evidence produced on record by the assessee/appellant. In the given facts and circumstances, the addition made on account of cash sales during the demonetization period is not found to be legally justified and accordingly set aside. The addition made by Assessing Officer and confirmed by the ld. CIT(A) is accordingly ordered to be deleted. The grounds raised by the applicant are allowed.