BENZ FURNITURE PRIVATE LIMITED,AHMEDABAD vs. THE DY.CIT, CENTRAL CIRCLE-1(2), AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL "B” BENCH, AHMEDABAD DR. B.R.R. KUMAR VICE PRESIDENT AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.1356/AHD/2025 (Assessment Year: 2017-2018) Assistant Commissioner Of Income Tax, Central Circle 1(2) Ahmedabad Room No 303, 3 Floor, Aayakar Bhawan, Ashram Road, Ahmedabad-380009, Gujarat …………. Appellant Benz Furniture Private Limited Vs. 9 ManiyarHouse,RushabhSociety,Paladi, Ahmedabad 380001, Gujarat, India [PAN: AAECB2635B] …………. Respondent ITA No.1346/AHD/2025 (Assessment Year: 2017-2018) Benz Furniture Private Limited 9 ManiyarHouse,RushabhSociety,Paladi, Ahmedabad 380001, Gujarat, India [PAN: AAECB2635B] …………. Appellant Vs. Assistant Commissioner of Income Tax Central Circle 1(2) Ahmedabad Room No.303, 3 Floor, Aayakar Bhawan, Ashram Road, Ahmedabad-380009, Gujarat ………… Respondent

Appearance For the Appellant/Assessee : Shri Abhijit, Sr. DR For the Respondent/Department : Shri Parin Shah, AR Date : Conclusion of hearing 10.06.2026 : Pronouncement of order 19.08.2026

O R D E R Per Rahul Chaudhary, Judicial Member: 1. The present cross-appeals arise from the Order, dated 24/04/2025, passed by Commissioner of Income Tax, Appeals-12, Ahmedabad [hereinafter referred to as ‘the CIT(A)’] whereby the Learned CIT(A)

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited partly allowed the appeal against the Assessment Order, dated 21/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”] for the Assessment Year 2017-2018. 2. The Revenue has raised the following grounds of appeal in ITA No.1356/AHD/2025: 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,45,29,100/- made by the AO on account of unexplained cash credit u/s 68 of the I.T.Act." 2. "The Ld. CIT(A) has erred in law and on facts in holding that the provisions of Section 115BBE of the Act are not applicable to the addition of Rs. 1,45,29,100/ made under Section 68, without appreciating that such addition, being unexplained cash credit, squarely attracts Section 115BBE." 3. "The Ld. CIT(A) has erred in law and on facts in not deciding the appeal on merits of the case."

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited Officer competed the assessment vide Assessment Order, dated 21/12/2019, at income of INR.1,67,22,370/- after making following additions and disallowances:

(a) Addition of INR.1,45,29,100/- under Section 68 read with Section 115BBE of the Act holding that the Assessee had failed to provide explanation regarding the source of cash deposits made in the bank account of the Assessee during the demonetization period. In the process the Assessing Officer treated the purchases made from AkashImpex, Ahmedabad as bogus, rejected the contention of the Assessee that the cash deposits were sourced from cash sales and rejected the books of accounts of the Assessee.

(b) Disallowance of traveling expenses of INR.14,39,818/- invoking the provisions of Section 37(1) of the Act.

ITA No.1356/AHD/2025 7. We would first take up the grounds raised by the Revenue in its appeal. All the grounds raised by the Revenue are directed against

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited order passed by Learned CIT(A) deleted the addition of INR.1,45,29,100/- made by the Assessing Officer under Section 68 of the Act and are, therefore, the same taken up together hereinafter.

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited purchases made from AksharImpex, Ahmedabad. As the Assessee had maintained proper books of accounts and had made relevant disclosures in the financial statement, the Assessing Officer was incorrect in rejecting books of accounts and making addition of INR.1,45,29,100/- in the hands of the Assessee under Section 68 of the Act. It was further submitted that the additions made by the Assessing Officer amounted to double taxation of same income in the hands of the Assessee as the Assessee had disclosed all purchase/sales in the books of account and had already offered to tax the corresponding profits earned by the Assessee during the ordinary course of business.

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited during the assessment proceedings, the Assessee furnished replies/details/documents. We note that the Assessee had provide following details of opening stock, purchases, sales, closing stock and gross profit margins:

Month Opening Purchase Sales ClosingStock Gross Provided Stock Ratio April 2023 525052 422250 7063 19.31 May 7063 1220740 1453618 7319 11.89 June 7319 285613 101115 8147 22.54 July 8147 0 0 8147 0 August 8147 2956663 3077500 8171 (-)0.68 September 8147 398992 37800 8304 28.81 October 8304 2616232 9562400 9115 38.35 November 9115 3082500 4801650 8355 18.16 December 8355 3351295 3939900 8320 (-)22.53 January 8320 5839510 4811150 7379 (-)11.75 February 7379 1620025 3842915 9623 38.42 March 9323 40595 190100 9593 2.26 Total 21937217 32240398

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited we find that vide Letter, dated 17/12/2019, filed during the assessment proceedings the Assessee had provided summary of stock position as on 01/4/2016 and 01/04/2017. The Assessing Officer also noted that even VAT Returns for the relevant period were filed by the Assessee after delay. According to the Assessing Officer the cash deposits made during the relevant previous year were substantially higher as compared to immediately preceding previous year. After analyzing the details and documents furnished by the Assessee and taking note of relevant facts the Assessing Officer concluded as under: “4. Further on the basis of facts mentioned in 3.4 & 3.5 above, I am of view that the account of assessee company does not represent the true & correct state of affair and books of account have been manipulated to inflate cash sales to cover up its unexplained cash. So in the light of these facts the books of accounts of the assessee are hereby rejected u/s 145 of the Income-tax Act, 1961 Further, the total sales shown by the assessee in ITR is Rs.3,22,54,698/-, out of as discussed above, sales of Rs. 1,45,29,100/- have been held to be bogus. Accordingly, actual sales is taken at Rs.1,77,25,598/- (Rs.3,22,54,698 + Rs. 1,45,29,100). Thus, the inflated/manipulated cash sales of Rs.1,45,29,100/- is treated as closing stock of the company and increased to that extent.However, the said benefit cannot be given to the assessee company on the ground that assessee has not furnished stock register and substantial purchase from AkashImpex Ahmedabad during the year remained unverifiable. As per Gross profit working mentioned in para 3.4 above, the assessee company has shown gross profit of Rs.45,51,963/- on inflated/manipulated cash sales of Rs. 1,45,29,100/- whereas gross profit of Rs.2,86,227/- on actual sale of Rs. 177,29,100/-, Considering these facts, the net profit shown in the books of accounts is treated on sale of actual sale of Rs. 1,77,29,100/- 5. Accordingly, it is held that cash sales to the extent of Rs.1,45,29,100/- during theperiod 25.10.2016 to 08.11.2016 are manipulated to cover up unaccounted cash. Therefore,cash deposit during demonization to the extent of Rs. 1,45,29,100/- out of total cash depositofRs. 1,50,00,000/- is treated as unexplained. The assessee company is maintaining regular books of accounts and

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited

accounts of the assessee have been audited u/s 44AB of the Act and audit report in Form 3CA/3CD have been filed alongwith return of income. Therefore, said unexplained cash of Rs. 1,45,29,100/- is added to the total income of the assessee u/s 68 instead of section 69 of the IT Act, 1961. Since the addition is made u/s 68 of the Act, tax is to be charged u/s. 115BBE of the Act. Since income of the assessee includes income u/s 68 of the Ac, penalty proceedings u/s 271AAC are hereby separately initiated.” (Emphasis Supplied) 14. On perusal of the above we find that Assessing Officerhad concluded that books account of the Assessee did not reflect true and correct state of affairs. Therefore, the Assessing Officer rejected the books of accounts; estimated income of the Assessee and proceeded to make addition of INR.1,45,29,100/-under Section 68 of the Act. 15. In appeal the Learned CIT(A) deleted the above additions made by the Assessing Officer returning the following findings:

“5.3. I have considered the assessment order passed by the AO and submission furnished by the appellant. During the assessment proceedings, the AO observed that the appellant made substantial cash deposits during the demonetization period which were significantly higher compared to the corresponding period in The previous year The closing cash balance before demonetization was also found to be unusually high in comparison to the prior year. A sudden surge in cash sales was recorded just before demonetization, whereas cash sales for the rest of the financial year remained minimal. Accordingly, the AO inferred it as an attempt to inflate sales and regularize undisclosed cash On the contrary, the appellant has submitted that the source of cash deposits were cash sales made by it during the demonetization period.The appellant submitted the purchase and sales register, stock register, copies of sales and purchase invoices, and details of buyers, as provided before the AO to demonstrate that the furniture items were sold exclusively from existing stock. In regards to the observation of the AO that the appellant has shown substantial purchase from AkashImpex Ahmedabad and also shown purchase of Rs 22,42,500/- on 07.11.2016 and for Rs. 12,43,725/- on 08.11.2016.

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited

It is observed from purchase and sales register that in the month of October the appellant had a closing stock of Rs.81,76,411/- and sale in November is to the tune of Rs 48.67,036/- This clearly transpires that the stock was Sufficient to meet the sales. The appellant has also submitted theVAT Returns for the FY 2016-17 and claimed that there is no mismatch in the data submitted to the VAT Return Further the AO has not found any shortage or deficit in stock versus the sales. The addition was made by the AO on the basis that after demonetization, demonetized currencies could not have been accepted as valid legal tender.However the sale proceeds from which demonetization cash was received from various customers were already admitted as income of the Assessee and duly recorded its books of accounts. Thus, it remains the fact that the appellant has accounted total sales of Rs.3.22.54,698/- including alleged bogus cash sales of Rs 1,45,29,100/- in its books of account and offered for tax while filing its return of income for the year under consideration Further, the cash sales of the appellant during the year under consideration has also not been Rs. 3,42,64,621/- to the total income of disputed by the AO. Thus the addition of Rs 3,42.8 the appellant has led to double taxation in the hands of the appellant as rightly stated by the appellant in his submission_ It is settled principle that once sales are recorded in books of accounts, corresponding purchases are not in doubt, such sales cannot be subject matter of addition u/s 68 of the Act ……………..

5.4 It is observed that appellant has relied upon various decisions including decision of Jurisdictional ITAT, Ahmedabad in support of its claim that income offered to tax in form of sale cannot be subject matter of addition again u/s 68 of the Act. It is observed that the AO has made the entire addition based on the claim that the appellant booked bogus cash sales totaling Rs. 1,45,29,100/-. The AO construed that the appellant has inflated cash sales to cover up its unaccounted cash. However, there are no substantial evidences on record to prove his contention The AO has considered

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited cash sales occurred before the demonetization period as unexplained income u/s 68 of the Act. The AO has not disputed corresponding purchases/manufactured stocks made by appellant before sale and even not disputed quantum of closing stock.It is observed that entire sales have been made out of available stock with appellant and in assessment order,AO has not disputed the fact that appellant was having sufficient stock to cater such sales. There is no allegation of AO that the appellant has backdated its purchases or purchases shown in books of account are bogus or claimed to have been entered to show that sales were genuine.Once AO has not disputed quantity of stock as well as purchase. corresponding sales made by appellant, the amount credited by the appellant in the Profit & Loss Account cannot be taxed again u/s 68 of the Act.

5.5 In view of above factual and legal matrix, it is observed that AO was not justified in making addition u/s 68 of the Act for Rs 1,45,29,100/- u/s 68 of the Act The addition made by AO is thus deleted and ground of appeal No.1 is allowed.” (Emphasis Supplied)

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited Therefore, we find merit in the contention advanced by Learned Departmental Representative that the Learned CIT(A) overturn the finding returned by the Assessing Officer without correctly appreciating the relevant facts. We also note that the details of debtors realization in cash was not available on record. 17. At the same time we note that the Assessee had placed before the Assessing Officer the details of purchases made from Akash Impex, Ahmedabad. In support the Assessee had also placed on record, invoices and details, the Assessing Officer rejected the same solely for the reasons that the notice issued under Section 133(6) of the Act had not been served and was returned with remarks ‘Left’. The Assessee is stated to be in the business of trading of furniture. The Assessee has furnished the details of opening balance, purchase, sales and closing stock. Since the Assessee had not filed stock register during the assessment proceedings, the Assessing Officer could carry out the necessary verification. Therefore, we deem it appropriate to set aside the issue of verification of alleged bogus purchases made from Akash Impex, Ahmedabad back to the file of the Assessing Officer for denovo adjudication with the direction to the Assessee to furnish the stock register and the corresponding purchase and sale invoices before the Assessing Officer. It is clarified that unless some infirmity is found in the documents furnished by the Assessee, the purchases made by the Assessee would not be treated as bogus solely on account of the facts that the vendor was no longer found at the address specified in the invoice. The Assessee is also directed to make an attempt to locate and furnish the current address of the Akash Impex, Ahmedabad. 18. We note that the Assessee had also furnished the month-wise details of sales made during the relevant previous year. However, the Assessing Officer could not verify the same in absence of relevant supporting documents and treated cash sales of INR.1,45,29,100/-as bogus and therefore, treated the cash despot of INR.1,50,00,000/-

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited made in the bank account of the Assessee during the demonetization period as unexplained. It is the case of the Assessee that the cash sales are genuine. We have hereinabove directed the Assessee to produce before the Assessing Officer the stock register. The Assessing Officer is directed to verify the stock position to examine the contention of the Assessee that the Assessee had sufficient stock to make cash sales. The Assessee is directed to substantiate the cash sales by furnishing corroborative evidence before the Assessing Officer in the form of cash sale invoices, along with details of furniture/material sold along mode/proof of delivery. We note the Assessee has also filed VAT Returns. The Assessing Officer is directed to take the same into consideration and not reject the same merely because there was a delay in filing VAT Returns. With the aforesaid directions, the issue of verification of cash sale is also remanded back to the file of the Assessing Officer. 19. Since we have directed the Assessing Officer to examine the issue of alleged bogus purchases and alleged bogus cash sales afresh hereinabove, we set-aside the order of the Assessing Officer rejecting the books and account and direct the Assessing Officer to adjudicate the consequential issues of rejection of the books of account as well as the source of cash deposits made in the bank account afresh after taking into consideration the denovo adjudication of the issue of alleged bogus purchases and alleged bogus cash sales. The Assessee is directed to furnish before the Assessing Officer the details of cash received on account of debtor realization as it was contended that part of cash deposits were sourced from the same. 20. It is clarified that the onus would be on the Assessee to support the claim/contention made by the Assessee by furnishing sufficient corroborative evidence and submission before the Assessing Officer. The Assessing Officer would be at liberty to carry out such inquiry/verification, as the Assessing Officer may deem fit to adjudicate the above issues afresh as per law. The Assessee would be

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited confronted with the material gather by the Assessing Officer and the Assessee shall, in any case, be granted a reasonable opportunity of being heard by the Assessing Officer. 21. In terms of above, Ground No. 1 to 3 raised by the Revenue are treated as allowed for statistical purposes. 22. In result, the appeal preferred by the Revenue is allowed for statistical purposes. ITA No. 1346/AHD/2025 23. Next would first take up the grounds raised by the Assessee in its appeal which are directed against order passed by Learned CIT(A) confirming the disallowance of traveling expenses of INR.14,39,818/- made by the Assessing Officer invoking the provisions of Section 37(1) of the Act which was confirmed by the Learned CIT(A).

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited Officer with the aforesaid directions, all the rights and contention of the Assessee are left open. Thus, Ground No.1 to 4 raised by the Assessee are treated as allowed for statistical purposes. 26. In result, the appeal preferred by the Assessee is allowed for statistical purposes. 27. In conclusion the cross appeals are allowed for statistical purposes.

Order pronounced on 19.08.2026.

Sd/- Sd/- (Dr. B.R.R. Kumar) (Rahul Chaudhary) Vice President Judicial Member

िदनांक Dated :19.08.2026 अहमदाबाद Ahmedabad; True Copy Harshit,PS

ITA 1356& 1346/AHD/2025 Benz Furniture Private Limited आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent. 3. संबंिधतआयकरआयु�/ Concerned CIT 4. आयकरआयु�(अपील) / The CIT(A) 5. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड�फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, अहमदाबाद / ITAT, Ahmedabad