SITI SAI STAR DIGITAL MEDIA PVT LTD,VADODARA vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), VADODARA

The present appeal preferred by the Assessee is directed against the Order, dated 15/09/2025, passed by National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the 'CIT(A)'] whereby Learned CIT(A) had partly allowed the appeal against the Assessment Order, dated 30/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act'], for the Assessment Year 2017-2018)

The Assessee has raised the following grounds of appeal:

The admitted facts of the case, as emanating from the records, are that the Assessee- company is engaged in the business of digital cable TV services through set-top boxes and subscription of TV channels. For the Assessment Year 2017-2018 the books of account of the Assessee were maintained regularly and were audited. For the Assessment Year 2017- 2018, the Assessee filed return of income on 30/10/2017 declaring loss of INR.86,75,038/- under the normal provisions. The return filed by the Assessee was selected for scrutiny, inter alia, on account of large value cash deposits during the demonetisation period. The Assessing Officer noted that during the period commencing from 09/11/2016 and ending on 31/12/2016, the Assessee had deposited cash aggregating INR.3,11,90,200/- in its current accounts maintained with the State Bank of India and IndusInd Bank. Out of the aforesaid cash deposits, the Assessing Officer treated INR.2,93,28,000/- as unexplained cash credits under Section 68 of the Act and brought the same to tax under Section 115BBE after rejecting the books of account invoking the provisions contained in Section 145(3) of the Act.

In appeal, the Learned CIT(A), vide order dated 15/09/2025, upheld the addition of INR.2,93,28,000/- made by the Assessing Officer under Section 68 of the Act.

Being aggrieved, the Assessee carried the issue in appeal before this Tribunal.

We have heard the rival submissions and have perused the material on record. Before adverting to the grounds on merits, we shall first deal with the issue of delay in filing the present appeal.

It is noted that there is a delay of 245 days in filing the present appeal before this Tribunal. In the application seeking condonation of delay, it has been explained that the Assessee had entrusted the handling of appellate proceedings to tax consultant. On account of lack of effective communication, coupled with the practical difficulty of collating voluminous records pertaining to demonetisation-period cash deposits (including cash books maintained at multiple locations, debtor ledgers, activation reports and bank statements), the Assessee could not take timely steps to file the present appeal before this Tribunal. It has been stated that the Assessee was under a bonafide belief that appropriate remedies were being pursued by the tax consultant. However, subsequently the Assessee found that the tax consultant had not taken any steps to and upon realising the same, the Assessee got the present appeal filed. In the aforesaid facts and circumstances, there occurred a delay of 245 days in filing the appeal.

Having regard to the nature of additions (involving a substantial addition of INR.2,93,28,000/- under Section 68 of the Act), and considering that the explanation for delay offered by the Assessee (which does not indicate any malafide intent or deliberate inaction attributable to the Assessee), we are satisfied that the Assessee was prevented by sufficient cause from filing the present appeal within prescribed time. Therefore, we condone the delay of 245 days in filing the present appeal and proceed to adjudicate the grounds raised by the Assessee in the present appeal on merits which are taken up hereinafter in seriatim.

Ground No. 1 to 4 raised by the Assessee are directed against the addition of INR. INR.2,93,28,000/- made by the Assessing Officer under Section 68 of the Act which was confirmed by the Learned CIT(A).

Briefly stated the relevant facts in brief are that during the assessment proceedings the Assessing Officer noted that between 09/11/2016 and 31/12/2016, the Assessee had made cash deposits of INR.3,11,90,200/- in its bank accounts. The Assessing Officer called for extensive details under Sections 142(1) and 133(6) of the Act which included month-wise cash sales and deposits, debtor-wise details, cash books, VAT returns and bank statements. In response the Assessee filed relevant reply/details. The Assessee explained that its business model was inherently cash-intensive; the local cable operators and linemen collected cash from a large base of end customers and remitted the same to the Assessee. The deposits in question represented recovery of the outstanding dues from sundry debtors for activation and subscription charges. In support the Assessee relied upon debtor ledgers, LCO-wise reports, STB activation records and cash books. The Assessing Officer was not satisfied with the explanation offered by the Assessee. The Assessing Officer noted that there was no corresponding increase in cash sales, that the pattern of cash deposits before and during demonetisation was irregular; that several major debtors had failed to furnish complete evidences in response to notices under Section 133(6); and that the cash book of the Assessee and the debtor accounts displayed discrepancies. Applying the doctrine of human probability, the Assessing Officer rejected the books of account under Section 145(3); concluded that the debtor recoveries were inflated, and treated INR.2,93,28,000/- as unexplained cash credits under Section 68 of the Act.

In appeal preferred by the Assessee the CIT(A) conclude that the Assessee had failed to discharged the onus under Section 68 of the Act to prove the nature and source of cash deposits and the creditworthiness/genuineness of the debtors. Therefore, the Assessing Officer was justified in making addition of INR.2,93,28,000/- under Section 68 of the Act. Thus, the Learned CIT(A) upheld the addition made by the Assessing Officer on account of cash deposits during the demonetization period.

Being aggrieved, the Assessee is now in appeal before this Tribunal on the above issue.

The Learned Authorised Representative for the Assessee contended that submitted that the business carried by the Assessee involved high percentage of cash receipts, and that the deposits made by the Assessee in its bank account during the demonetization period were these cash receipts aggregated during the normal course of business of the Assessee which were duly recognised as income in the Profit & Loss Account. It was contended that detailed month-wise debtor statements, STB activation records with auto-generated SMS IDs, LCO-wise reports and cash books were maintained/filed by the Assessee which demonstrated that substantial outstanding dues existed prior to demonetisation and that deposits could be correlated with recoveries made from debtors.

Per contra, the Learned Departmental Representative relied upon the assessment order and the order passed by the Learned CIT(A). The Learned Departmental Representative pointed out that the quantum as well as the timing of cash deposits clearly showed that the deposits were not sourced from business receipts or debtor realization. The Assessee had furnished incomplete details and the major debtors had not made complete compliance to notices issued by the Assessing Officer under Section 133(6) of the Act. The patterns entries in cash book and debtor ledgers support the rejection of books by the Assessing Officer and showed that the Assessee had introduced undisclosed income in the guise of debtor recoveries.

We have given thoughtful consideration to the rival contentions and have perused the material on record.

In our view the issue raised in Ground No. 1 to 4 hinges upon the appreciation of the business model of the Assessee, cash-collection process, debtor realization cycle and the supporting documentary evidences (such as debtor ledgers, activation and subscription records, cash book and bank statements) filed by the Assessee. We note that while the Assessing Officer and the Learned CIT(A) have recorded adverse findings, the record also shows that the Assessee had claimed to have filed voluminous data and explanations. On perusal of the orders passed by the Assessing Officer and the Learned CIT(A) we conclude that both the authorities have failed to fully and comprehensively examine and appreciate the documentary evidence furnished by the Assessee at the appellate stage. The order passed by the Learned CIT(A) does not refer to the documentary evidenced filed by the Assessee. Keeping in view the quantum of the addition and the nature of business carried on by the Assessee, we are of the view that the ends of justice would be served if the issue is remanded back to the file of the Learned CIT(A) for de novo adjudication after appreciation of the evidence furnished by the Assessee as per law. Accordingly, we set aside the Order, dated 15/09/2025, passed by the Learned CIT(A) to the extent it relates to the addition of INR.2,93,28,000/- made under Section 68 of the Act is concerned, and restore the issue to the file of the Learned CIT(A) for fresh adjudication in accordance with law. The Learned CIT(A) shall provide the Assessee a reasonable opportunity of being heard. The Assessee is directed to place before the Learned CIT(A) such documents and details as may be requisitioned by the Learned CIT(A) including but not limited to debtor-wise and month-wise ledgers, activation and subscription records, cash books maintained at different locations and bank statements already filed by the Assessee. The Learned CIT(A) would be at liberty to call for and obtain from the Assessing Officer remand reports in respect of major debtors and cash deposits. The Assessee is directed to fully cooperate in the appellate proceedings before the learned CIT(A) and file such documents/details as may be requisitioned by the Learned CIT(A). In case of non- cooperation, the Learned CIT(A) would be at liberty to decide the issue as per law on the basis of material available on record. Since we have restored the issue to the file of the Learned CIT(A) for denovo adjudication, we have not expressed any opinion on the merits of the addition made under Section 68 of the Act and/or on the applicability of Section 145(3) of the Act at this stage. All contentions of both the sides are left open to be urged before the Learned CIT(A).

Ground No.5 and 6 pertain to levy/charging of interest under Sections 234B and 234C of the Act and the same are disposed as being consequential in nature.

Ground No.7 and 8 raised by the Assessee relate to initiation of penalty proceedings under Sections 271AAC and 270A of the Act. As penalty proceedings are independent and separate from quantum proceedings, both the aforesaid grounds are dismissed as being premature.

In terms of the above, the Ground No.1 to 4 relating to the addition of INR.2,93,28,000/- are treated as allowed for statistical purposes, while the other grounds are disposed as indicated hereinabove.

In the result, the appeal preferred by the Appellant is partly allowed.

""यथ"/ 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.