VORTEX SYSTEMS PRIVATE LIMITED,DELHI vs. INCOME TAX OFFICER, DELHI

P a g e | 1 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER

ITA No.7284/Del/2025 (Assessment Year: 2017-18)

M/s Vortex Systems Vs. ITO, Ward 26(4) Private Limited New Delhi - 110002 Flat No. 105, 1st Floor, A-13, Kailash Colony, New Delhi – 110048 स्थायीलेखासं./जीआइआरसं./PAN/GIR No: AAECV7789E Appellant .. Respondent Appellant by : Sh. P.K. Jain, CA Sh. Kunal Gupta, CA Respondent by : Sh. Ashok Kumar Pandey, Sr. DR

Date of Hearing 01.06.2026 Date of Pronouncement 10.07.2026

O R D E R PER ANUBHAV SHARMA, JM:

This appeal is preferred by the assessee against the order dated 16.09.2025 of the Ld. Commissioner of Income Tax (Appeal)-29 New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld.

P a g e | 2 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) ‘FAA’) in Appeal No: CIT(A), Delhi-9, 10689/2019-20 arising out of the assessment order dated 30.12.2019 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ITO, Ward-26(4) New Delhi, for AY: 2017-18.

“5. Ground No. 1: is general in nature and is therefore, not adjudicatedироп. 6. Ground Nos. 2 to 15: are regarding the addition of Ra. 54,03,000/-made by AO u/s 68 of the Act on account of unexplained cash deposits. 6.1 The AO noted that the assessee deposited Ra. 54,03,000g- in cash into two Bank of Baroda accounts during the period from 9ü November to 30t December, 2016, coinciding with the demonetization of high-denomination currency notes. On scrutiny, AO observed that the company had minimal cash sales and cash deposits in earlier years. Suddenly, for October and the first eight days of November, 2016, monthly cash sales amounted to Rs.34,30,440/- and Rs.13,57,475/- respectively,

P a g e | 3 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) resulting in a cash-in-hand figure of Rs.55,75,247/- as of g% November, 2016, which was almost entirely deposited after demonetization. The AO found no corresponding growth or pattern in prior years and highlighted that such accumulations and heavy cash deposits were absent earlier. Repeated requests were made for day-wise stock registers, full reconciliations of sales and VAT returns, purchase and sales bills, and details of debtors and creditors, but only partial or summary information was submitted, and key documents were either missing or not contemporaneous. VAT returns had been revised post-facto, with significant mismatches explained as inadvertent rather than justified with supporting evidence, leading AO to conclude that the books of account were unreliable. 6.2 The appellant has filed written submissions and has argued that all cash deposits were fully explained through regular business cash sales and legitimate withdrawals from the bank, as reflected in the VAT returns and sales invoices. It was contended that all purchases and sales were genuine, inventory tallies matched (with tax audit reports), and there was no adverse material found in books. 6.3 The appellant has explained that the spike in cash sales was due to increased sales of fabrics through counter transactions in an industrial area, alongside continued business in engineering goods. All revenue was said to have been offered for VAT and income tax, and revision of VAT returns was attributed to mere reporting oversight. The appellant further invoked multiple judicial precedents, including Principal CIT v. Dilip Kumar Swami (Hon'ble Rajasthan HC), Hon'ble ITAT, Delhi in Jethu Ram Prem Chand, and Hon'ble ITAT, Mumbai in Jaspal Singh Sehgal, stating additions u/s 68 cannot be made where sales are taxed, inventory is reconciled and no defects are found in stock records. It was also argued that the AO did not point out any defects in purchases, and that quantitative tallies support the business claims. 6.4 I have perused the assessment order and submissions of appellant. The key discrepancies observed in the submissions of the appellant primarily relate to the lack of complete, contemporaneous supporting records and contradictions in explanations versus documented business conduct.Although the appellant has claimed that increased cosh sales and accumulated cash deposits were attributable to legitimate business activity in fabrics and engineering goods, it was noted during assessment that only summary stock details were provided rather than a comprehensive day-wise stock register, and that critical documents, such as full purchase vouchers and sales accounts, were repeatedly sought by AO but could not be furnished.The appellant also failed to supply daily cash book details, a list of customers for OTC cash sales, and proper reconcillation of VAT returns with books of accounts for the relevant period despite explicit AO requests. Significantly, the revision of third-quarter VAT returns after the assessment period was explained as a reporting oversight, but was unsupported by credible evidence, raising a presumption of account manipulation for the period under scrutiny. 6.5 Additionally, the explanation of appellant regarding the retention of substantial cash-in-hand before demonetization were found untenable under judicially endorsed human probability principles. The business had not previously recorded such high volumes of cash sales or closing cash, and the sudden spike was not corroborated with matching trends or supporting documentation from prior years. Some claims, such as recurrence of similar cash sales post-demonetization, were unsupported by

P a g e | 4 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) actual deposits and statements. The assertion that all purchases were genuine and inventory tallies matched was not reflected in the absence of daily movement records, proper reconciliation statements, or contemporaneous audit trails. 6.6. In view of the above facts, it can be concluded that the combination of partial evidence, revision of returns, and unexplained accumulation of cash before only a specific period lends no credence to the appellant's explanation and, instead, aligns with the AO's conclusion that the deposits represented unexplained cash credits, liable for addition under section 68 and taxation under section 115BBE. Therefore, the addition made by AO are hereby upheld and these grounds of appeal are dismissed.”

P a g e | 5 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) Admittedly, assesse maintained proper books of account which have not been rejected and at the same time admittedly assessee’s books of account were subject to tax audit which was there before the ld. Tax authorities. Assessee establishes a cash in hand of Rs.55,75,247/- as on 08.11.2016 this is certainly higher than the impugned deposits. Assesse’s cash fabrics sales of Rs.47,87,915/- has not been doubted on the basis of quantitative stock records maintained and reconciled. Detailed item wise stock register of the stocks were there in evidence, which established that sales as invoiced were from stock and same has been accepted by the department. Assessee’s gross profit rate of 16.74% has been duly accepted. Thus, the corresponding sales from the stock cannot be in isolation be alleged to be non–genuine reflection of sales.

P a g e | 6 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) 7. We are of the considered view that ld. Tax authorities had merely proceeded to doubt the claim of assesse on the human probabilities test but the same cannot override documentary evidences which sufficiently establish the nature of business of the assesse and the quantitative data and financials establishing the assessee’s stock and sales including cash sales. We are of the considered view that it is not justified on behalf of department to raise a suspicion by pointing out deficiency of assesse in providing certain details which were not actually called by any specific notice and further unless the details already filed are found to be in any way not worth acceptance. The assessing officer has drawn of the suspicion from allegation that there was sudden rise at the end of October in cash sales and the cash balance as increase from Rs.2,96,096/- to Rs.42,87,119/-. When assesse claims that assesse had stock to goods like fabrics where any household need products then sales during period of demonetization cannot be held to be not genuine. Suspicion raised by assessing officer has been sustained by ld. CIT(A) but such suspicion howsoever strong on the basis of the alleged facts arising out of change in ratio of cash to total sales, the same cannot take place of proof while quantitative evidences of the assesse have coherence to discharge the burden for the purpose of Section 68 of the Act. Hon’ble Delhi High Court

P a g e | 7 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) in the case of CIT Vs. Smt. Krishna Devi, ITA No. 125/2020 & Other Order dated 15.01.2021 has held that the theory of human behaviors and preponderance probabilities cannot be cited as basis to turn blind eye to the evidence produced by the respondent (assesse). Thus, the decision which ld. Tax authorities have relied in the case of SumatiDayal Vs. CIT, Bangalore (1995) 214 ITR 801 and CIT Vs. Durga Prasad (1969) 72 ITR 807 are distinguishable on facts as in the present case before us assesse had placed quantitative details, audited accounts, purchase vouchers, sales invoices, stock registers and VAT returns which cannot be ignored merely on suspicion gathered by pointing out the manner in which cash sales have increased.

Order pronounced in the open court on 10.07.2026

Sd/- Sd/- (Amitabh Shukla) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 10.07.2026 Rohit, Sr. PS

P a g e | 8 ITA No.7284/Del/2025 M/s Vortex System Pvt. Ltd. (AY: 2017-18) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI