RAJNEESH VERMA,DELHI vs. ACIT CIRCLE - 50(1) DELHI, DELHI

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ITA 6634/DEL/2025Status: DisposedITAT Delhi15 May 2026AY 2017-188 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the AO had not rejected the assessee's books of accounts and the cash sales were reflected therein, making an addition for cash deposits would amount to double taxation. The Tribunal also noted that Section 115BBE, imposing a higher tax rate, was not applicable for the assessment year in question.

What were the facts?

The assessee deposited a significant amount of cash during the demonetization period. The Assessing Officer (AO) treated these deposits as unexplained cash credits and made an addition, which was confirmed by the CIT(A). The assessee argued that these deposits were from cash sales already disclosed in their books.

What were the issues?

Whether cash deposits during demonetization, explained by cash sales already disclosed in books, can be treated as unexplained cash credits. Applicability of Section 115BBE for the assessment year.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 143(3),Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES,‘B’, NEW DELHI

Before: SHRI CHALLA NAGENDRA PRASAD

For Respondent: Shri Rajesh Kumar Dhanesta, Sr
Pronounced: 15.05.2026

आदेश / ORDER

PER AMITABH SHUKLA, AM: This appeal filed by the assessee is against order dated 26.05.2025 of National Faceless Appeal Centre/learned Commissioner of Income Tax(Appeals), New Delhi, [hereinafter referred to as ‘ld. CIT(A)] arising out of assessment order dated 25.12.2019 passed under section 143(3) of the Income Tax Act, 1961 pertaining to Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961. 2. The assessee has raised the following grounds of appeal:

1) That having regard to the facts and circumstances of the case, assumption of jurisdiction in passing of the impugned assessment order by Ld. AO u/s 143(3) dated 25-12-2019 is illegal, bad in law and nullity in the eyes of law as the mandatory notice u/s 143(2) has not been issued in terms of CBDT instruction dated 23-06-2017 and in view of judgment Sajal Biswas vs ITO in ITA 1244/Kol./2023, Date of order 26- 03-2025. Kolkata ITAT. 2) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.2,55,31,287/- on account of cash deposits in bank account of the assessee by treating it as alleged unexplained cash credit u/s 68 and taxing the same u/s 115BBE and that too by recording incorrect facts and findings and without following the principles of natural justice. 3) That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.2,55,31,287/- on account of cash deposits in bank account of the assessee by treating it as alleged unexplained cash credit u/s 68/115BBE, is bad in law and against the facts and circumstances of the case. 4) Without prejudice to the above grounds, that in any case and in any view of the matter, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in taxing a sum of Rs.2,55,31,287/- u/s 115BBE and that too without appreciating the latest law in this regard. 5) That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B and 234C of Income Tax Act, 1961.

3.

At the outset, we have noted that the Registry has identified the delay of 79 days in this case for filing of appeal. Justifying the delay, the appellant had submitted that due to bona fide and unavoidable reasons including administrative constraints and delay in obtaining professional advice, the appeal could not file in time. The ld. Counsel submitted that reasons for delay, inter alia, included unfortunate death of briefing counsel. Thus, it was argued that the delay is not intentional. We are conscious that no litigant gains by delay its matter. The Ld. DR did not seriously object to the condonation of delay. Delay of 79 days in filing of the assessee’s instant appeal is condoned in larger interest of justice and in light of Hon’ble Apex court decision in the case of Collector, Land & Acquisition vs. Mst. Katiji& Others (1987) 167 ITR 471 (SC).

4.

At the outset, the ld. Counsel for the assessee submitted that it is not pressing the ground of appeal no.4 (ground of appeal no.1 in the Appeal Memo). Accordingly, the same is dismissed as infructuous.

5.

The main issue contested by the appellant assessee is regarding the addition of Rs.2,55,31,287/- on account of unexplained cash deposits during the demonetization period coupled with invocation of provisions of section 115BBE of the Act. The brief factual matrix of the case is that Return declaring Income of Rs.1,42,92,370/- was filed by the assessee on 31.10.2017. The case was selected for scrutiny to examine the sales and cash deposits during the demonetization period. During the course of assessment proceedings, the Ld. AO noted that between the period 09.11.2016 to 30.12.2016, the assessee had deposited Rs.6,72,57,000/- in his bank account which corresponded with the prevailing demonetization period. The assessee had submitted that the impugned cash deposits had direct nexus with its cash sales and cash balances. The Ld. AO conducted his enquiries and enhances so as to conclude that the theory of cash sales was incorrect considering abnormal rise in cash sales. He therefore proceeded to make an addition of Rs.2,55,31,287/-. The impugned addition rested upon supposition of the Ld. AO of assessee having certain amount of cash in hand only on particular dates. The Ld. CIT(A) confirmed the action of the Ld. AO by raising the hypothesis of human probability. While drawing their conclusions, both the lower authorities have relied upon a catena of judgments deemed to be supporting their hypothesis.

6.

The ld. Counsel for the assessee, Shri Rakesh Gupta, vehemently argued against the conclusions drawn by the Ld. Assessing Officer and Ld. CIT(A). It was submitted that the ld. AO has not rejected the books of accounts and thus have accepted the book results. It was argued that it is settled principal of law that the same is not permissible. Disturbances to trading accounts can be made only upon rejection of books of accounts and not otherwise. The ld. Counsel argued that lower authorities have failed to appreciate that the cash sales of the assessee during the year comprised just Rs.14 Crores as against total turnover of Rs.106 Crores. It was submitted that in the immediately preceding year also, the assessee had achieved nearly identical figures. The ld. Counsel argued that the cash deposits added which in reality was the cash sales has already been included in the profits on which taxes have been paid. It was argued that the consequent addition in reality, tantamount to a case of double addition. The ld. Counsel placed a voluminous paper book indicating sales of last few year so as to allude that it sales has been ranging in the same figures.

7.

The ld. DR vehemently argued in favour of the order of the lower authorities while relying upon the same.

8.

We have heard rival submission the light of material available on record. We have noted that this Tribunal has been consistently holding that where, the trading result of the assessee have been accepted by the Revenue, books of accounts have not been rejected, no addition is permissible. Thus, we have noted that in the case of DCIT vs Adarsh Kanch Udyog P. Ltd. in ITA No.4741/Del/2024, dated 21.03.2025, it has been held

“…4. The Ld. CIT(A) has rightly held that the books of accounts of appellant have not been rejected and the purchases stand accepted. We find sufficient force in the argument that corresponding sales cannot be suspected. We also find force in the argument that assessee’s VAT orders for F.Y 2016-17 also support his case of genuine sales having undertaken. Accordingly, we are of the considered view that there is no case for any interference to the order of the Ld. CIT(A) at this stage. The same is, therefore, confirmed and all the grounds of appeal raised by the revenue are dismissed…” 9. Again in ITA No.3520/Del/2024 in the case of ITO vs MOBI TRADELINK, dated 06.12.2024, a Co-ordinate Bench of this Tribunal held :-

“…6. The Revenue’s stand, on the other hand, is that it was the assesee’s onus only to plead and prove all the relevant facts by satisfying the genuineness/creditworthiness of its explanation tendered during scrutiny as per PCIT v. NRA Iron & Steel Pvt. Ltd (2019) 412 ITR 161 and Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC). We find no merit in the Revenue’s instant former substantive ground once it has come on record that the assessee had duly explained the source of these cash deposits to regular trading activity in electronics business etc. by filing all the relevant detailswhich have gone unrebutted from departmental side. The Revenue fails in its instant first and foremost substantive grievance in very terms…” 10. Further, in ITA No.1337/Del/2024 in the case of M/s HKT Retail Ventures Pvt. Ltd. dated 07.05.2025, another Co-ordinate Bench has held

“….3. We have heard the rival submissions and perused the materials available on record. The Assessee Company is engaged in the business of retail trading of home décor products including furniture, sculptures, lights etc. The return of income for the assessment year 17- 18 was electronically filed by the Assessee on 13-01-2018 declaring loss of Rs. 4,71,475/-. During the course of scrutiny assessment proceedings, the learned AO noted that Assessee had made cash deposits of Rs. 53,82,150/- in HDFC Bank Ltd, East Patel Nagar, Delhi during the demonetization period in specified bank notes. The Assessee submitted that the said cash deposits were made out of cash sales which are already disclosed in the books of accounts and in the income tax return. The assessee submitted that during the assessment year 2017-18, it had made cash sales of Rs. 53,50,422/- out of total sales of Rs. 58,37,645/-. The assessee also submitted that major part of cash sales had taken place in the months of October 2016 to 8-11- 2016. The assessee explained the reason of huge sales made in cash during this period by attributing the same to various auspicious festival occasions including Diwali. Since the assessee was engaged in the business of selling of home decor items, it is the usual practice for the customers to make huge purchases of home decor items during the festive occasions including the period of Diwali. The assessee specifically stated that the sales made by the assessee had been duly disclosed in the audited books of accounts and also in the income tax return. The assessee had sufficient cash balance to explain the cash deposits and hence nothing could be treated as unexplained there on. The learned AO however disbelieved the entire contentions and observed that similar cash deposits were not made by the assessee in the earlier year. The assessee to buttress this argument submitted that the business itself was started only in October 2016 and hence the same is not comparable with that of the earlier year. The assessee specifically stated that the retail showroom in Delhi started in October 2016. This showroom was taken on rent from Mrs. Rajini Apan from July 2016, post which showroom fit outs took 3 to 4 months and the assessee being a new showroom, lot of retail sales took place during the months ofOctober to 8th November 2016. The assessee also submitted the complete copies of sale bills, cash book, VAT returns (both original and revised) and purchase invoices. The assessee also submitted that it had sufficient stocks in its kitty as is evident from the stock register and to the extent of sales, the stocks were duly reduced and reflected in the books of accounts of the assessee. The learned AO however disregarded all these contentions and proceeded to add the cash deposits made in SBN during the demontization period in the sum of Rs 53,82,150/- as unexplained money under section 68 read with section 115BBE of the Act. This action of the learned AO was upheld by the learned NFAC. 4. We find that the lower authorities had not rejected the books of accounts and book results of the assessee. The assessee had made cash sales of home décor items from its new showroom started in October 2016 only. It is quite normal and usual practice for the customers to make purchase of home décor items during the festive occasions including Diwali that too from new showroom. It is a fact that assessee had made cash sales thereon and had duly reflected the sales in the books of accounts and in the income tax returns. On perusal of the cash book, we find that the said cash sales are duly reflected as receipts thereon and there is absolutely no negative cash balance with the assessee, meaning thereby – the cash deposits made during the whole year including the demonetization period is squarely covered and explained out of cash balance available with the assessee. To the extent of sales made by the assessee, the stocks of home décor items had been duly reduced. The assessee had furnished the sale invoices, purchase invoices, stock registers, VAT returns (both original and revised) cash book , entire books of accounts before the learned AO. None of these documents and records were even rejected by the learned AO. The assessee had filed revised VAT returns for the third quarter only to change the input tax credit figure thereon. The sales figure in original VAT returns and revised VAT returns remain unchanged. The sales made by the assessee had not been doubted by the revenue. Hence the revenue having accepted the sales made by the assessee, ought not tohave made separate addition on account of cash deposits by treating it as unexplained. Otherwise, the same would amount to double addition made by the learned AO. On this count itself, the addition made on account of cash deposits deserves to be deleted. Further, the Hon’ble Madras High Court in the case of SMILE Microfinance Limited vs ACIT in WP (MD) No. 2078 of 2020 and WMP (MD) No. 1742 of 2020 dated 19-11-2024 had categorically held that enhanced rate of tax at 60% as provided in section 115BBE of the Act could be made applicable only from Assessment Year 2018- 19 onwards and cannot be applied for earlier years. Hence we hold that cash deposits made by the assessee is duly explained and no addition is warranted thereon. Accordingly, the grounds raised by the assessee are allowed…”

11.

We have noted that the facts of the present case are akin to those deliberated in judicial precedents above. Accordingly, in respectful compliance to the decision of Co-ordinate Benches of this Tribunal as well as for the purposes of consistency, we are of the view that no case for any addition is made out in the hands of the assessee. Accordingly, we set-aside the order of the ld. CIT(A) and direct the ld. AO to delete the addition of Rs.2,55,31,287/-. The appellant succeeds on this issue. The appeal of the assessee is therefore allowed. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 15th May, 2026

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (AMITABH SHUKLA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15/05/2026 Shekhar Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi,

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