PAANERI EXIM PRIVATE LTD ,MUMBAI vs. DCIT, 8(2)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No.1994/Mum/2026 (Assessment year: 2017-18)

Paaneri Exim Pvt. Ltd. vs DCIT-8(2)(1), Mumbai (Erstwhile 372, Dadarkar Building, N.C. ACIT-7(3)(1) Room No.624, 6th floor, Aayakar Kelkar Road, Ranade Road, S.O., Shivaji Park, Mumbai- Bhavan, Mumbai-400020 400028 PAN: AABCP4336L APPELLANT RESPONDENT Assessee by : Dr. K. Shivaram-Sr. Adv./Ms. Neelam Jadhav Revenue by : Shri V.S. Mahajan (Sr.DR) Date of hearing : 14/05/2026 Date of pronouncement : 25/05/2026 O R D E R Per:Anikesh Banerjee (JM): The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2017-18, date of order 24.11.2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax C.C. 7(3)(1), Mumbai (for brevity the ‘Ld. AO’) order passed under section 143(3) of the Act date of order 30.12.2019.

2 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. 2. The registry inform that the appeal was filed with a delay of 25 days. The assessee filed an affidavit duly executed on 04.05.2026 by the Director of the assessee company Mr. Virji Debraj Gada. The director who is handling this income tax matter was suffering in medical emergency. The Ld. DR had not made any strong objection against the ordinate delay of 25 days. Accordingly, we condone the delay for filing of appeal for 25 days and the appeal is taken for adjudication. 3. The brief facts of the case are that he assessee is engaged in retail business of Saree and Dress Material during the impugned assessment year. The assessee filed the return by declaring total income of Rs.35,83,710/- and book profit u/sec. 115JB of the Act of Rs.37,38,748/-. The assessee regularly audited the accounts u/sec 44AB of the Act. During the impugned assessment year the assessee deposited cash in the bank account during the demonetization period. The Ld. AO selected the assessee’s case in scrutiny. The assessee was asked to submit the details of cash deposit during the demonetization period after 08.11.2016. The Ld. AO found that the assessee deposited amount to Rs.1,90,82,500/- as Specified Bank Notes (SBN) during the demonetization period from 09.11.2016 to 31.12.2016. The assessee was asked to provide explanation and detail cash deposited related to this period. The assessee had submitted the evidence in compliance of the notice u/sec 142(1) of the Act. On comparison of cash book duly submitted by the assessee for F.Y. 2014-15, 2015-16 and 2016-17 the Ld. AO observed that cash in hand on 08.12.2016 was Rs.1,96,53,133/- which is much higher than cash in hand on 08.11.2015 which was Rs.31,29,162/-. The ratio of cash in hand as per closing cash in hand on 08.11.2016 was tremendously high on 08.11.2015. The assessee had explained the source of cash deposited during the demonetization period. But the Ld. AO added back the amount of

3 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. Rs.1,90,82,500/- with the total income of the assessee. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the impugned assessment order. Being aggrieved assessee filed an appeal before us. 4. The Ld. AR argued filed a paper book comprising pages 1 to 367 which has been placed on record. The Ld. AR stated that the assessee had submitted all the relevant documents in support of their claim related to day-wise cash book, month-wise summary of cash, month wise stock statement, quarterly Value Added Tax (VAT) return before the Ld. AO and the Ld. CIT(A). The Ld. AR invited our attention in APB page 312 to 339, the quarterly VAT return for F.Y. 2016-17 is annexed. The assessee had declared the sales during demonetization period in VAT Return & no adverse finding was made by the State VAT Authority. A month wise stock summary, purchase and sale are duly annexed in APB page 309 and 310. The comparative chart of purchase and sale of credit and cash cell for F.Y. 2014-15 and F.Y.2015-16 are annexed in APB page 309 and 310 which are reproduced as below:

4 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd.

5 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. 5. The Ld. AR contended that the following documents are duly submitted before the revenue authorities which are also annexed in the APB. The List of the relevant documents is reproduced as below:

6 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. Particulars 1st April 2015 to 8th November 2015 1st April 2016 to 8th November 2016 Cash Sales Rs. 7,92,26,639/- Rs. 7,98,86,005/- Cash Deposit Rs. 6,60,13,625/- Rs. 5,09,60,700/- Particular 9th November 2015 to 31st December 9th November 2016 to 31st 2015 December 2016 Cash Deposit Rs. 2,22,40,462/- Rs. 1,79,81,499/-

7 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. In case of rejection of books of account under section 145(3), we find that the business income of the assessee is not disputed nor the purchase. Respectfully relied on the order of coordinate bench of ITAT-Mumbaiin the case of ACIT vs. Ramlal Jewellers (P) Ltd (2023) 154 taxmann.com 584 held that addition U/s 68 on account of cash deposit could not be made simply on reason that during demonetization period cash deposits vis-à-vis cash sales ratio was higher. It is established that sales representing outflow of stock was duly accounted in the books of account and there was no abnormal profit during the year, then there is no justification to treat deposits made in bank account out of cash sales to be income from undisclosed source. We note that the assessee is maintaining a consistent GP ratio. There is no finding of the ld. AO for cash purchase by the assessee. The reliance was also placed in the order of Coordinate Bench of ITAT Mumbai SMC Benchin Pukhraj Nathmal Jain vs. ITO 25(3)(2), Mumbai ITA No-2815/Mum/2023 date of pronouncement 26/02/2024, held that. “10. Considering the facts of the present case and applying the ratio of the above decision of the coordinate bench we are of the view that the assessee has discharged the onus of substantiating the source for the deposits made in SBN during demonetisation period and that the addition made by the revenue without disputing the business income of the assessee is not tenable. In view of the above discussion, we are of the considered view that the addition of Rs 33,40,327/- made under section 68 of the Act cannot be sustained and is therefore deleted.” The ld.AO was not satisfied with the representation of books of account of the assessee. But no specific lacuna was found for rejection of Books of accounts of the assessee. The submitted all the relevant documents before the ld. AO and the submissions are annexed in APB pages 116 to 123. We respectfully relied on the orders of ITAT-Mumbai Bench in the cases of M/s Kandan Jewellers Pvt Ltd (supra), Ramlal Jewellers (P) Ltd (supra) and Pukhraj Nathmal Jain (supra). We setaside the impugned appeal order and the addition amount to Rs. 3,16,97,000/- is quashed.”

8 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. 8. The Ld. DR vehemently relied upon the orders of the revenue authorities and submitted that the assessee had deposited cash far in excess of the normal pattern of cash deposits during the demonetization period. The Ld. DR contended that the unusual spike in cash in hand as on 08.11.2016, in comparison to the immediately preceding year, clearly creates serious doubt regarding the genuineness of the cash available with the assessee. It was argued that though the assessee claimed that the cash deposited represented business receipts, no convincing evidence was furnished to establish that the Specified Bank Notes (SBNs) deposited after 09.11.2016 were actually received from genuine business transactions carried out on or before 08.11.2016. The Ld. DR further submitted that the assessee was not legally authorized to accept SBNs after demonetization and therefore the explanation of the assessee lacks credibility. The Ld. DR further argued that mere maintenance of books of account or filing of VAT returns would not automatically discharge the burden cast upon the assessee under the provisions of section 68/69A of the Act. According to the Ld. DR, the onus squarely lies upon the assessee to establish the nature and source of cash deposits with cogent documentary evidence. The Ld. DR submitted that the abnormal increase in cash balance as on 08.11.2016, without corresponding abnormal growth in sales turnover, clearly indicates that the cash introduced in the books was manipulated only to facilitate deposit of SBNs during the demonetization period. It was further argued that the assessee failed to establish any exceptional business circumstances warranting retention of such huge cash in hand. The Ld. DR invited our attention to paragraph no. 6.3 of the impugned appellate order and submitted that the Ld. CIT(A) had categorically recorded a finding that the assessee failed to satisfactorily explain the source of cash

9 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. deposits. The Ld. DR emphasized that the explanation furnished by the assessee was general in nature and unsupported by independent corroborative evidence establishing the genuineness of the cash transactions. Therefore, the Ld. DR strongly supported the addition made by the Ld. AO and prayed that the order of the Ld. CIT(A) sustaining the addition be upheld. The relevant paragraph of the impugned appellate order is reproduced as below:- “6.3 I have gone through the grounds of appeal, assessment order and submissions made by the appellant. Appellant is a company running retail show room of sarees and dress material. There is no dispute that the bank accounts in which cash was deposited belong to the assessee and cash was deposited by him. The transactions came to the notice of the department through AIR information. As per the IT Act, the entire onus is on the assessee to explain the transactions in the bank accounts. If cash is deposited in the bank account, the onus is on the assessee to explain the source of cash deposited with supporting evidence. In the present appeal, the issue is with regard to the cash deposits and the sources of such cash deposits. During the course of appellate proceedings, the appellant has not explained the sources for such cash deposits. It is simply explained that the cash was received from the sales. However, the appellant was not authorized to accept SBN notes on and from 9.11.2016. The AO observed that cash sale for the period from April 2015 to October 2015 were at Rs. 7,36,93,175 and April 2016 to October 2016 were Rs. 7,67,77,286/-. There is no much change in the sales. However, the cash in hand as on 8.11.2016 in comparison to 9.11.2015 is very high and is almost more than 500%. This sudden increase in cash in hand on 8.11.2016 is non-satisfactory and the assessee has failed to provide any satisfactory explanation. As the cash is deposited in the bank a/c of the assessee, as per section 69A the assessee has to explain the source of the same to the satisfaction of the AO. If no explanation is filed, or the explanation given is not satisfactory, the section provides that the money is deemed to be income of the assessee for the year in which it was deposited. In this case the assessee failed to give any explanation, therefore, the amount of cash deposited is liable to be added under provision of section 68. Section 68 reads as under.”

10 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. 9. We heard the rival submissions and considered the documents available on record. The undisputed facts are that the assessee is engaged in the retail business of sarees and dress materials and is maintaining regular books of account which are duly audited under section 44AB of the Act. The assessee had maintained day-wise cash book, sales register, purchase register and stock register and the same were produced before the revenue authorities. The assessee had also filed month-wise stock summary, comparative cash sales chart, quarterly VAT returns and other supporting evidences to substantiate the cash deposits made during the demonetization period. On perusal of the records, we find that the sales declared by the assessee during the demonetization period were duly reflected in the books of account as well as in the VAT returns filed before the State VAT Authorities and no adverse finding has been brought on record by the VAT Department. The Ld. AO has not rejected the books of account under section 145(3) of the Act nor pointed out any discrepancy in the cash book, stock register, sales register or purchase register maintained by the assessee. The purchases are also not doubted by the revenue authorities and corresponding stock movement is duly supported by quantitative details. Therefore, once the purchases and stock are accepted, the sales recorded by the assessee cannot be discarded merely on suspicion.

11 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. the cash sales during the period 01.04.2016 to 08.11.2016 were broadly similar to the preceding year whereas the cash deposits during the demonetization period were in fact lower than the immediately preceding corresponding period. The assessee had explained the source of cash deposits from regular business receipts duly recorded in the books of account. The Ld. AO merely proceeded on presumption and suspicion without bringing any cogent evidence to rebut the documentary evidences furnished by the assessee.

12 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. during demonetization cannot be sustained. We further note that similar view has also been taken by the Coordinate Bench in the cases of ACIT vs Ramlal Jewellers (P.) Ltd. (supra) and Pukhraj Nathmal Jain (supra).

13 ITA No.1994/Mum/2026 Paaneri Exim Pvt. Ltd. 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI