ACIT, CIRCLE 19(1), DELHI vs. PEARL INTERNATIONALSERVICES PRIVATE LIMITED, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘B’, NEW DELHI Before Sh. Sudhir Kumar, Judicial Member & Sh. Manish Agarwal, Accountant Member ITA No. 4737/Del/2025 : Asstt. Year: 2017-18 ACIT, Vs Pearl International Services Pvt. Circle-19(1), Ltd., 903, Rohit House, 3, Tolstoy New Delhi-110002 Marg, Connaught Place, New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AAACP0979J Assessee by:Sh. R. K. Kapoor, CA Revenue by:Sh. Rajesh Kumar Dhanesta, Sr. DR Date of Hearing: 16.02.2026 Date of Pronouncement: 08.05.2026 ORDER Per Manish Agarwal, Accountant Member: The present appeal has been filed by the Revenue against the order dated 01.07.2025 passed by ld. CIT(A)/NFAC, Delhi in DIN & order No. ITBA/NFAC/S/250/2025-26/1078081236(1) passed u/s 250 of the Income Tax Act, 1961 (“the Act”) arising from the Assessment Order dated 16.12.2019 passed u/s 143(3) of the Act pertaining to assessment year 2017-18.

2 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

income at Rs. 1,48,57,830/- under normal provisions of the Act. The said return was revised on 06.06.2018 at the same income. Case of the assessee was selected for complete scrutiny wherein one of the reason was large value of cash deposited during demonetization period. The AO observed that assessee has deposited a sum of Rs.2,22,35,734/- during the demonetization period as per the form submitted, however later stage it was found that total cash deposited during demonetization period was of Rs.2,24,01,455/-. It was explained by the assessee that there was cash in hand of Rs.85,76,000/- in SBN as on the opening hours of 09.11.2016 that is the next day when the demonetization was announced by the Hon’ble Prime Minister and the balance amount was claimed as deposited by the portal agents and cash sales in new notes also. However, the AO had not accepted the contention of the assessee and made the addition for the differential amount of Rs.1,38,25,455/- (2,24,01,455- 85,76,000) u/s 68 of the Act as an explained cash credit.

3 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

Rs.1,38,25,455/- made u/s 68 on account of cash deposit during demonetization period.

4 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

The learned Assessing Officer in Para-6 of his order noted that during the year under consideration, there was an abnormal increase in the cash deposit during the demonetization period as compared to the corresponding period of the immediate preceding year. The learned Assessing Officer issued notices to the banks u/s 133(6) of the Income Tax Act and called for the details of amounts deposited in various banks during the demonetization period. The assessee was put to notice by the learned Assessing Officer about such cash deposits. In response to such notice, assessee submitted the details which are duly noted/extracted by the learned Assessing Officer in the Assessment Order at Pages-4 to 7 of his order. The details as was submitted to the learned Assessing Officer were as under: Financial Total Cash Cash Cash Deposited Year Deposit in Deposited during Banks - from 08.11.2016 to Whole Year 01.04.2016 till 30.12.2016 08.11.2016 2015-16 50.61 Cr. 27.45 Cr. 8.57 Cr 2016-17 50.52 Cr. 40.08 Cr. 2.24 Cr.* * Includes opening balance lying at the closing hours on 08.11.2016 at about Rs. 86 Lakhs, Based on the aforesaid figures extracted, it would be noted that the primary factual findings of the learned Assessing Officer as noted in Para-6 based on which the whole issue seems to have arisen are factually incorrectbecause the learned Assessing Officer observed that cash deposited by the assessee during the demonetization period as compared to the corresponding similar period in the preceding year are much higher. Whereas from the chart given above it would be noted that the cash deposited during the demonetization period at Rs.2.24 Crores is just about 26% of the cash which was deposited during the similar period in the immediate preceding year. Moreover, it would be noted that out of the cash deposited at Rs.2.24 Crores, about 86 lakhs was the cash in hand with the assessee on the date of declaring demonetization by the Hon’ble Prime Minister. This fact has been accepted by the learned Assessing Officerand addition has been made only for the balance cash deposited at Rs. 1.38 Crores. It has been demonstrated on record that all cash deposited was in new currency notes which was introduced by the government w.e.f. 09.11,2016 i.e. the new notes of

5 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

Rs.2,000/- denomination and Rs.500/- denomination which was deposited during the demonetization period. Necessary certificates from the banks have also been obtained and were submitted to the learned Assessing Officer as well as with the learned CIT(A) which clearly establish that all the currency notes deposited in the banks after the demonetization were in new currency notes. It is precisely for these reasons that the sales of the assessee during the demonetization period had sharply declined as compared to the immediate preceding year as would be noted from above chart. It would be noted from the above chart that whereas the cash sales during the period under consideration till the date of announcing demonetization increased from Rs.27.45 Crores to Rs.40.08 Crores, an increase of about 46%, the same i.e. the cash sales declined by about 74% during the period of demonetization as compared to the similar period in the corresponding earlier year. Therefore, as already clarified above, the very basis of making the addition was factually incorrect. Moreover, all the cash deposited have been duly accounted for in the books of accounts and has been recognized as the sales which fact has also been accepted by the Assessing Officer as no observation or adverse findings have been given on this issue in the Assessment Order. The courts across the country have held that when the cash deposited during the demonetization period is duly explained and duly accounted for in the books of accounts of the company, no addition u/s 68 can be made. Some of the judgements of the Hon’ble Tribunal/Courts are as under: • Vijay Kumar Jain vs. ITO (ITA No.l730/DeV2024) - TDS- 562-ITAT-2024 (Delhi) “10. The issue involved is essentially a question of fact and depends on appraisal of all relevant evidences on record on cumulative basis. As contended, it is a matter of record that cash sales giving rise to cash deposits have been duly recorded in the ‘statement of profit and loss ’ and the resultant profits have been admittedly declared in the return of income. The income thus arising from cash sales has been duly subjected to taxation..... 10.3 Having assessed a credit of revenue character as income, it is outside the ambit of the AO to subject the same credit under different provision i.e. section

6 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

68 yet again, inflicting double whammy on the assessee. Besides, the books of accounts and book results have been not rejected per se. No defect has been pointed out on the declarations made towards purchases, the closing stock and the profits either. The additions made have resulted assessment of cash sales twice which is not permissible in law.” Similarly, in the present case, the Assessee's cash sales were duly recorded in the audited books and offered to tax as part of the total income. Therefore, treating these receipts as unexplained under Section 68 constitutes an impermissible "double taxation" of revenue that has already been assessed. • Merchants Credit Co-operative Society Ltd., vs ITO (ITA No.329/Bang/2023) “There is no doubt that the assessee has satisfied the identity of the deposits, who are members of the society and genuineness of the transactions because the amounts have been deposited in the members accounts only. If the AO had any doubts that the assessee has not satisfied the ingredients of section 68, he could have asked further details from the assessee, but the AO has not done the same, which clearly shows that the assessee has discharged its duty to satisfy the requirement of section 68. We further note that the SBNs have been deposited in the members accounts, accordingly, the assessee did not get any extra benefit as observed by the AO in his order at para No. 06 which was treated as income us 69A of the Act. In view of this, the provisions of section 68 is not applicable in the present facts of the case and the AO without discussing in detail has made addition u/s. 68 which is not proper. Therefore the addition is deleted.” Similarly, the ratio of the aforementioned case is squarely applicable to the Assessee, as it has discharged its primary onus by providing exhaustive PNR data, system-generated invoices, and bank- confirmed certificates, deposit slips. Since the Ld. AO failed to identify any specific defects in these records, the addition lacks factual and legal basis. • [2022] 140 taxmann.com 588 (Chandigarh - Trib.) IN THE ITAT CHANDIGARH BENCH 'A' Smt. Charu Aggarwal v. Deputy Commissioner of Income-tax

7 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

“The cash deposited post-demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the Assessing Officer, there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of the sales. So, respectfully following the orders by the various High Courts and the Co-ordinate Benches of the Tribunal, it is viewed that the impugned addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified, accordingly the same is deleted. [Para 10.13]” Applying the same principle to the facts of the present case, the Ld. AO has not disputed the existence of the Assessee's business or the genuineness of its regular cash-based operations. Following this precedent, deposits arising from such undisputed sales cannot be treated as unexplained merely due to their timing during the demonetization period. • [2024] 169 taxmann.com 220 (Chandigarh - Trib.) IN THE ITATCHANDIGARH BENCH 'B' Income-tax Officer v. Shree Balaji Processors* “It is a matter on record that regarding allegation of bogus sales, nothing has been brought on record by the Assessing Officer. The Assessing Officer has accepted all the purchases along with opening and closing stock of the assessee. Then on what basis sales out of such stock/ purchases may be rejected without any proof brought on record. Thus, the above findings given by the Commissioner (Appeals) on this issue in his order is very much justified and needs no interference. Accordingly, revenue’s appeal on this ground is hereby dismissed. [Para 14]” Similarly, in the present case, the Ld. AO accepted the Assessee’s opening cash balance and audited books. Therefore, the sales generated through these accepted business records cannot be rejected or treated as unexplained credits without concrete evidence to disprove the Assessee’s explanation it is respectfully submitted. Further reliance is placed in the following cases:  Agsons Global Private Limited vs. ACIT (ITA No. 374/2016)

8 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

 Harisons Diamonds Pvt. Ltd. [TS-150-ITAT- 2024(DEL  D.L. Heera Bhai Jewellery Arcade Pvt. Ltd. [TS-223- ITAT-2024(DEL)]  Hari Om Retail Private Ltd [TS-630-ITAT- 2024(DEL)]  Posina Jaya Lakshmi Rajahmundry Vs Income Tax Officer (2024-TIOL-1098- ITAT-VIZAG)  DCIT Vs the Rifle Factory Co-Operative Society Ltd (2024-TIOL-1108-ITAT- KOL) The learned CIT(A) on appreciation of all the facts and factual position has deleted this addition. The learned CIT(A)’s order is based on the correct appreciation of the facts as existed in this case which order is prayed to be upheld.” 6. Heard the parties and perused the material available on record. In the instant case, the solitary issue before us is with respect to the deletion of addition of Rs.1,38,25,455/- made by the AO u/s 68 by treating the cash deposited in SBN during demonetization period as unexplained cash credit. The ld. CIT(A) while deleting the addition in para 4 of the order has made following observations: “It has been amply demonstrated that all the allegations of the learned Assessing Officer in making the additions pertaining to the cash deposit allegedly during the demonetization period are based merely on conjectures and surmises. It has been demonstrated that in the nature of business carried out by the assessee large amount of cash is being collected and deposited year after year. As an example, a comparative study has also been submitted wherein it has been demonstrated that during the year under consideration pre-monetization cash deposit in about 7 months was Rs.40.08 Crores i.e. an average of more than Rs.5.5 Crores per month whereas during the demonetization period i.e. from 9th November to 31st December, 2016 cash deposited was Rs.2.24 Crores i.e. about Rs. 1.25 Crores per month. Similarly, it has been explained that during the same period in the corresponding previous year cash deposit was Rs.8.57 Crores as against Rs.2.24 Crores during the year under consideration. Therefore, by no standards the

9 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

allegations made by the learned Assessing Officer that the assessee deposited unexplained higher cash during the demonetization period can be sustained, it is respectfully submitted. In fact, such observations based on which additions have been made are factually incorrect. I observe that the AO has made a comparison of the cash deposits for the previous year with that of the year under reference, as well as for the demonetization period with the matching period of the previous year.” 7. It is observed that the ld. CIT(A) has fully appreciated the fact that assessee is in the line of business where cash is collected on regular basis and was regularly deposited into bank. During the pre-demonetization period also, cash of around Rs.40 crores was deposited in 7 months which comes to Rs.5.5 crores per month as against which Rs.2.24 crores were deposited during the demonetization period which is much less than the average monthly cash regularly deposited by the assessee. It is further observed that the AO has ignored the fact that the cash was deposited by the agents of the assessee spread all over the country who had collected the said cash from the sale of the tickets and the corresponding income declared has been accepted by the AO and no addition whatsoever was made on account of income received from the selling of tickets as well as tour operating business. Moreover, assessee claimed that part of the cash was deposited in new currency, credit of which was also not given by the AO. Hence, the assessee has explained the source of cash as out of sales

10 ITA No. 4737/Del/2025 Pearl International Services Pvt. Ltd.

which has been accepted. There is no reason to make any further addition for such cash sales as unexplained. In view of these facts, we find no error in the order of ld. CIT(A) which is hereby upheld.

Sd/- Sd/- (Sudhir Kumar) (Manish Agarwal) Judicial Member Accountant Member Dated: 08/05/2026 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR