INCOME TAX OFFICER WARD-26(3) DELHI, DELHI vs. M/S VIVACIOUS MARKETING SOLUTIONS PRIVATE LIMITED, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”, DELHI BEFORE SH. SUDHIR KUMAR, JUDICIAL MEMBER AND SH. MANISH AGARWAL, ACCOUNTANT MEMBER

ITA Nos. 211 & 232/DEL/2025 Assessment Year: 2011-12 INCOME TAX OFFICER, Vs. M/S VIVACIOUS WARD 26(3), MARKETING SOLUTIONS NEW DELHI PRIVATE LIMITED, 38/1-A, TIHAR-II, ASHOK NAGAR, DELHI – 110 034 (PAN: AACCV4775G) (APPELLANT) (RESPONDENT)

Appellant by Ms. Anu, Adv. Respondent by Sh. Ajay Kumar Arora, Sr. DR.

Date of hearing: 12/05/2026 Date of Pronouncement: 05/06/2026

ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER:

These are quantum and penalty appeals filed by the revenue are directed against the separate orders of the National Faceless Appeal Centre/Ld. Commissioner of Income Tax, (Appeal), New Delhi [hereinafter referred to as “Ld. CIT(A))”] pertaining to A.Y. 2011-12 arising out the assessment order as well as penalty order. We first deal with the revenue’s quantum appeal wherein, following grounds have been raised:- a. Whether on facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,36,33,587/- out of total addition

of Rs. 3,15,11,449/- u/s. 69A of the Act on account of unexplained cash deposit without any relevant details brought on record by the assessee either during assessment proceedings or appeal proceedings. b. Whether on facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 96,34,250/- out of total addition of Rs. 1,07,04,722/- on account of cash purchases exceeding Rs. 20,000/- u/s. 40A(3) whereas assessee failed to furnish supporting documents purchases during the course of assessment proceedings or appeal proceedings. 2. The brief facts of the case are that the assessee has been engaged in the business of multi level marketing. Originally, the return was filed on 30.3.2012 at NIL and declaring loss of Rs. 1,16,511. As per information received from the ITO, Investigation Wing, Unit-VI, New Delhi, the assesse made cash purchases of Rs. 1,07,04,422/- and further made cash deposits of Rs. 3,17,19,591/-. Therefore, this case has been reopened and notice was issued u/s. 148 on 20.3.2018. Subsequently, notices issued u/s. 142(1) of the Act calling for various details. In response to the notice, the AR of the assesse filed part details. By not satisfied with the assessee’s submission, the AO proceeded to finalise the assessment by making an addition of Rs. 3,15,11,449/- on account of unexplained cash deposits and Rs. 1,07,04,722/- on account of cash purchases totaling to Rs. 4,22,16,171 to the returned income. Aggrieved the order of the AO the assessee preferred the appeal before the Ld. CIT(A), who vide his order dated 28-12-2024 partly allowed the appeal, against which the Revenue is in appeal before the Tribunal.

We find that Ld. CIT(A) has observed in his impugned order as under: “4(a). I have considered the facts and circumstances of the case. From the facts of the case, it is seen that the assessee has been engaged in the business of multi level marketing. The AO on the basis of information received from the ITO, Investigation Wing, Unit-VI, New Delhi held that the assessee made cash deposits in his bank account of Rs. 3,15,11,449/- and the same were treated as unexplained cash deposits. The AO did not bring any corroborative material to make entire amount as unexplained cash deposits. However, it appears that the assessee also not substantiated nature and sources of these cash deposits. However, from the circumstantial facts, it is understood that the assessee has been involved in multi level marketing and filed ITR with a turnover of Rs. 5,41,29,587/-. This fact was already confirmed by the AO in the assessment order at page no. 6. This turnover contains both credit transfers as well as cash deposits. As mentioned in the assessment order, there was credit entries of about 4.41 Crores and cash deposits of Rs. 3.15 Crores. There may be few cash withdrawals and further deposits, therefore, there would be possibility of circulation of same entries. Thus, these cash deposits appears to be substantially derived from business receipts for which the assessee did not file any supporting documents before the AO. During the course of appellate proceedings also, the assessee did not turn up and filed any relevant details. However, making addition of entire cash deposits by the AO without bringing out any specific adverse material is not correct. Therefore, to meet the ends of justice and in the interests of revenue, 1/4th of cash deposits are hereby treated as from undisclosed sources which comes to Rs. 78,77,862/- and the remaining amount is hereby deleted. 4(b). Further, the AO also noticed that the appellant made cash payments of Rs. 1,07,04,722/- on various dates and the assessee did not file any details to substantiate the same. That’s why, the

AO proceeded to disallow entire cash payments. From the facts, it is seen that the assessee already showed about 4.41 Crores of credits in its bank account and Rs. 3.15 Crores cash deposits in the bank accounts. Further, these cash payments were mostly from the cash withdrawals from the same bank account. Further, if any cash payment made to any single person in a day which exceeds Rs. 20,000/- then only it attracts disallowance u/s. 40A(3). However, the AO mentioned date wise cash payments, but there was no details about bifurcation of no. of persons involved in a single day, therefore, the AO did not bring any specific adverse material to authenticate this disallowance. Further, they may be some circumstances as enumerated in Rule 6DD of the IT Rules which may not come under purview of disallowance of Section 40A(3) of the IT Act. Considering all the above facts and circumstances, the disallowance of cash payments is hereby restricted to 10 % of the total disallowance which comes to Rs. 10,07,472/- and the balance amount is hereby deleted. Accordingly, the ground raised by the appellant in this regard is partly allowed.”

5.1 After perusing the aforesaid findings of the Ld. CIT(A), we find that AO on the basis of information received from the ITO, Investigation Wing, Unit-VI, New

Delhi held that the assessee made cash deposits in his bank account of Rs. 3,15,11,449/- and the same were treated as unexplained cash deposits. However, AO did not bring any corroborative material to make entire amount as unexplained

cash deposits and also assessee not substantiated nature and sources of these cash

deposits. Further, assessee did not file any supporting documents before the AO. Despite these facts, the Ld. CIT(A) treated the 1/4th of cash deposits from

undisclosed sources which comes to Rs. 78,77,862/- and the remaining amount was deleted. Further, as regards cash payments of Rs. 1,07,04,722/- on various dates, however, AO mentioned the date wise cash payments, but there was no

details about bifurcation of no. of persons involved in a single day, hence, the AO did not bring any specific adverse material to authenticate the disallowance, accordingly, the Ld. CIT(A) restricted the addition to 10 % of the total disallowance which comes to Rs. 10,07,472/- and the balance amount was deleted.

In view of the aforesaid discussions, it is an unadmitted fact that Ld. CIT(A) without discussing the facts and circumstance of the case, granted the part relief to the assessee. However, no corroborative evidences / details and reply have been

filed before the Ld. CIT(A), but Ld. CIT(A) in the absence of any corroborative evidences/ details/ reply has granted the part relief to the assessee, which is not sustainable in the eyes of law. Keeping in view of the aforesaid facts and

circumstances of the case and in the interest of justice, we deem it fit and proper to remit back the issues to the file of the Ld. CIT(A) for fresh adjudication and decide the matter in accordance with law. We hold and direct accordingly.

remitted back the issues in the quantum appeal of the revenue as aforesaid, thus,

the issues involved in the penalty appeal are also remitted back to the Ld. CIT(A) for fresh adjudication on similar lines.

Sd/- Sd/- (MANISH AGARWAL) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER SR BHATNAGGAR Date: 05.06.2026