VIKAS SETHI,NEW DELHI vs. INCOME TAX OFFICER WARD 43(5), DELHI, DELHI

आदेश / ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. National Faceless Appeal Centre (NFAC), Delhi dated 28-11-2025 for the Assessment Year 2017-18 on the following grounds:-

29.12.2019 passed u/s. 143(3) of the Income Tax Act, 1961 by the AO on the ground of being illegal, bad in law, without jurisdiction, and not in accordance with the provision of the Act. 2. That the notice dated 10.9.2018 under section 143(2) of the Act was issued by ITO, Ward 40(5), Delhi is without jurisdiction, illegal, and void ab initio. Accordingly, the assessment framed pursuant thereto is bad in law and liable to be quashed. 3. That the Ld. CIT(A) has erred both in law and on facts in not quashing the assessment order 29.12.2019 passed by ITO, Ward 43(5), Delhi, without any lawful transfer of jurisdiction, and further failing to appreciate the fact that the AO who assumed jurisdiction over the appellant by issuing a valid notice under section 143(2) of the Act (i.e. ITO, Ward 40(5), Delhi) did not conclude the assessment proceedings. 4. That the Ld. CIT(A) has erred both on facts and in law in upholding the addition of Rs. 2,26,54,967/- as unexplained money under section 69A of the Act on account of cash deposits, made in the assessment order dated 29.12.2019 under section 143(3) of the Act. 4.1 That the Ld. CIT(A) has erred both in law and on facts in sustaining the addition of Rs. 2,26,54,967/- under section 69A of the Act by treating the cash deposits as unexplained money, without appreciating that the entire cash deposits including Rs. 31,06,500/- deposited during the demonetization period were duly sourced from recorded cash withdrawals made by the appellant in the ordinary course of business during the year under consideration. 4.2 That on the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in not accepting the appellant’s submission

merely on account of minor clerical or procedural discrepancis, without demonstrating that the source of deposits was not traceable to the appellant’s own documented withdrawals. 4.3 That the Ld. CIT(A) erred both in law and on facts in sustaining the addition of Rs. 2,26,54,967/- u/s. 69A of the Act, without rejecting the books of account maintained by the appellant. 4.4 That the Ld. CIT(A) and AO erred on facts and in law in not appreciating that the higher rate of tax prescribed under section 115BBE, which was introduced subsequently vide The Taxation Law Second Amendment Act, 2016 was not applicable retrospectively to the impugned transactions.

69A of the Act vide the assessment order dated 29.12.2019. Against the above, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 28.11.2025 has partly allowed the appeal of the assessee by giving the relief of Rs. 27,38,533/- being cash sales as claimed by the assessee and balance addition of Rs. 2,26,54,967/- was confirmed. Aggrieved, assessee is in appeal before us.

unaccounted cash and accordingly rejected the cash book. However, the assessee received cash gifts aggregating to Rs. 3,65,000/- from his parents, comprising Rs. 1,85,000/- from his father, Late Shri NN Sethi and Rs. 1,80,000/- from his mother, Smt. Veena Sethi. It was the submission of the Ld. AR that assessee had instructed his accountant to record the cash received in the cash book, however, due to inadvertent mistake the same was not recorded by him, as a result negative balance was appeared in the cash book. But the cash book was produced before the CIT(A) for the first time as additional evidence under Rule 46A and the same was admitted by the CIT(A) as going to the core of the issue. The assessee became aware of the negative cash balance in the cash book only after the order of the Ld. CIT(A) was passed. Hence, the rejection of cash book on the basis of negative balance arising out of a recording error without considering the explanation is contrary to the settled legal position.

6.1 Further, the Ld. CIT(A) found inconsistencies in the monthwise cash summary submitted by the assessse, noting that the closing cash in hand was shown as negative at the end of August 2016 and September, 2016 that most closing balances in the summary did not match the corresponding balance in the cash book, and that the closing cash in hand as per the cash book was Rs. 7,97,607/- while as per summary it was Rs. 47,71,512/-. Accordingly, the cash summary was also rejected,. We note that the alleged negative closing balances for August and September 2016 arise solely due to a computational error in the cash summary reproduced by the CIT(A). In August, 23016, the opening cash balance of Rs. 18,04,775/- together with cash withdrawals of Rs. 56,70,000/- resulted in cash availability of Rs. 74,74,775/-, against which bank deposits of Rs. 36,90,350/- where made, leaving a positive cash balance of Rs. 37,84,425/- rather than negative balance of Rs. 1,74,875/- as wrongly computed by the assessee’s accountant. The discrepancy between the closing balance in the cash book (Rs. 7,95,607) and the closing balance in the summary (Rs. 47,71,512) is

also a consequence of this computation error in the summary, and not a reflection of any undisclosed income. The corrected summary demonstrates positive balances throughout and is consistent with the bank statements on record.

6.2 It is noted that Ld. CIT(A) observed that the assessee had claimed that the cash deposits made during the demonetization period were sourced from a withdrawal of Rs. 22,86,500/- from ICICI Bank Account in August, 2016 and Ld. CIT(A) held that if this were the case, the cash in hand balance ought to have been at least Rs. 22,86,500/- on every day after August, 2016, which was not borne out by either the cash book or the cash summary. We find that the findings of the Ld. CIT(A) is based on the rejected and erroneous cash book and cash summary. The AO himself noted that cash withdrawal of Rs. 2,69,31,000/- were made during the year and never disputed the fact of such withdrawal. In the absence of any material on record to show that the withdrawn cash was utilized elsewhere, the cash deposits cannot be treated as income from undisclosed sources.

6.3 Further, Ld. CIT(A) noted that the assessee had claimed to have withdrawn cash from ICICI Bank, Chennai Branch, whereas the deposits of cash during the demonetization period were mainly made into Andhra Bank, Delhi accounts. The CIT(A) treated this geographic discrepancy as a further ground casting doubt on the assessee explanation. It reveals from records that the ICICI Bank overdraft account is governed / registered with the Chennai Branch, being the address mentioned in the assessee’s submissions, however, the account was operated from Delhi branches. The bank statement of the ICIC bank account clearly demonstrates that the cash withdrawals were made at Pitampura Branch and Lawrence Road Branch, Delhi and accordingly, the allegation of the CIT(A) relating to geographical discrepancy is factually not correct and contrary to the bank statement on record.

6.4 Also, the Ld. CIT(A) noted that the during the demonetization period, the

assessee deposited cash of Rs. 31,06,500/- in his bank account, as confirmed by

the ITD data and the assessee’s own confirmations. However, in his audited accounts ( Notes on Accounts – SBN Disclosure), the assessee declared that the

total amount deposited in banks during the period 8.11.2016 to 30.12.2016 was

Rs. 27,86,500/- (comprising SBN of Rs. 25,00,000/- and other denomination

notes of Rs. 2,86,500/-) and Ld. CIT(A) treated this as a discrepancy in the

assessee’s own accounts. It is noted that SBN disclosure in the Notes on

accounts pertains specifically to the accounts of M/s Smart Infosystems (the

proprietary firm) and reflects only those deposits routed through the firm’s

books. The remaining deposits were made from personal / other accounts of the

assessee not forming part of the firm’s books and accordingly did not appear in

the firm’s SBN disclosure i.e. Andhra Bank. And ICICI Bank. The difference of Rs. 3,20,000/- (Rs. 31,06,500 – Rs. 27,86,500) is thus fully accounted for by

deposits in accounts not covered by the SBN statement of the firm. There is no

contradiction – the two figures operate at different levels of aggregation. The

SBN disclosure was made in the audited accounts only in relation to the entity’s

own accounts and the assessee complied with this requirement correctly. It is

submitted by the Ld. AR that no inference can be drawn from a difference in

figures that arise from different accounting perimeters. The CIT(A) has

conflated ITD level data (across all accounts of the individual) with firm-level

SBN disclosure, which is an error on the face of the record.

contention of the Ld. AR that in the month of August, 2016 the opening

balance was Rs. 18,04,775/- and during this month withdrawals were made for Rs. 56,70,000/- resulted the cash availability of Rs. 74,74,775/- against which

the assessee deposited the amount of Rs. 36,90,350/- and the positive cash

balance was available, rather than the negative balance which was wrongly

computed by the appellant’s accountant. The assessee also filed cash balance

flow which shows that the cash balance was available with the assessee to

deposit the money. During the course of hearing, the assessee has filed the

additional evidences to show that the negative balance was not available with

the assessee, because Rs. 3,65,000/- in cash was gifted by his parents, who filed

the affidavit to prove that the cash gift was made by them to their son. We did

not find any reason to accept the additional evidences at this stage, because the cash was gifted by the parents which the assessee showed in the books of

accounts at the time of gift. We further note that Ld. CIT(A) granted the relief of

Rs. 27,38,533/- and confirmed the addition of Rs. 2,26,54,967/-. The deposit

was made by the assessee has been proved by the evidences and purchases were

not doubted by the AO, thus, the entire sales cannot be added in the hands of the

assessee. Considering the entirety of the fact and circumstances of the case and

in the interest of justice, we deem it fit and proper to sustain the addition of

Rs. 5 lacs (Rupees Five Lacs) only and direct the AO to re-compute the income

of the assessee accordingly.

Order pronounced in the open court on 05-06-2026.

Sd/- Sd/-

(MANISH AGARWAL) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER SR BHATNAGGAR

Date: 05.06.2026