PRIYANKA AGGARWAL,NEW DELHI vs. INCOME TAX OFFICER, WARD 43(6), DELHI, NEW DELHI

Brief factual matrix of the case, as culled out from records of lower authorities, is that the assessee is an individual engaged in the business of trading of cattle feed through proprietary concern named Lotus Enterprises. Return of Income was filed on 28.07.2017, declaring income of Rs.7,76,330/-. The Return was selected for scrutiny to verify cash deposits made during the demonetization period. The ld. Assessing Officer noted that the assessee has deposited an amount of Rs.44,15,000/- in cash in her bank account maintained with Kotak Mahindra Bank and Axis Bank. The ld. Assessing Officer in para-3 of his order has noted that the impugned amount were deposited between the period 09.11.2016 to 30.12.2016. Before the ld. Assessing Officer, the assessee had submitted that impugned cash represents sale proceeds of cattle feed made during 01.04.2016 to 08.11.2016 as well as past savings of about Rs.2.5 lakhs. The ld Assessing Officer noted that the assessee has not furnished satisfactory details to allude that the impugned cash deposits had direct nexus with the sales in past savings and thus to justify her case and proceeded to make the impugned addition u/s 68 of the Act. The ld. CIT(A) confirmed the findings of the ld. Assessing Officer and sustained the addition. 4. We have heard rival submissions in the light of material placed on records. 5. It is the case of the ld. Counsel for the assessee that it has made genuine sales. The ld. Counsel submitted that during the course of assessment proceedings, it has provided the copy of cash book prepared by it for FY 2015-16 and 2016-17 and copies of VAT return as well as assessment orders passed under Haryana VAT Act. It was submitted that the turnover indicated by the assessee stands accepted. The ld. Counsel has argued that since it is a small tax payer, it had subscribed to provision of section 44AD of presumptive taxation and therefore not maintained any regular books of accounts. Copies of confirmation of creditors was also filed. The ld. Counsel submitted that cash in hand as on 08.11.2016 comprised cash in hand from case sales as well as household savings. The ld. Counsel argued that cash in hand as on 08.11.2016 was the material fact and deposit of said cash on subsequent dates cannot make the source of said cash doubtful. The ld. Counsel has argued that the cash sales amounts received prior to 08.11.2016 through specified bank notes was not an illegal or irregular act. It was argued that the addition on account of cash deposits which was actually sales constitutes double addition, since it has already been included in overall sales. In support of his contentions, the ld. Counsel placed reliance upon a catena of judgments, inter alia, including of this Bench as in the case of Agson Global Pvt. Ltd. 134 taxmann.com 256, Gordhan in ITA No.811/Del/2015, Sushila Chordia 298 ITR 349, etc. It was accordingly requested that the addition deserves to be deleted. 6. The ld. DR placed reliance upon the orders of the lower authorities. 7. The judicial precedents relied upon by the assessee has been considered. At the outset, we have noted that the ld. Counsel through its paper book has submitted that before us copies of replies given by it to the ld. Assessing Officer dated 02.09.2019, 18.11.2019, 09.12.2019 which alludes that it had given all the requisite details to the ld. Assessing Officer. The appellant assessee has given a certificate regarding the production and availability of the same before the ld. Assessing Officer. Consequently, we fail to comprehend the argument of the ld. Assessing Officer in his assessment order regarding non-supply of documents by the assessee. From the perusal of the impugned document that the same allude towards regular sale activity pursued by the appellant. We have noted that on the issue at hand, on identical facts, this Tribunal in the case of Indowestern Commodities and Energy Trade Private Limited in ITA No.5027/DEL/2025, vide order dated 15.05.2026 has observed as under:- “….6. We have heard the rival submissions in 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…” 7. 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…” 8. 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 of October 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 to have 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…” 9. 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.6,34,53,500/- u/s 68 of the Act. The appellant succeeds on this issue…”

We have noted that in the present case also the assessee has adduced sufficient evidences so as to allude towards the genuineness of its sales activities. We have also noted that the cash amounts as on 08.11.2016 represented sales made earlier though deposits were made in bank account during demonetization period. The same therefore cannot be a ground for an addition in the hands of the assessee. Accordingly, considering the peculiar facts of the case as well as in respectful compliance to judicial precedents enumerated hereinabove, we are of the considered view that no case of any addition is made out in the hands of the assessee. We, therefore, set-aside the order of the lower authorities and direct the ld. Assessing Officer to delete the addition of Rs.44,15,000/-. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 23rd September, 2026.