MYTHIC DEKOR PRIVATE LIMITED,THANE vs. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 4(3)(1), MUMBAI, MUMBAI

The Ld. AR further contended that the details of year wise Closing Stock and Turnover are submitted before the revenue authorities by the assessee. The said details in tabular format are reproduced as below.

The Ld. AR further contended that the revenue has not made any additions related to payment to director amount Rs. 19,87,800/-. But the point was mentioned in impugned assessment order. The assessee paid to the director cum shareholder of the assessee company amount to Rs. 19,87,800/- in alleged financial year. But the revenue has raised the question that the alleged cash deposited in the bank account was paid to the director as loan. In his argument, the Ld. AR contended that for the purpose of buying a new office space for the business and planning for shifting of office, the assessee had paid the advance to the director cum shareholder of the assessee company amount of rupees 19,87,800/-. The Ld. AR respectfully relied on the order of coordinate bench of ITAT Amritsar in the case of Balwinder Kumar reported in (2023) 151 taxman.com 338 (Amritsar-Trib.) where the assessee deposited cash sales made during the demonetization period in his bank account and admitted such sales as revenue receipt since books of accounts of the assessee clearly reflected sufficient stock to affect such sales and same were accepted by revenue authorities, there was no basis for making additions under section 69A treating the said deposits to be bogus. The Ld. AR further respectfully relied on the order of coordinate bench of ITAT Delhi in the case of S. Balaji Mech-Tech (P.) Ltd. reported in (2025) 170 taxman.com 639 (Delhi Trib.) where the assessee had already declared cash sale in the books of accounts and lower authorities had accepted the same as regular business transactions and cash were already recorded and explanation was already part of book results, there was no avenue for lower authorities to make additions under section 68. 9. The Ld. DR argued and stands in favor of the orders of revenue authorities. The Ld. DR contended that the revenue has raised the following objections in the assessee's case. a The books of accounts were stated to be unaudited b The turnover in preceding and succeeding years are negligible c VAT/CST returns were filed under demonetization period d Sample sales bills lacked complete buyer details e A sum of Rs.19,87,800/- out of the deposited cash was subsequently transferred to director as a loan. The Ld. DR prayed to uphold the addition made by the Ld. AO. 10. We have heard the rival submissions and perused the materials available on record. The controversy before us is whether the cash deposited by the assessee in its bank accounts, particularly during the demonetization period, can be treated as unexplained cash and brought to tax under section 69 of the Act, when the assessee has explained the source thereof as cash sales arising from disposal of its old stock. We find that the assessee had consistently maintained substantial stock in the earlier years. The details placed before us show closing stock of Rs.59,74,700/-, Rs.61,09,640/- and Rs.61,59,654/- for F.Ys. 2013-14, 2014-15 and 2015-16 respectively. During the year under consideration, the assessee disclosed turnover of Rs.43,80,014/- and the closing stock was reduced to Nil. The subsequent financial statements also reflect Nil closing stock. Thus, the explanation of the assessee that the old stock was disposed of during the year under consideration is supported by the movement of stock reflected in the financial statements and cannot be rejected merely on the basis of the volume of business carried on in the preceding or succeeding years. 11. We further find that the assessee is a private limited company and its financial statements were subjected to statutory audit under the Companies Act. The objection that the books were unaudited, therefore, does not by itself establish that the sales recorded therein were not genuine. The assessee has also explained that it was not required to obtain a tax audit report under section 44AB of the Act and, accordingly, Forms No.3CB and 3CD were not filed. No specific defect in the books of account or in the quantitative movement of the stock has been pointed out by the revenue which could demonstrate that the stock reflected in the earlier financial statements was either nonexistent or remained available with the assessee after the alleged sales. 12. We have also considered the VAT/CST records placed at APB pages 47 to 63. The sales in question were disclosed before the concerned indirect-tax authorities and the corresponding VAT payment details were also placed on record. The delay in filing certain VAT/CST returns, by itself, cannot lead to the conclusion that the underlying sales were fictitious, particularly when the assessee has placed at APB pages 171 to 172 the Trade Circular issued by the Commissioner of Sales Tax, Mumbai, relating to extension of the prescribed dates for filing the relevant returns. Therefore, the timing of filing of the VAT/CST returns, without any further adverse material, cannot be the sole basis for rejecting the sales recorded by the assessee. 13. The revenue has further objected that the sample sales invoices do not contain complete particulars of the purchasers. However, this circumstance has to be considered along with the other contemporaneous evidence. The existence of opening stock, reduction of the stock to Nil, recording of corresponding sales in the books, disclosure of such sales in the statutory financial statements and reporting thereof in the VAT/CST records constitute relevant corroborative material. Nothing has been brought before us to establish that the stock continued to remain with the assessee or that the sales recorded in the books represented any transaction other than sale of the existing stock. 14. The further objection of the revenue relates to the amount of Rs.19,87,800/- subsequently transferred to the director-cum-shareholder. The assessee has explained that the said amount was advanced to the director in connection with the proposed purchase of a new office premises and shifting of its office. We find that no separate addition in respect of the said advance has been made by the Ld. AO. Once the source of the cash deposited in the bank account is examined with reference to the recorded sales and available stock, the subsequent utilization of a part of the deposited amount, by itself, cannot establish that the original cash deposits represented unexplained money. 15. We further find support from the decision of the Coordinate Bench in Balwinder Kumar (supra), relied upon by the Ld. AR, wherein, on the facts of that case, cash deposited during the demonetization period out of recorded cash sales was considered in the light of the stock available in the books and the sales already offered as business receipts. Similarly, the Ld. AR has relied upon the decision of the Coordinate Bench in S. Balaji Mech-Tech (P.) Ltd., (supra) for the proposition that where the cash sales have already been recorded and offered as business receipts in the books, the same amount cannot, without supporting adverse material, again be treated as an unexplained credit merely because the corresponding cash was deposited in the bank account. 16. In the present case, the revenue has not brought any material on record to establish that the cash deposited in the bank accounts originated from a source independent of the sales recorded by the assessee. The availability of old stock is reflected in the financial statements; the stock stood reduced to Nil upon the sales made during the year; the corresponding turnover of Rs.43,80,014/- was recorded in the books; and the sales were also reflected in the VAT/CST records. The objections raised by the revenue regarding low turnover in the adjoining years, timing of filing of VAT/CST returns, incomplete particulars in certain sample invoices and subsequent advancement of a part of the money to the director, considered either individually or cumulatively, do not dislodge the documentary trail explaining the source of the cash deposits. 17. In view of the above discussion and considering the entirety of the facts and circumstances of the case, we are unable to sustain the treatment of the impugned cash deposits as unexplained under section 69 of the Act. The addition made by the Ld. AO and sustained by the Ld. CIT(A) is accordingly deleted. The grounds raised by the assessee on this issue are allowed.

In the result the appeal of the assesse bearing ITA No.4528/Mum/2026 is allowed. Order pronounced in the open court on 24th day of September 2026 Sd/- Sd/- (RATNA DASGUPTA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 24/09/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI