ITO , LOWER PAREL vs. SHREEJI PAPER CORPORATION, DN NAGAR

ITA 2966/MUM/2026Status: DisposedITAT Mumbai13 October 2026AY 2017-1810 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A) and dismissed the appeal of the Revenue. The Tribunal found no infirmity in the CIT(A)'s conclusion. The Tribunal noted that the CIT(A) had appreciated the reply and explanations adduced by the assessee, accepted the assessee's contentions, and deleted the addition. The Tribunal observed that the addition was made by the AO without bringing on record any material facts and findings, and the books of account were not found to be suffering from any defect and were not rejected. The Tribunal agreed with the CIT(A)'s finding that the cash deposits were traceable to earlier cash withdrawals, duly recorded in the books of account, and that there were sufficient cash withdrawals to support the assessee's submissions. The ratio decidendi is that where cash deposits are traceable to recent withdrawals and are supported by audited books of account, they cannot be rejected solely on the basis of demonetization period deposits, especially when the AO has not brought forth specific defects or rejected the books.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2017-18. The Assessing Officer (AO) made an addition of Rs. 90,50,000/- under Section 68 read with Section 115BBE of the Income Tax Act, 1961, on account of unexplained cash deposits made by the assessee, Shreeji Paper Corporation, during the demonetization period. The assessee claimed these deposits were out of earlier cash withdrawals for business purposes. The AO noted that cash sales during the year were nil and that cash deposits in the preceding financial year for a similar period were significantly lower. The CIT(A) deleted the addition, holding that the cash deposits were traceable to earlier cash withdrawals and were duly recorded in the assessee's audited books of account.

What were the issues?

1. Whether on the facts and in law, the CIT(A) erred in deleting the addition of Rs. 90,50,000/- made under Section 68 of the Income Tax Act, 1961, on account of unexplained cash deposits during the demonetization period, without properly appreciating the facts and material on record? (Revenue's contention: The assessee failed to establish credible evidence for the availability and retention of cash and a direct nexus between withdrawals and deposits. The assessee had no cash sales, making the accumulation and deposit of cash unexplained. The burden of proof under Section 68 was not discharged.) 2. Whether on the facts and in law, the CIT(A) erred in relying on the decision in Hardeep Dalal v. ITO, which is distinguishable on facts, and failed to appreciate that the assessee had not established continuous availability and retention of cash withdrawn earlier? (Revenue's contention: The AO made the addition after detailed examination, rightly invoking Section 68 read with Section 115BBE.) Assessee's contention (as per CIT(A)'s order): The deposits were from the balance available on 8th November 2016 and cash withdrawn during the demonetization period. Detailed workings and tangible documents were placed on record. The cash withdrawals were duly recorded in the books of account, which were audited, and the opening cash balance as on 08.11.2016 was Rs. 99,02,429/-. The CIT(A) relied on the decision in Hardeep Dalal v. ITO.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 143(3),Section 44AB

AI-generated summary — verify with the full judgment below

Before: HON’BLE JUSTICE (RETD.) C. V. BHADANG & SHRI PRABHASH SHANKAR

For Appellant: Shri Vyamesh Pathak, CA (Virtually Present)
For Respondent: Shri Basavaraj Hiremath, CIT-DR
Hearing: 05.10.2026Pronounced: 13.10.2026

PER PRABHASH SHANKAR [A.M.] :- The instant appeal emanating from the appellate order dated 30.01.2026 is preferred by the Revenue against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 27.12.2019 for the Assessment Year [A.Y.] 2017-18. P a g e | 2 A.Y. 2017-18 Shreeji Paper Corporation

The order continues below.

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