ITO,WARD-11(1), NEW DELHI vs. HONEY PORTFOLIO PVT. LTD., DELHI

Brief facts of the case are that assessee is a private limited company and is a NBFC duly registered with RBI. The return of income was filed on 30.10.2017 declaring total income at Rs. 20,21,550/-. The assessment was taken up for complete scrutiny by way of issue of notice u/s 143(2) of the Act. The reason for scrutiny were 1. High value receipt of cash from third parties in ITO vs. Honey Portfolio Pvt. Ltd.

Before us, the Ld. Sr. DR submitted that the AO during the course of assessment proceedings, assessee had failed to submit the details of month wise instalments due from various customers in the month of October 2016 and November 2016. ITO vs. Honey Portfolio Pvt. Ltd.

Ld. Sr. DR further submitted that assessee has made deposit on various dates during the demonetization which is quite surprising as when the assessee was having cash balance on the closing hours of 08.11.2016 when the demonetization was announced by the Hon’ble PM, why such cash was deposited on various dates in small amounts. This clearly leads to the believe that assessee had received instalments in cash in SBN even after 08.11.2016 when the same was not the legal tender. Ld. DR further submitted that ld. CIT(A) without appreciating these facts has deleted the addition wherein ld. CIT(A) has wrongly observed that the acceptance of SBN was permissible upto 31.12.2016. Therefore, ld. DR prayed for the restoration of the addition made by the AO. 6. Per contra, ld.AR submitted that during the year under appeal assessee was working as RBI approved NBFC. Regarding the immediate source of the cash, ld. AR stated that assessee has financed to the small persons like auto drivers who normally make the payment of the due instalments in cash. During the course of assessment proceedings, assessee has filed the copy of the cash book wherein the cash received from each individual loanee was duly recorded with the reference of their respective auto registration number. As per ld.AR if the AO had doubts, he could have made enquiries from such loanees by issuing summons u/s 133(6) of the Act, which he failed to do so. The Ld. 8. Claim of the assessee was that it has deposited cash during the demonetization period out of the cash balance available as on the closing hours of 08.11.2016 i.e. the date when the demonetization was announced by the Hon’ble Prime Minister. Assessee has filed bank statements and copy of the cash book in support of the cash balance available which is the accumulation of the instalments paid by various person to whom the assessee had financed. These loanees are mainly to auto driver and in the cash book vehicle number of each loanee is mentioned with each individual instalment received from them which has not been doubted by the AO. The assessee has also filed the details of such persons in the response given to the department in compliance to the notice issued to explain the cash transaction during the demonetization, the said details are available in the paper book pages 93 to 156 filed by the assessee. It appears that the AO has failed to make independent enquiry from these auto drivers who had made payment of the instalments in cash of the loan taken from the assessee. When the assessee has filed all the details of the loanees who had repaid their instalments in cash, without there being any contrary evidence and without making any enquiry the Ld. A.O erred in invoking the provision of section 68 of the Act. The AO can make addition u/s 68 only under two circumstances, i.e. (i) Appellant does not offer any explanation about nature and source of such credit; or (ii) Explanation offered by Appellant is not upto the satisfaction of Ld. AO.

In other words, whenever Appellant provides explanation, before rejecting the same, the AO has to record his dissatisfaction Order pronounced in open court on 09.04.2025 /- (MAHAVIR SINGH) (MANISH AGARWAL)