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Facts
The assessee, M/s Star Ply Lam Limited, appealed an order confirming the addition of Rs. 33.26 Lacs in cash deposits made during the demonetization period. The Assessing Officer alleged manipulation of the cash book and added the amount after considering the average cash balance.
Held
The Tribunal held that the addition was not sustainable on facts. The assessee is a corporate entity with regular cash flows from its business of selling ply-boards, and its books of accounts were not found faulty. Making additions based on mere suspicion or by ignoring the assessee's books of accounts is fallacious.
Key Issues
Whether the addition of cash deposits made during the demonetization period is sustainable when the assessee has regular cash flow from business and its books of accounts are not faulted.
Sections Cited
143(3), 68, 115BBE
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा"रण वष" / Assessment Year: 2017-18) M/s Star Ply Lam Limited DCIT/ACIT Circle 1(1) बनाम/ SCO 34, Sector 26 Chandigarh Vs. Chandigarh-160019 "ायीलेखासं./जीआइआरसं./PAN/GIR No. AAECS-3258-F (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Shri Parikshit Aggarwal (CA) - Ld. AR Revenue by : Shri Vinod Kumar Chaudhary (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 13-11-2025 घोषणाकीतारीख /Date of Pronouncement : 17/11/2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 17-10- 2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 31-12-2019. The sole grievance of the assessee is confirmation of addition of cash deposit of Rs.33.26 Lacs during demonetization period. The registry has noted delay of 132 days in the appeal, the condonation of which has been sought by Ld. AR on the strength of condonation petition which is accompanied by affidavit of assessee’s Chartered Accountant Shri Manish Goel. It has been stated that the appeal could not be filed due to mistake on the part of CA’s office. Considering the same, we condone the delay and proceed with adjudication of appeal on merits.
The Ld. AR advanced arguments and contended that the assessee’s nature of business is such that it carries out regular cash sales throughout the year. The deposits are stated to be sourced out of regular business sales proceeds. The Ld. Sr. DR controverted the arguments of Ld. AR and supported the findings of lower authorities. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
From the facts, it could be seen that the assessee filed return of income declaring income of Rs.23.35 Lacs. To verify the source of cash deposits in assessee’s bank account, the case was subjected to scrutiny. The assessee being resident corporate assessee is stated to be engaged in sale of ply-boards etc. It transpired that the assessee deposited cash of Rs.42.19 Lacs in Specified Bank notes and accordingly, required to explain the sources thereof. In response, the assessee furnished monthly cash statement to demonstrate that it had sufficient cash balance to make these deposits. However, finding certain discrepancy in the same, Ld. AO alleged that the assessee manipulated its cash book. Finally, Ld. AO computed average cash balance for FYs 2015-16 to 2017-18 which came to be Rs.8.92 Lacs. The benefit of the same was granted to the assessee and the remaining cash deposit of Rs.33.26 Lacs was added u/s 68 r.w.s. 115BBE of the Act.
During first appeal, the assessee assailed the findings of Ld. AO and referred to various judicial decisions to support its contentions. However, the same could not find favor with Ld. CIT(A) who upheld the stand of Ld. AO against which the assessee is in further appeal before us.
It emerges that the assessee is a corporate entity and by statute, it is required to maintain proper books of accounts including its cash book. The assessee is engaged in sale of ply-boards and it supplies the material to small traders. The assessee’s nature of business is such that it generates regular cash flows out of business activities. The assessee has achieved turnover of Rs.5.83 Crores in AY 2016-17 which has increased to Rs.14.83 Crores in this year. The assessee has deposited cash of Rs.207.96 Lacs in FY 2015-16 whereas the quantum of cash deposit in this year is less i.e., Rs.162.67 Lacs. The assessee has made regular deposits in its bank account in all the months of this year and there is no abnormality in the same. The trading results of the assessee have been accepted by Ld. AO and no fault has been found in the books of the assessee. The assessee has supplied cash books in support of cash deposits. The assessee is not shown to have any other sources of income. It is trite law that no addition could be made on mere suspicion. Even the working made by Ld. AO by applying average cash balance is fallacious one since the addition could not be made in this manner by completely ignoring the books of the assessee. On these facts, we would hold that the impugned addition is not sustainable on facts. Therefore, we delete the same.