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Facts
The assessee, engaged in transportation and logistics, filed its return for AY 2017-18. The Assessing Officer (AO) questioned cash deposits of Rs.37,09,000/- during demonetization, which the assessee explained as cash-in-hand and customer receipts. The AO did not accept the explanation and made an addition under Section 68 of the Income-tax Act.
Held
The Tribunal found flaw in the AO's approach of partially accepting the books of account. Since the payments received were below Rs.50,000/-, there was no mandatory requirement to obtain PAN details. The Service Tax Returns filed for FY 2016-17 demonstrated business activity.
Key Issues
Whether the addition of Rs.37,09,000/- on account of unexplained cash deposits in bank accounts is justified when the assessee provided explanations and supporting documents.
Sections Cited
68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “SMC”, DELHI
ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 08.08.2025, for Assessment Year 2017-18.
The appeal is time barred by 21 days. The assessee has filed a petition for condonation of delay supported by medical records. After perusal of same, I am satisfied that delay in filing of appeal is not intentional, but is for the reasons stated in the condonation petition which appears to be bonafide. Hence, delay in filing of appeal is condoned and appeal is admitted for hearing on merits.
Shri Atul Puri, appearing on behalf of the assessee, submits that the assessee is engaged in the business of transportation and logistics. The assessee filed its return of income for AY 2017-18 declaring total income of Rs.11,15,410/-. The return of income was selected for scrutiny assessment. The Assessing Officer (AO), during assessment proceedings, questioned the assessee regarding cash deposits of Rs.37,09,000/- during the period of demonetization. The assessee explained that the cash deposits in the bank accounts during the demonetization period were out of cash-in-hand available with the assessee and cash received from various customers during the relevant financial year. The assessee further explained that the receipts from various customers were duly accounted in the books. The AO did not accept the explanation furnished by the assessee and also raised doubt over the business carried out by the assessee. To substantiate the business activity, the assessee furnished copies of Service Tax Returns for the Financial Year 2016-17. The AO took cognizance of only the Service Tax Return filed for the first half of Financial Year 2016-17 i.e. from 01.04.2016 to 30.09.2016, wherein the Service Tax return was filed at NIL, but failed to take note of the second Service Tax Return from 01.10.2016 to 31.03.2017 wherein the assessee had paid Service Tax of more than Rs.1,00,000/-. The ld. AR submits that FY 2016-17 was the first year of the assessee’s operations and therefore there was no history of cash deposits in the bank for comparative analysis. The ld. AR further submitted that during the assessment proceedings, the assessee explained that PAN details of customers were not obtained since all payments received were below Rs.50,000/-. In fact, the highest payment received during the financial year was not exceeding Rs.15,000/-. The ld. AR submitted that the AO accepted the expenditure claimed and the payments made to other transporters from whom the assessee had booked transport vehicles, but has not accepted the cash received by the assessee from customers and other transporters with whom assessee had counter arrangements. The ld. AR drew attention to the Balance Sheet and Financial Statements relevant
to AY 2017-18 at pages 22 to 35 of the paper book and copies of Service Tax Returns filed for FY 2016-17 at pages 2 to 20 of the paper book. The ld. Counsel further referred to handling charges as per the books of account at page 21 of the paper book.
Shri Manoj Kumar, representing the department vehemently defended the impugned order and submitted that the assessee has failed to substantiate cash receipts from third parties. No confirmations were filed and no supporting evidence in the form of vouchers, bills or invoices were furnished. The assessee also failed to provide PAN details and addresses of the customers from whom cash was received. Hence, the AO rightly made an addition of Rs.37,09,000/- being unexplained cash deposited in the bank accounts held by the assessee with IDBI Bank Ltd. and HDFC Bank Ltd. and the CIT(A) vide impugned order has upheld the same. The ld. DR prayed for confirming the addition and dismissing appeal of the assessee.
Both sides heard, orders of the authorities below examined. The AO has made an addition of Rs.37,09,000/- under section 68 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) on account of alleged unexplained cash deposits in the bank accounts of the assessee. The contention of the assessee is that the cash deposits are out of opening cash-in-hand and cash received from customers in the course of business. The assessee is engaged in the business of transportation. Financial Year 2016-17 is stated to be the first year of assessee’s operations. As per the submissions, the assessee is engaged in transportation of small consignments using tempos and pick-up vans for delivery of goods. From perusal of the assessment order, it emerges that the AO has expressed suspicion over the business activity carried out by the assessee. At the same time, the AO has accepted the assessee’s claim of business expenditure and the payments made to other transporters. It is only the cash receipts from customers that have been doubted. I find flaw in the approach of the AO. Once the AO has accepted business expenditure, on same set of books of account, he ought to have examined the corresponding business receipts in a holistic manner. The books of account cannot be partially accepted and partially rejected without cogent reasons. Insofar as the failure of the assessee to furnish PAN and address details of customers is concerned, since the payments received by the assessee were below Rs.50,000/-, there was no mandatory requirement for the assessee to obtain PAN of such customers. The Revenue has nowhere alleged the payments received by the assessee were such that required the assessee to mandatorily ask for PAN details. The assessee has placed on record Service Tax Returns for FY 2016-17. The said returns demonstrate business activity was carried out by the assessee during the relevant period. Taking into consideration entire facts of the case, I find merit in the submissions of the assessee. Accordingly, the addition of Rs.37,09,000/- is directed to be deleted.
In the result, impugned order is set aside and appeal of the assessee is allowed Order pronounced in the open court on Thursday the 19th day of February, 2026.