VISHAL FIRE WORKS,DELHI vs. ASSESSING OFFICER, DELHI

PDF · subscribers
ITA 5337/DEL/2025Status: DisposedITAT Delhi21 January 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that regarding the cash deposits during demonetization, a lumpsum estimation of Rs. 1,27,92,500/- at 8% or the declared amount, whichever is higher, would be just and proper, with a rider that it should not be treated as a precedent. This decision acknowledges the cash-intensive nature of the business and the partial failure of the assessee to fully discharge its onus. For the GP estimation, the Tribunal found that there was no specific rejection of the assessee's books supporting the declared GP of 10.82%. Therefore, it deemed a GP of 11.25% to be just and proper in the larger interest of justice, also stating it should not be treated as a precedent. Regarding Section 115BBE, the Tribunal, relying on the Madras High Court decision, held that the provision comes into effect for transactions done on or after 01.04.2017. Thus, the assessee was directed to be assessed under normal provisions. The operative directions include a revised estimation of cash deposits and GP, and assessment under normal provisions for Section 115BBE.

What were the facts?

The assessee, Sh. Vishal Fire Works, a partnership firm engaged in the wholesale and retail trading of firecrackers, filed an appeal for assessment year 2017-18 against the order of the CIT(A)/NFAC. The appeal challenged the addition of Rs. 1,82,75,000/- made by the Assessing Officer and upheld by the CIT(A) on account of cash deposits during demonetization, treating them as unexplained under Section 68 of the Income-tax Act, 1961. Additionally, the lower authorities had re-estimated the assessee's Gross Profit (GP) at 20% instead of the declared 10.82%, leading to an addition of Rs. 26,67,125/-. The assessee argued that it is a cash-oriented business and had provided relevant details of turnover during demonetization.

What were the issues?

1. Whether the cash deposits amounting to Rs. 1,82,75,000/- during demonetization can be treated as unexplained under Section 68 of the Income-tax Act, 1961, and added to the assessee's income? The assessee contended that it is a cash-oriented business and had provided details of turnover during demonetization. The Revenue argued that the assessee failed to discharge its onus of pleading and proving its explanation. 2. Whether the re-estimation of the assessee's Gross Profit (GP) at 20% by the lower authorities, instead of the declared 10.82%, is justified? The assessee argued that its books of account supported the declared GP. The Revenue's contentions were not explicitly recorded beyond raising technical objections. 3. Whether the assessment under Section 115BBE is applicable to the assessment year 2017-18? The assessee relied on the Madras High Court decision in S.M.I.L.E. Microfinance Ltd. Vs. ACIT.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI

Before: SHRI SATBEER SINGH GODARAAND

For Respondent: Ms. Ankush Kalra, Sr. DR
Hearing: 21.01.2026Pronounced: 21.01.2026

ORDER

PER SATBEER SINGH GODARA, JM

1.

This assessee’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1078721953(1), dated 21.07.2025 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.

2.

Coming to the assessee’s sole substantive ground raised

herein, we notice that it seeks to reverse both the learned lower authorities’ respective findings assessing its cash deposits during demonetization amounting to Rs.1,82,75,000/- as unexplained under section 68 of the Act; in assessment order dated 21.12.2019 as upheld in the lower appellate discussion.

3. Learned counsel further clarifies that both the learned lower authorities have also re-estimated the assessee’s GP @ 20% instead of @ 10.82%; resulting in addition of Rs.26,67,125/- in the lower appellate discussion.

4. We have given our thoughtful consideration to the assessee’s and the Revenue’s respective vehement submissions. We wish to make it clear that there has been no dispute all along that the assessee is a partnership firm carrying out wholesale and retail trading of firecrackers which is more a cash-oriented sector being in the nature of an unorganized business. And that it had all along filed all the relevant details of the business turnover during demonetization, whose credit could not be denied in entirety, although it appears to have not successfully discharged its onus of pleading and proving its explanation to the very effect. Be that as 2 | P a g e it may, we deem it appropriate in this factual backdrop that a lumpsum estimation of the assessee’s impugned cash deposits amounting to Rs. 1,27,92,500/- @ 8% or that already declared at his behest, whichever is higher, as just and proper with a rider that the same shall not be treated as a precedent. Necessary computation shall follow as per law.

5.

Next comes the latter issue of the assessee’s GP estimation. A perusal of the case records indicates that the CIT(A)’s detailed discussion at pages 11 and 12 has reduced the assessee’s GP from that estimated @ 20% by the Assessing Officer to 13% only as against already disclosed @ 10.82%. We make it clear that apart from raising some technical objections, there is no specific rejection of assessee’s books of account supporting its foregoing GP disclosure @ 10.82%. Be that as it may, we deem it appropriate in the larger interest of justice that the assessee’s impugned GP @ 11.25% would be just and proper that same shall not be treated as a precedent. We order accordingly. Necessary computation shall follow as per law.

6.

So far as assessee’s assessment under section 115BBE is concerned, we quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P.

3 | P a g e (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. The assessee is accordingly directed to be assessed under the normal provision as per law.

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →