GOLD SPICE IMPEX,DELHI vs. INCOME TAX OFFICER, WARD-47(2), DELHI

(Assessment Year: 2017-18) M/s. Gold Spice Impex, vs. ITO, Ward 47 (2), 1879, Kucha Chelian, Khari Boali, Delhi. Delhi – 110 006. (PAN : AAPFG0688P) (APPELLANT) (RESPONDENT) ASSESSEE BY :Shri Rakesh Gupta, Advocate Shri Deepesh Garg, Advocate REVENUE BY : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 26.08.2025 Date of Order : 21.11.2025 O R D E R

PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs.1,15,00,000/- on account of cash deposits u/s 68 and taxing the same u/s 115BBE and that too by recording incorrect facts and findings and without following the principles of natural justice.

2. That in any case and in any view of the matter, action of Ld. CITCA) in confirming the action of Ld. AO in making aggregate addition of Rs.1,15,00,000/- on account of cash deposits u/s 68/115BBE, is bad in law and against the facts and circumstances of the case.

3. That having regards to the facts and circumstances of the case, the Ld. CITCA) erred in law and facts, in addition of cash deposited during demonetization period of admitted sales as per the audited books of account as well as per the returns filed under Delhi Value Added Tax leading to double addition and without providing relief of reduced sales and stock as per the Provisions of Income Tax Act, 1961.

4. That having regards to the facts and circumstances of the case, the Ld. "CIT(A) erred in law and facts, in violating the principles of natural justice by not affording an opportunity before proceeding to pass an order as per the provisions of tile Income Tax Act, 1961.

6. That having regards to the facts and circumstances of the case, the Ld. Assessing Officer erred in law and facts, without prejudice to the above in treating the income of business as Income of Other Sources.

7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B, 234C and 234D of Income Tax Act, 1961.”

2. Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period.

3. Custom Duty paid as shown in the ITR is less than the duty paid as per export import data. 3. Accordingly, notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. Several notices were issued to the assessee to provide the information in particular format about opening stock, purchases, total sales, cash sales, credit sales and closing stock and specifically assessee was asked to provide statement of cash deposit and cash sales for three financial years i.e. 2015-16 to 2017-18. In response, assessee has not submitted the relevant information as asked by the AO in the above said particular format. Due to non-compliance of the above requirement, the AO observed that the case of the assessee was basically selected to verify the cash deposit made by the assessee during demonetization period and he came to the conclusion that the assessee has recorded concocted sales to declare the cash sales and accordingly, he rejected the contentions of the assessee and proceeded to make the addition u/s 68 of the Act to the extent of Rs.1,15,00,000/- u/s 68 of the Act and also invoked the provisions of section 115BBE.

4. Aggrieved assessee preferred an appeal before the NFAC, Delhi and filed detailed submissions. In the above said detailed submissions, assessee submitted that purchases and sales are duly recorded in the books of account which are reconciliation and accepted with the VAT and FSSAI authorities making it properly clear that assessee has declared the same consistently and paid the applicable taxes on the same at every stage. It was submitted that assessee has not complied to the notices and summons u/s 131 was issued to the partners, Shri Tushank Bajaj and Anirudh Arora but none appeared even during second summons. The assessee has accepted that assessee has deposited Rs.1,15,00,000/- during demonetization period and these are of out of cash sales made by the assessee during the year. They objected to the fact that assessee has made 100% of the cash deposit which is added to the income of the assessee u/s 68 of the Act. After considering the submissions of the assessee, ld. CIT (A) dismissed the grounds raised

by the assessee with the observation that in spite of repeated notices / explanations sent by the AO for the submissions of relevant details explaining source of cash deposit made in the bank account during the demonetization period and assessee has not submitted any such detail. Further he observed that assessee has not explained the source of cash deposit during the demonetization period in the course of appellate proceedings also. Accordingly, he sustained the additions made by the AO. Aggrieved assessee is in appeal before us.

5. At the time of hearing, ld. AR of the assessee brought to our notice relevant facts of the issue and also brought to our notice details of sales and cash sales recorded by the assessee to the extent of Rs.1,14,03,500/-. He also brought to our notice audited Balance Sheet and Profit & Loss account including inventories maintained by the assessee. He also brought to our notice auditor’s report and also audit report on quantitative details of goods traded and movements. Further it was submitted that cash sales declared by the assessee is only 6.1% of the total turnover as assessee firm being the wholesaler of goods, its sales in bulk to dealers through banking channel only. All these details were part and parcel of the paper book submitted by the assessee along with copy of reconciliation statement of VAT and FSAAI authorities. Assessee has submitted detailed fact sheets in the form of written submissions with regard to observations of the AO and CIT (A) for non-submissions of details. In this regard, he submitted as under :- 1. Ld. AO has mentioned in para 8.2 at page 4 of the assessment order that concocted cash sale has been booked by the assessee to adjust undisclosed income during the demonetization period.

In this regard it is submitted that Ld. CIT(A) has held in para 4.2 at page no. 5 of the impugned order “that there is no finding by the AO on concocted sales made by the Appellant. The AO has simply made as observation about concocted sales made by the Appellant without bringing out any evidences in this regard.” Further. once the Learned CIT(A) has accepted the genuineness of the sales, it logically follows that the realisation of the corresponding sale proceeds is also genuine and beyond further dispute. IN SmtCharu Aggarwal v DCIT [2022]96 ITR(T) 66 (Chandigarh Trib.)[25- 03-2022] it was held that where cash deposited post-demonetization by assessee was out of cash sales which had been accepted by Sales Tax/VAT Department and not doubted by Ld. AO then cash deposits could not have been treated as undisclosed income of assessee.

PB 78 is the copy of written submission dated 19.07.2023 before Ld. CIT(A) stating that purchases/sales are reconciled and accepted with VAT & FSSAI. Further it is submitted that the Ld. AO has not pointed out any discrepancies in the books of accounts which was also confirmed by Ld. CIT(A) in impugned order(para 4.2 at page no. 7 of the appeal order).Therefore, there was no justification for making addition on account of the balance cash deposit which was from that very sale, which has been accepted in the impugned order. Therefore, reliance is placed on the following judicial precedents, wherein it has been held that no additions can be made of sales already disclosed and offered to tax by the assessee:- - Addl. CIT vs. Gurshant Rotary Compressor Ltd. 15 DTR 429(Del’C’)(TM) Income—Cash credit----Alleged sale consideration of goods---Amount of alleged sale consideration of books though not established by assessee to be genuine, same having been credited to the P&L a/c by assessee, it was neither required to be added nor deleted.

- Eland International (P) Ltd. vs. Dy. CIT 26 DTR 113(Del.’C’) - CIT v. Vishal Exports Overseas Limited (Gujarat High Court) Tax Appeal No. 2471 of 2009 Thus, impugned additions will only result in double taxation which is not permissible in the eyes of law.

2. Ld. CIT(A) has mentioned in para 4.3 at page 9 of the appeal order that appellant has not submitted any details/explanation explaining source of cash deposits in the demonetization period. In reply, assessee respectfully submits that the allegation regarding non- explanation is not factually correct. During the appellate proceedings, the assessee has duly explained the relevant facts and submitted all material documents as required which is evident from the above evidences also. In view of the above, it is submitted that this observation of Ld. CIT(A) may please be ignored. In view of the above, it is respectfully submitted that the addition made by Ld. AO is without any basis, evidence or material and is merely based on surmises and conjectures and may please be deleted.

Reliance is placed on the following decisions for cash deposit during the demonetization period and also for the aspect of cash sales: -  Deepak Sharma vs. ACIT, Order dated 26.03.2025 “Once the purchases declared in the books of accounts were duly accepted then no subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained cash credits taxable under section 68 of the Act. It is settled law that once the books of accounts, sales have been accepted, the same could not be regarded as unexplained credits.”  ITO vs. J.K. Wood India (P.) Ltd,(2024) 158 taxmann.com 208 (Delhi - Trib.) “The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account. Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment. The assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and it is not the case of the Assessing Officer that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period”.  Kalaneedhi Jewellers LLP [2022] 96 ITR 66 ( Chandigarh-ITAT) “Wherein, there was issue of cash deposits in the regular bank account of the assessee out of sales as reflected in trading account and it was held that if the opening stock, purchases, sales and closing stock have not been doubted and cash is received against such sales, then the addition cannot be said to be justified.”  CIT v. Hirapanna Jewellers [2021] 96 ITR 24 ( Vishakhapatnam-ITAT) “ Where AO made addition under section 68 on account of huge cash amount deposited by assessee-jeweller in its bank account post demonetization, since assessee had explained source of said cash deposits as sales of jewellery, produced sale bills and admitted same as revenue receipt as well as offered it to tax and assessee also represented outgo of stocks which was matching with sales, impugned addition was to be deleted”  Arun Garg v. ITO[2022] 98 ITR 508 (Chandigarh-ITAT)

They had made cash deposits out of their independent sources and furnished necessary proof for same and, thus, source stood justified - Further, opening stock, purchases, sales and closing stock in hands of assessee was accepted by Assessing Officer and its books of account was also not rejected - Such entries related to parties in effect stood accepted - Whether, on facts, impugned additions made by Assessing Officer was unjustified – Held, yes.

In view of the above, it is submitted that this observation of Ld. CIT(A) may please be ignored. In view of the above, it is respectfully submitted that the addition made by Ld. AO is without any basis, evidence or material and is merely based on surmises and conjectures and may please be deleted.”

2. Ld. CIT(A) at page 5-7 of the appeal order has found that Ld. AO erred in rejecting the books of accounts and that finding has attained finality and thus, if there had been any non-compliance as alleged, Ld. CIT(A) would not have demolished the case of the Ld. AO in rejecting the books of accounts.

by the assessee are partly allowed.

10. With regard to applicability of section 115BBE, we observe that Hon’ble Madras High Court in the case of SMILE Microfinance Ltd. vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020 dated 19.11.2024 held that the said provision applied for transactions done on or after 01.04.2017 only. The Assessing Officer is accordingly directed to assess the income under normal provisions only.

11. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 21st day of November, 2025.