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Facts
The assessee, engaged in the dairy business, filed its return of income. During demonetization, it deposited a significant amount of cash. The Assessing Officer made an addition on account of alleged unexplained cash deposits, treating them as undisclosed income under Section 68.
Held
The Tribunal held that the Assessing Officer and the CIT(A) erred in making the addition without properly verifying the assessee's books of account and considering the cash sales and opening cash balance. The Tribunal found that the cash sales and deposits were integral to the business, and the addition under Section 68 was not justified, especially considering the nature of the dairy business.
Key Issues
Whether the addition made under Section 68 on account of unexplained cash deposits during demonetization, despite the assessee being in a cash-intensive business with substantial cash sales, is justified. Whether the lower authorities properly considered the assessee's submissions and documentary evidence.
Sections Cited
143(2), 142(1), 68, 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
(Assessment Year: 2017-18) Dairy India Private Limited, vs. ACIT, Circle 7 (1), 41-42, Pandav Nagar, Delhi. Delhi – 110 008. (PAN : AAHCS9771N) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Bhupinderjit Kumar, Advocate Ms. Raina Majumdar, Advocate REVENUE BY : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 01.07.2025 Date of Order : 24.09.2025 O R D E R
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 27.02.2024 for the Assessment Year 2017-18.
Brief facts of the case are, the assessee filed its return of income declaring an income of Rs.1,39,10,450/- on 07.11.2017. The case was selected for scrutiny through CASS. The statutory notices under section 143(2) and 142 (1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee through ITBA portal. The Assessing Officer observed that assessee is engaged in the business of manufacturing and processing of milk foods. The Assessing Officer observed that the assessee has deposited Rs.4,78,15,745/- in old currency during demonetization period. A separate notice u/s 142(1) dated 19.11.2019 was issued to the assessee asking for bank statements, VAT returns and details of cash deposits during FY 2015-16 and 2016-17 and specific cash deposits before demonetization and after demonetization for both the years. Further details of cash sales were also asked for AYs 2015-16 and 2016-17 before and after demonetization. In response to another notice issued u/s 142(1), assessee furnished the details vide letter dated 23.10.2019. Assessee submitted that the bank-wise amount of cash deposited during demonetization period and further submitted the cash deposited in the bank was lying in cash-in-hand as on 08.11.2016, it is dealing in sale and purchase of milk and milk products, normally the transactions are in cash. The cash was lying at various sale depot/offices of the assessee company and the same was deposited in banks and it is a regular practice in this line of business. After considering the above submissions, the Assessing Officer rejected the submissions of the 68 of the Act with the following observations :- “The cash sales reported in F.Y. 2016-17 is Rs.6,09,65,767/-. The average sale from April 2016 to October 2016 is 59,75,235/- whereas the cash sales shown in the books is Rs.1,91,39,120/-. The reason of the same has not been submitted by the assessee. On further perusal of the information it was found that the assessee has not submitted the details as required in the format and no separate details have been submitted by the assessee. The assessee has also failed to give any month wise detail of cash sale in earlier year and failed to reconcile the same with sudden increase of the cash sale No details of any purchase made by the assessee and explanation wrt sudden increase in the purchase of milk and Milk products were forwarded in this regard. The assessee has also failed to explain that how the payment to those parties was made. The assessee failed to explain the quantity of the milk and milk products. No details wrt sudden addition/increase in new customer in the month of the Oct 2016 till November, 8th 2016 was found. The assessee has also failed to explain why cash was not deposited by the assessee on real time basis. Party wise details and bills to substantiate the cash sales has not been uploaded by the assessee. Thus, the assessee has accommodated its unaccounted money by depositing the same and showing it as cash sales from customers.”
Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and raised grounds of appeal, also filed additional evidence to prove the genuineness of the cash deposit and cash sales effected. In this regard, the assessee has submitted cash sales and cash deposited during AYs 2016-17, 2017-18 and 2018-19 and also reconciliation of return as per ITR with VAT return. The same was accepted under Rule 46A and remanded the matter back to the Assessing Officer. In response, Assessing Officer submitted that remand report vide letter dated 24.01.2024. After considering the remand report, ld. CIT (A) observed that the Assessing Officer has given following findings that the assessee has deposited Rs.35,83,30,511/- in its bank account from 01.04.2016 upto 07.11.2016 out of the cash sales of Rs.36,54,70,311/-. There is a difference of Rs.71,39,800/- between cash sales to cash deposited. The said difference was due to the daily expenses meet out by the assessee for running its business as per the submissions of the assessee. Further Assessing Officer observed that during demonetization period i.e. 08.11.2016 to 30.12.2016, the total cash deposited by the assessee was Rs.4,78,92,325/- but the total cash sales during this time period was Rs.4,25,41,305/-. Thus, there is a difference of Rs.53,51,020/- between cash sales and cash deposited regarding which assessee failed to furnish any explanation. Therefore, AO made a plea to that extent the addition should be sustained. The said remand report was also shared with the assessee and in response, assessee submitted detailed information, we are reproducing the relevant part of the submission as under :- “To reiterate, the impugned addition was made by the AO, solely on the basis of the details furnished by assessee itself in respect of cash deposits during demonetization period. The AO conveniently skipped other relevant parts of business information/s/details furnished which were directly pointing out that cash sales and cash deposits in bank was an integral.
In fact, there has been 123% decrease in cash deposits as compared to earlier year relevant period. Also there has been decreasing tread even in the cash sales as compared to earlier period. The assessee’s business is not of real estate or jewelry where the people having cash could invest the cash into purchases/ investments (accountedly or unaccountedly); its business is of dairy products i.e. daily consumable goods were nobody would make any substantial investments influenced by move of demonetization.”
After considering the above submissions and rejoinder, ld. CIT (A) sustained the addition to the extent of Rs.53,51,020/- with the observation that as the assessee has not given any verifiable documentary evidence in support of his claim.
Aggrieved assessee is in appeal before us raising following grounds of appeal :-
1. On the facts and circumstances of the case, the orders passed by the Ld. CIT(A) is bad in eyes of law.
2. That Ld. CIT(A) has erred in law and on facts in holding that out of total cash deposit of Rs.4,78,15,745/- made during demonetization period; while deposits to the extent of Rs.42,4,64,725/- were explained by cash sales, the balance i.e., Rs.53,51 ,020/- was not explained.
3. That the Ld. CIT(A) has erred in law and on facts holding that the appellant had not given verifiable documentary evidence in support of its claim of cash incoming, although the appellant had furnished sufficient supporting details and documents and also chart of cash sales and other cash incomings explaining such cash availability.
4. That the Ld. CIT(A) has erred in law and on facts by not providing any opportunity of personal hearing through video conference as mandate by CBDT instructions.
5. That ld. CIT (A) has erred in law and on facts in confirming the initiation of penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961.”
Further assessee has also filed following additional grounds of appeal :-
“2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in partly confirming the addition made in the assessment order dated 29.12.2019 passed by the Assistant Commissioner of Income-tax, Circle-7(1), Delhi (hereinafter referred to as "AO") under section 143 (3) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") in the case of the Appellant for Assessment Year (hereinafter referred to as "A.Y''') 2017-18, because the assessment order is without jurisdiction, bad in law and void ab initio, as the mandatory notice under section 143(2) was issued by the Additional Commissioner of Income-tax, Special Range- 3, Delhi, who was not vested with jurisdiction over the case of the Appellant either under section 120(4)(b) or through a valid order of transfer under section 127 of the Act, and the subsequent assessment was completed by the Assistant Commissioner of Income-tax, Circle- 7(1), Delhi, also without there being any valid transfer of jurisdiction in his favour.
3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the addition to the tune of Rs.53,51,020/- based on the remand report furnished by the learned AD, ignoring the position of law that provisions of section 68 cannot be applied in respect of income from a source which has already been taxed which would amount to double taxation.”
At the time of hearing, ld. AR of the assessee submitted that in remand proceedings, the assessee has submitted all the details relating to cash sales and cash deposit which was duly accepted by the Assessing Officer and the difference of cash sales and cash deposited for the period of demonetization the tax authorities have added the difference of the above as undisclosed income u/s 68 of the Act. In this regard, he submitted that the tax authorities failed to verify the books of account and assessee had opening cash balance during demonetization. Further he submitted that the Assessing Officer itself has observed that before demonetization, assessee has done cash sales of Rs.36.54 crores and cash deposit was Rs.35.83 crores. He submitted that there is difference of cash balance between cash sales and cash deposit before the demonetization period.
Even after adjusting certain expenditure, still assessee had opening cash balance. Further he submitted that assessee is into dairy business, there is sufficient and regular cash flow in the business. Therefore, the additions made by the tax authorities are unwarranted and also the additions were made u/s 68 of the Act. He submitted that all the cash were already disclosed in the books of account making addition u/s 68 is uncalled for and also it amounts to double addition.
On the other hand, ld. DR of the Revenue relied on the orders of the lower authorities and he submitted that ld. CIT (A) has given substantial relief.
Considered the rival submissions and material placed on record. We observe that the Assessing Officer proceeded to make the total cash deposit made by the assessee during demonetization period since assessee could not submit the relevant cash deposit made by the assessee during the impugned year as well as previous year during the assessment proceeding. Since there was no information available with him, he proceeded to make the whole cash deposits as addition. In appeal, assessee filed additional evidences before the first appellate authority. In remand proceedings, after considering the additional evidences and other details submitted before the Assessing Officer, the Assessing Officer observed that assessee has achieved cash sales of Rs.36.54 crores and Rs.35.83 crores and the difference of Rs.71,40,000/- with the assessee. He observed that assessee may have meet out the same in running the business. Accordingly, he assumed that cash balance was utilised for business expenses as dairy business being cash intensified enterprise. After observing the above, he further observed that during demonetization, assessee has deposited Rs.4,78,92,325/- whereas achieved the total cash sales during the period of Rs.4,25,41,305/-, therefore there is a difference of Rs.53,51,020/-. Therefore, the assessee failed to furnish any explanation. We observe that the ld. CIT (A) also proceeded to sustain the above addition without considering the actual facts on record. We observe that before demonetization i.e. on 07.11.2016, the assessee had closing cash balance which was not considered by the lower authorities and also they themselves observed that there is a difference of Rs.71.39 lakhs pre-demonetization period from the total cash sales and cash deposited by the assessee. They presumed that the abovesaid difference must have been utilised by the assessee for business purpose without duly verifying the cash book maintained by the assessee. Since they proceeded to sustain the addition arbitrarily without actually verifying the cash book maintained by the assessee. When we look at the total cash sales and total cash deposit made by the assessee during the year, it clearly shows that assessee has Rs.48.03 crores and made the cash deposit of Rs.47.45 crores. Therefore, there is absolutely not justified for making the abovesaid addition u/s 68 of the Act. Considering the above facts on record, we are inclined to allow the grounds raised
by the assessee.
10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 24TH day of September, 2025.