AURAINE BOTANICALS PRIVATE LIMITED,GURGAON V. INCOME TAX OFFICER, GURGAON

ITA 751/DEL/2024

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Auraine Botanicals Private Ltd. appealed against the order of the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, which had upheld the additions made by the Assessing Officer (AO) regarding unexplained cash deposits during the demonetization period and certain disallowances related to PF and ESI contributions. The AO had made these additions under sections 68 and 115BBE of the Income Tax Act, 1961, after observing substantial cash deposits during the demonetization period. The Tribunal examined the cash book and bank statements provided by the assessee, which detailed cash withdrawals and subsequent redeposits, and found the assessee's explanations credible, leading to the reversal of the AO's additions regarding the cash deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716648 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 19-02-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR ARORA
• Assessee Lawyers: VINOD JAIN
• Keywords: Opportunity of being heard; Business expenditure; Unexplained cash credit; Principle of natural justice
• Section: 68; 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER and SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.751/DEL/2024 (Assessment Year: 2017-18) Auraine Botanicals Private Ltd., vs. Income Tax Officer, Plot No.22, Sector 18, Gurgaon. Electronic City, Palam Road, Gurgaon – 122 016 (Haryana). (PAN : AAMCA8139P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Vinod Jain, CA Ms. Nisha Sharma, CA REVENUE BY : Shri Ajay Kumar Arora, Sr. DR Date of Hearing : 27.05.2025 Date of Order : 22.08.2025 O R D E R PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. The assessee has filed appeal against the order of ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 23.11.2023 for Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed its return of income declaring an income of Rs.1,53,74,492/- on 30.10.2017. The case was selected for Printed from counselvise.com 2 ITA No.751/DEL/2024 scrutiny under CASS. 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. In response, assessee filed its submissions through e-proceedings from time to time. During assessment proceedings, the AO observed that assessee had deposited Specified Bank Notes (SBM) during demonetization period. It was observed that assessee had deposited an amount of Rs.41,50,000/- during demonetization period i.e. 09.12.2016 to 20.12.2016 as under :- Bank Date Amount Kotak Mahindra Bank 09.12.2016 Rs.9,50,000/- 14.12.2016 Rs.9,00,000/- 16.12.2016 Rs.5,00,000/- 17.12.2016 Rs.9,00,000/- 20.12.2016 Rs.9,00,000/- Total Rs.41,50,000/- 3. The assessee is in the business of trading of cosmetics goods. It imports the goods from USA and sell the same in pan India. On enquiry relating to cash deposits, the assessee submitted that the cash were withdrawn earlier for certain specific purpose which could not be utilized due to change in management decision and the cash was redeposited as per the books of account. The AO rejected the above submissions of the assessee and observed that the assessee has not furnished any cogent reason for withdrawal of cash and redepositing the same and further observed that cash- in-hand kept by the assessee are exorbitantly high compared to the period Printed from counselvise.com 3 ITA No.751/DEL/2024 before and after demonetization which raises suspicion. The AO observed that on examination of the bank statement, it was noticed that assessee had never deposited any cash during demonetization. By relying on certain decisions, he made the additions u/s 68 of the Act and also invoked the provisions of section 115BBE of the Act. Accordingly, he levied tax @ 60% by virtue of section 115BBE of the Act. 4. Further the AO observed that assessee has deposited PF and ESI (employee contribution) beyond due date as per the tax audit report in Form 3CD to the extent of Rs.5,08,854/-. Accordingly, he assessed the income of the assessee to the extent of Rs.2,00,33,346/-. 5. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and raised several grounds. However, several notices were issued to the assessee giving multiple opportunities for furnishing the details in support of the grounds of appeal raised by the assessee. Since no compliance was made by the assessee, ld. CIT (A) dismissed the appeal filed by the assessee in limine, however decided the issue on merits based on the material available on record. 6. Aggrieved, assessee is in appeal before us raising following grounds of appeal :- “1. The learned CIT Appeals has erred in law and facts of the case while ordering appeal dismissal without giving proper notice or opportunity of being heard to the assessee. Printed from counselvise.com 4 ITA No.751/DEL/2024 2. The learned CIT Appeals has erred in law and facts having not provided a personal hearing or even video hearing before dismissing the appeal against principle of natural justice. 3. The learned CIT Appeals has erred in law and facts while sustaining the disallowance made by the learned AO, without considering facts and evidence on record. 4. That the learned AO has erred in law and facts of the case by making an addition of INR 41,50,000/- in the income of the assessee, by treating the cash as unexplained money and disregarded evidence of bank withdrawals and cash book and the nature of business of the assessee, requiring expenditure in cash. 5. That the learned AO has erred in law and facts in concluding that the addition can be made under section 68 of the Income tax act as unexplained money, inspite of the facts on record of regular withdrawal and usage of cash in the company even in the past for genuine business expenditure. 6. The learned AO has erred in law and facts of the case by not complying with the provisions of section 68 of the Act and making addition of INR 41,50,000/- on account of alleged unexplained cash credits in the books of assessee. 7. That the learned AO has erred in law and on facts in concluding that the assessee has deposited unexplained cash of INR 41,50,000/- during the demonetization period and did not consider the justification that the cash deposits were out of previous cash withdrawals. 8. That the learned AO has erred in law and facts by applying section 115BBE of the Act in the case of the assessee, although the section was introduced w.e.f 1st April, 2017 and cash deposited in question were made in December 2016. 9. That the learned AO has erred in law and facts by computing the interest liability u/s 234C on the addition made in the assessment order since the section 234C uses the word 'returned Income' and not 'assessed Income' as a criteria for applicability of the said section. 10. That the learned AO has erred in law and facts by computing the interest liability u/s 234B on the addition made in the assessment order under section 68 and disallowing the amount under section 36(1)(va) of the Act. Printed from counselvise.com 5 ITA No.751/DEL/2024 11. The learned AO has erred in law and facts by making an addition of INR 5,08,854/- under section 36(1)(va) since the delay in payment of 'employee's part of contribution' was only for INR 2,44,623/- and the same is disallowable as per section 36(1)(va) of the Act. However, learned AO has also disallowed INR 2,64,231/- ('the employer part of contribution') under section 36(1)(va) which is allowable as per the provision of section 438 of the Act. 12. That the learned AO has erred in law and facts of the case by not providing reasonable opportunity of being heard before passing an adverse order under the Act. 13. That the learned AO has erred in law while initiating penalty proceedings u/s 271AAC(1) of Income Tax Act,1961 since the section was inserted by the Taxation laws (Second Amendment) Act, 2016 which was enacted as an act on 15th December,2016. Hence, the same cannot be applied on cash deposits done before 15th December 2016. 14. That the learned AO has erred in law in applying the Section 271AAC(1) of Income Tax Act,1961 on the assessee since the Article 20(1) of the Constitution of India prohibits that \"No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the Act charged as an offence, not be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.” 7. At the time of hearing, ld. AR of the assessee brought to our notice relevant facts on record and brought to our notice that assessee has withdrawn cash from Kotak Mahindra Bank and unutilized funds were redeposited in the bank. He brought to our notice cash book for FYs 2015-16 and 2016-17 and submitted that during FY 2015-16, assessee has withdrawn cash from bank and utilized the funds for the purpose of business and he also brought to our notice that assessee has utilized the whole cash withdrawn for the purpose of business. For the FYs 2015-16 & 2016-17, he brought to our notice summary of cash book for the abovesaid two years as under :- Printed from counselvise.com 6 ITA No.751/DEL/2024 8. He submitted that assessee has withdrawn Rs.1.38 crores during the year and utilized for the requirement of business similar to previous financial year and Printed from counselvise.com 7 ITA No.751/DEL/2024 excess funds were redeposited in the bank to the extent of Rs.41,50,000/-. He submitted that assessee has maintained books of account which were duly audited and assessee has already demonstrated the excess cash withdrawn from the bank and unutilized funds were deposited in the bank. Therefore, he submitted that the cash deposited by the assessee are already accounted for. He also brought to our notice details of cash withdrawn and details of cash deposited by the assessee as under :- Date Cash deposited (INR) Page no. of paper book 09th December, 2016 9,50,000/- 335 14th December, 2016 9,00,000/- 334 16th December, 2016 5,00,000/- 333 17th December, 2016 9,00,000/- 333 20th December, 2016 9,00,000/- 332 Total 41,50,000/- Month Cash withdrawn (INR) April 2016 26,000/- May 2016 25,000/- June 2016 18,85,000/- July 2016 21,50,000/- August 2016 20,45,000/- September 2016 36,70,000/- October 2016 36,01,000/- November 2016 4,01,400/- Total 1,38,03,900/- 9. Further he submitted that the AO has initiated the provisions of section 115BBE of the Act. With regard to PF and ESI issue, he agreed that the addition may be sustained. Printed from counselvise.com 8 ITA No.751/DEL/2024 10. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 11. Considered the rival submissions and material placed on record. We observe that assessee has deposited Rs.41,50,000/- during demonetization period as per the chart submitted by the assessee. Further it is brought to our notice that assessee has withdrawn cash from Kotak Mahindra Bank and he submitted cash book indicating the withdrawal of cash from the bank and he also submitted the details of expenditure incurred by the assessee and more or less the expenditure incurred by the assessee are similar to the expenditure incurred by the assessee in the previous assessment year. Excess cash which was not utilized by the assessee for the purpose of business were redeposited due to declaration of demonetization during the current assessment year. Considering the cash book and bank book brought on record, we noticed the excess cash maintained by the assessee, it is evident from the cash book brought on record, therefore, we are inclined to allow the claim of the assessee also it has demonstrated that it has carried the respective cash balance in the business, which was deposited in their bank account due to declaration of demonetization. No other material brought on record by the Assessing Officer except observation and surmises on the basis of information that assessee had deposited cash during demonetization, accordingly, ground raised by the assessee is allowed. Printed from counselvise.com 9 ITA No.751/DEL/2024 12. With regard to issue of PF and ESI, at the time of hearing, ld. AR of the assessee itself conceded the abovesaid disallowance. Accordingly, the ground raised by the assessee is dismissed. 13. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 22nd day of August, 2025. Sd/- sd/- (CHALLA NAGENDRA PRASAD) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 22.08.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "