DCIT, INCOME TAX DEPARTMENT V. PACE TEL SYSTEMS PVT LTD, DELHI

ITA 956/DEL/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax (Dy. CIT) appealing against the decision of the CIT(A), which had deleted an addition of Rs. 2,88,38,262 made by the Assessing Officer (AO) on account of unexplained cash deposits under section 68 of the Income Tax Act during the demonetization period. The assessee, Pace Tel Systems Pvt Limited, had claimed that the cash deposits were from legitimate business sales. The Tribunal, after considering the submissions and evidence, decided to make a reduced addition of Rs. 8 lakhs to the income of the assessee, emphasizing that this should not set a precedent for future cases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774628 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 29-02-2024
• Other Referred Cases: S.M.I.L.E. Microfinance Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANURAG S. DARIA
• Assessee Lawyers: SAIF ALI
• Keywords: Unexplained cash credit
• Section: 68; 115JB; 40(a)(ia)

Judgement Text

"Page 1 of 6 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘A’ BENCH, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 956/DEL/2024 [A.Y 2017-18] The Dy. C.I.T. Vs. Pace Tel Systems Pvt Limited I.T.D, New Delhi D-13/1, Model Town-III New Delhi PAN: AAFCP 8340 L (Appellant) (Respondent) Assessee By : Shri Saif Ali, Adv Shri Pranav Menon, Adv Department By : Shri Anurag S. Daria, Sr. DR Date of Hearing : 20.08.2025 Date of Pronouncement : 20.08.2025 ORDER PER NAVEEN CHANDRA, AM :- This appeal by the Revenue is directed against the order of the ld. CIT(A, New Delhi dated 21.12.2023 pertaining to A.Y 2017-18. 2. The solitary grievance raised by the Revenue is the deletion of addition of Rs. 2,88,38,262/- by the ld. CIT(A) made by the Assessing Officer on account of unexplained cash deposit u/s 68 of the Act. Printed from counselvise.com ITA No. 956 /DEL/2024 Dy. CIT Vs. Pace Tel Systems [A.Y 2017-18] Page 2 of 6 3. Briefly stated, the facts of the case are that Pace Tel Systems Private Limited e-filed its return of income for A.Y 2017-18 on 02.11.2017 declaring income of Rs. 2,69,86,910/-and Rs. 2,78,84,951 u/s 115JB of the Act. Subsequently, the case was selected for complete scrutiny assessment through CASS with reasons to examine lower amount disallowed under section 40(a)(ia) in ITR in comparison to tax audit report and High Revenue from operations including other income and no scrutiny in preceding 5 assessment years. Accordingly, notice under sub section 2 of section 143 of the Act was issued and served on the assessee company. 4. During the assessment proceedings, the Assessing Officer found abnormal increase in the cash deposit made in different bank accounts of the Assessee Company during the demonetization period as compared to the rate of cash deposit during the pre-demonetization. The assessee explained that total cash deposited during the period of demonetization in different bank accounts maintained by the assessee on PAN India basis was Rs. 2,88,38,262/- out of which cash in old currency SBN was Rs. 50,72,500/. The Assessee also filed certificate from HDFC Bank and email from ICICI Bank for deposit of cash with breakup of old currency notes SBN. Printed from counselvise.com ITA No. 956 /DEL/2024 Dy. CIT Vs. Pace Tel Systems [A.Y 2017-18] Page 3 of 6 5. The Assessing Officer not being satisfied with the explanation made the addition of Rs. 3,39,10,762/- on account of cash deposit during demonetization period as unexplained cash credit under section 68 read with section 115BBE of the Act. 6. When the aggrieved assessee went in appeal before the ld. CIT(A), the ld. CIT(A) deleted the addition. 7. Aggrieved, the Revenue is in appeal before us. 8. We have heard the rival submissions and perused the relevant material on record. In the instant case, we find that the assessee has attempted to prove the entire source of cash deposit during demonetization as cash sales from 274 centers in different cities providing exclusive service cum retail sales of the big mobile manufacture i.e. OPPO Mobiles India Private Limited. Although the assessee, prima facie, appears to have discharged its onus of explaining source of cash deposit, its contentions to prove the source, hardly deserves to be accepted in entirety especially when the Assessing Officer found that the assessee did not submit any comparable of the cash deposit made in FY 2015-16 vis a vis cash deposit made in the FY 2016-17. Further, the AO also found that the corresponding purchases for the said sales and the sources of cash deposits remained unverifiable. Printed from counselvise.com ITA No. 956 /DEL/2024 Dy. CIT Vs. Pace Tel Systems [A.Y 2017-18] Page 4 of 6 9. We also find that on the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of Rs. 8 lakhs only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The Revenue’s ground on this count is partly allowed. 10. In so far as assessee's levy of tax at a higher rate under section 115BBE of the Act is concerned, we find that the Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. Accordingly, we direct the AO to tax the addition under normal provisions of tax and not under the provisions of 115BBE. 11. In the result, appeal of Revenue in ITA No. 956/DEL/2024 is partly allowed. Printed from counselvise.com ITA No. 956 /DEL/2024 Dy. CIT Vs. Pace Tel Systems [A.Y 2017-18] Page 5 of 6 Order pronounced in open court on 20.08.2025. [SATBEER SINGH GODARA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : September, 2025. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking Printed from counselvise.com ITA No. 956 /DEL/2024 Dy. CIT Vs. Pace Tel Systems [A.Y 2017-18] Page 6 of 6 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order Printed from counselvise.com "