DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), CHANDIGARH V. ALLIED NOVATECH PRIVATE LIMITED, CHANDIGARH

ITA 609/CHANDI/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle-1(1), Chandigarh as the appellant and Allied Novatech Private Limited as the respondent. The core issue was the deletion of an addition of Rs. 1,83,95,000 by the CIT(A), which was initially added by the Assessing Officer under section 69A, claiming the cash deposits in the respondent's bank accounts were from unexplained sources. The CIT(A) found that the Assessing Officer had not properly rejected the books of account nor provided sufficient evidence to support the addition. The Tribunal upheld the CIT(A)'s decision, emphasizing that the Revenue had accepted the purchases, stock, and sales proceeds recorded in the books of account, and thus could not contest the cash deposits from these sales.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717335 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 17-05-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: PARIKSHIT AGGARWAL; SHRUTI KHANDEWAL
• Keywords: Deemed to accrue or arise in india; Bogus
• Section: 142(1); 40A(3)

Judgement Text

" आयकर अपीलȣय अͬधकरण, चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘A’, CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDEN & SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 609/CHD/2024 Ǔनधा[रण वष[ / Assessment Year : 2017-18 Deputy Commissioner of Income Tax, Circle- 1(1), Chandigarh बनाम Vs. Allied Novatech Private Limited SCO 90, Sector 44-C, Chandigarh. èथायी लेखा सं./PAN NO: AAKCA2286M अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent ( Physical Hearing ) Ǔनधा[ǐरती कȧ ओर से/Assessee by: Shri Parikshit Aggarwal CA & Ms. Shruti Khandewal, Advocate राजèव कȧ ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT Sr.DR सुनवाई कȧ तारȣख/Date of Hearing : 05-06-2025 उदघोषणा कȧ तारȣख/Date of Pronouncement : 12-08-2025 आदेश/Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the Revenue against the order dated 22-03-2024 of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi. 2. Grounds of appeal are as under: Printed from counselvise.com 609-Chd-2024 Allied Novatech Pvt. Ltd. Chandigarh. 2 1. That Ld. CIT(A)/NFAC has erred in deleting the addition of Rs. 1,83,95,000/- by holding that the Assessing Officer is wrong in not accepting the declared cash sales recorded in books of account as not verifiable and without formally rejecting the books of accounts, completely ignoring the peculiar facts and circumstantial evidences brought on record by the Assessing Officer, inter- alia giving observation that no cash sales have been recorded in the F.Y 2015-16 and during the entire F.Y 2016-17, the cash sales have been recorded during the months of October/November only and his observation, “that the assessee company has booked bogus sales for generating cash in its books and subsequent deposits in bank accounts.” 2. That Ld. CIT(A)/NFAC has erred in deleting the addition of Rs. 1,83,95,000/- made by the A.O. u/s 69A in view of the facts and circumstances of the case completely ignoring the principles of Preponderance of Human Probability and circumstantial evidence in particular, the starkly visible and significant fact that no cash sales were carried out during the several months prior to as well as following the impugned 2 months of October/November, 2016. 3. The Ld. CIT(A)/NFAC, in arriving at his precipitate and premature decision, has failed to consider the very likely possibility Printed from counselvise.com 609-Chd-2024 Allied Novatech Pvt. Ltd. Chandigarh. 3 that the assessee may have been running no or very little business activity at all during the entire F.Y. 2016-17 and the amounts manifested as cash deposits made in October and November, 2016 are therefore completely unexplained on facts, logic and in law. 4. That it is prayed that the order of the CIT(A)/NFAC be revoked and that of the Assessing Officer may be restored. 5. That the appellant craves to add, or alter, or amend any grounds of the appeal raised above at the time of hearing. 3. Although the Revenue has taken five grounds of appeal but the only issue involved in this case is the deletion of addition by the Ld. CIT(A) of Rs. 1,83,95,000/- by holding that the Assessing Officer is wrong in not accepting the declared cash sales recorded in the books of account as not verifiable and without rejecting the books of account. 4. Brief facts on this issue are as under: - 1. The appellant is a company and is engaged in the business of retail trade of Furniture and fittings. The assessee also carries on trading of IT hardware, software and AMC. Printed from counselvise.com 609-Chd-2024 Allied Novatech Pvt. Ltd. Chandigarh. 4 2. The return for the year under reference was filed on 03.11.2017 by the appellant declaring income at Rs. 24,43,000/-. The case of the assessee was selected for Scrutiny through CASS. 3. Thereafter, notice u/s 143(2) was issued on 09.08.2018 and various notices u/s 142(1) were issued from time to time. 4. During assessment, Ld. AO by resorting to provisions of the Act, made addition of Rs. 1,83,95,000/- u/s 69A by erroneously holding that cash deposit in the various bank accounts of the appellant are from unexplained sources and is deemed income of the appellant. 5. Further, an addition of Rs. 41,971/- on account of cash payment towards purchases by invoking provisions of S. 40A(3) was also made. 6. Being aggrieved against this addition, this appeal is being preferred. 5. The Ld. CIT(A) has given his findings on this issue in the appellate order as under:- “4.12 In light of facts and circumstances of the case, the discussion above and in line of the views taken by other higher courts in cases of similar nature, I am of the considered view that the addition made by the AO under section 69A is not justifiable and cannot be sustained. Accordingly, the Printed from counselvise.com 609-Chd-2024 Allied Novatech Pvt. Ltd. Chandigarh. 5 addition of Rs. 1,83,95,000/- made under section 69A is hereby deleted as the same has been done without corresponding facts and evidences, and also because such addition cannot be made without rejecting the books of account of the assessee that has been found to be regularly maintained by the assessee and also the fact that the said cash deposit is duly supported by the entries passed in the books of account and forms part of the sale otherwise accepted by the Assessing Officer. Therefore, the addition made by the AO is deleted, and the appeal is allowed.” 6. During proceedings before us, the ld. Counsel for the Assessee relied on the order of the Ld. CIT(A) while the ld. DR reiterated the arguments and facts mentioned by the Assessing Officer in the assessment order. 7. We have considered the findings given by the Assessing Officer in the assessment order and by the Ld. CIT(A) in the appellate order. We find that there is no denying the fact that the cash has been deposited during demonization period in Assessee’s account but at the same time there are certain facts which are to be taken into consideration, such as, the Assessee has claimed Printed from counselvise.com 609-Chd-2024 Allied Novatech Pvt. Ltd. Chandigarh. 6 that the cash deposits shown in its bank account was generated by sales during the year. The Revenue has accepted the purchase of stock maintained by the Assessee in its books of account. The Revenue has also accepted the books of account and no rejection has been made by the Assessing Officer. The Revenue has accepted the sales made by the Assessee and the sale proceeds generated out of such sales have also been accepted by the Revenue. No finger has been raised on all these things. The only objection of the Revenue is that such sale proceeds generated in cash were deposited in the bank account of the Assessee. Now here, it is pertinent to note that once the Revenue has accepted the purchases made and the stock maintained by the Assessee in the books of account, no finger can be raised on the sales made by the Assessee of such purchases made and stock maintained. The only item on that the Revenue has raised its fingers is that such sale proceeds made in cash were deposited in the bank account of the Assessee. In our considered view when purchases are accepted by the Revenue and the stock and sales proceeds are accepted, there is no case for Revenue to reject the deposits of such sale proceeds Printed from counselvise.com 609-Chd-2024 Allied Novatech Pvt. Ltd. Chandigarh. 7 in the bank account of the Assessee. Therefore, in our considered view, the findings given by the Ld. CIT(A) on this issue in his appellate order is justified and it needs no interference. Accordingly, Revenue’s appeal on this issue is dismissed. 8. In the result, appeal filed by the Revenue is dismissed. Order pronounced on 12.08.2025 Sd/- Sd/- ( RAJPAL YADAV ) ( KRINWANT SAHAY) Vice President Accountant Member Rkk आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आयुÈत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com 609-Chd-2024 Allied Novatech Pvt. Ltd. Chandigarh. 8 1. Draft dictated 8.8.2025 Sr.PS 2. Draft first placed before author 3. Approved draft comes to Sr.PS/PS 4 Final draft placed before author 5. Order signed and pronounced on 6 File sent to the Bench Clerk Sr.PS 7. Date on which file goes to the AR 8. Date on which file goes to the Head Clerk. 9. Date of dispatch of Order Printed from counselvise.com "