EPPELTONE ENGINEERS P. LTD. ,DELHI V. ACIT CIRCLE-9(2), DELHI

ITA 1020/DEL/2022

AI Insights

Eppeltone Engineers P. Ltd. appealed against the order of the Commissioner of Income Tax Appeals/National Faceless Appeal Centre, which confirmed the addition of Rs. 52,35,000 as unexplained cash deposits during the demonetization period. The Assessing Officer had initially made this addition under section 68 of the Income Tax Act, 1961, during the scrutiny assessment for the Assessment Year 2017-18. The Tribunal examined the arguments and evidence presented, including the audited accounts of the Assessee, which showed that the cash deposits were from withdrawals made in the normal course of business. The Tribunal noted that the Assessee had a history of depositing cash in months preceding demonetization and that the books of accounts were accepted without any defects or discrepancies in transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 22942 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANISTA
• Assessee Lawyers: K. SAMPATH; V. RAJKUMAR
• Section: 143(3)

Judgement Text

" 1 ITA No. 1020/Del/2022 Eppeltone Engineers P. Ltd. Vs. ACIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 1020/Del/2022 (A.Y. 2017-18) Eppeltone Engineers P. Ltd. A-57, Defence Colony, New Delhi PAN: AABCE3004A Vs. ACIT Circle- 9(2) C. R. Building, ITO I.P. Estate, New Delhi Appellant Respondent Assessee by Sh. K. Sampath, Adv, Sh. V. Rajkumar, Adv. Revenue by Sh. Rajesh Kumar Dhanista, Sr. DR Date of Hearing 29/01/2025 Date of Pronouncement 27/02/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of the Commissioner of Income Tax Appeals/ National Faceless Appeal Centre- Delhi [‘NFAC)’ for short] dated 14/03/2022 for the Assessment Year 2017-18. 2 ITA No. 1020/Del/2022 Eppeltone Engineers P. Ltd. Vs. ACIT 2. The Grounds of Appeal are as under:- “1. On the facts and in the circumstances of the case and in law the Ld. CIT(A), NFAC erred in confirming the addition made by the Assessing Officer in a sum of Rs.52,35,000/- being the amount of cash deposited in banks during the demonetization period treating the same as unexplained invoking the section 68 of the Act. The order being arbitrary, fallacious, unlawful and untenable must be quashed with directions for relief.” 3. Brief facts of the case are that, the Assessee filed return of income for Assessment Year 2017-18 declaring total income at Rs. 44,29,760/-. The case of the Assessee was selected for scrutiny under CASS and an assessment order came to be passed u/s 143(3) of the Income Tax Act, 1961 (‘Act’ for short) by making an addition of Rs. 52,35,000/- u/s 68 of the Act on account of cash deposited by the Assessee during the demonization. Aggrieved by the assessment order dated 17/12/2019, the Assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) vide order dated 14/03/2022, dismissed the Appeal filed by the Assessee. As against the order of the Ld. CIT(A) dated 14/03/2022, the Assessee preferred the present Appeal on the grounds mentioned above. 4. The Ld. Counsel for the Assessee submitted that the accounts of the Assessee have been audited and the cash of higher order has been habitually retained by the Assessee in the past many years, further submitted that books of accounts of the Assessee has been accepted by 3 ITA No. 1020/Del/2022 Eppeltone Engineers P. Ltd. Vs. ACIT the A.O. and no defect or discrepancy of any sort more particularly in the purchase and sales and stocks have been pointed out by the A.O. Further the A.O. has also not denied the fact that the cash as enduring to the Assessee from its business activities, the A.O. has also ignored the fact that there were cash deposits in the bank in the month preceding to demonetization. The Ld. Counsels for the Assessee relying on plethora of Judgments sought for allowing the Appeal. 5. Per contra, the Ld. Departmental Representative vehemently submitted that excessive withdrawal of cash or maintaining highest cash balance is not a prudent commercial practice particularly with a person has also borrowed funds. Though, the Assessee has contended that the cash deposit during the demonetization was out of the cash withdrawal from the bank from time to time, however, the Assessee has not proved that the said amount has not been utilized for any purpose which is start for a prudent business practice specially when the Assessee had taken the loan and was paying the interest on such loans. The Ld. Departmental Representative relying on the orders of the Lower Authorities, sought for deletion of the addition. 6. We have heard both the parties and perused the material available on record. The Assessee Company is into manufacture and sale of static energy meters which are used for measuring the consumption of 4 ITA No. 1020/Del/2022 Eppeltone Engineers P. Ltd. Vs. ACIT electricity. During the assessment proceedings, the A.O. questioned the purpose of retaining the excessive cash by the Assessee and as per the A.O. the same is against business practice, human probabilities and prudent commercialconsideration. It was the specific case of the Assessee that the cash deposited during the demonization was out of the cash withdrawal from the bank and the entirety of the cash withdrawals were from the regular bank account maintained in the usual course of business by the Assessee. The Ld. A.O. as well as the Ld. CIT(A) have ignored the fact that the account of the Assessee have been audited and the cash of higher order has been usually retained by the Assessee in the past many years. The Assessee has also demonstrated the cash withdrawals during the various months in the year of demonetization which are reproduce as under:- Month wise Opening Cash in hand (Rs.) Cash sales (Rs.) Cash deposited in Bank (Rs.) Cash withdrawal from Bank (Rs.) Closing cash in hand (Rs.) Apr-16 1829969 1100 0 2200000 3610058 May-16 3640058 70000 1800000 5034172 Jun-16 5034172 0 1000000 5705046 Jul-16 5705046 250000 850000 5934114 Aug-16 5934114 0 1000000 4720066 Sep-16 4720066 0 1000000 4273339 Oct-16 4273339 0 2400000 5302198 Nov. 01.11.16 5302198 0 0 750000 5796113 Nov. 09.11.16 to 30.11.16 5796113 4935000 274000 1061274 Dec-16 1061274 300000 500000 989314 Jan-17 989314 0 750000 1468556 Feb-17 1468556 200000 450000 1664219 Mar-17 1664219 0 450000 2120055 5 ITA No. 1020/Del/2022 Eppeltone Engineers P. Ltd. Vs. ACIT 7. The Lower Authorities have rejected the contention of the Assessee that the cash deposits during the demonetization are out of the cash withdrawals made by the Assessee, on the ground that human probabilities of keeping cash physically idle for long time as remote possibility and the Assessee has not proved that those cash withdrawals have not been spend for any other purpose. However, the Ld. A.O. has accepted the books of accounts of the Assessee and no defects or discrepancies of any source in the purchase and sales and stocks have been pointed out by the A.O., further the A.O. has also not doubted the fact that the source cash as enduring to the Assessee from its business activities, further it is not the case of the A.O. that the inflow of cash from any activity other than business of the Assessee. It is observed that the A.O. failed to look into the history of the Assessee wherein it is found that the Assessee used to deposit the cash in the bank in the months preceding demonization. Considering the above facts and circumstances we are of the opinion that the Ld. CIT(A) has committed error in upholding the addition made by the A.O., accordingly, ,we delete the addition made by the A.O. which has been upheld by the Ld. CIT(A) by allowing the Grounds of Appeal of the Assessee. 6 ITA No. 1020/Del/2022 Eppeltone Engineers P. Ltd. Vs. ACIT 8. In the result, the Appeal filed by the Assessee is allowed. Order pronounced in the open court on 27th February, 2025 Sd/- Sd/- (AVDHESH KUMAR MISHRA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 27.02.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "