GOLD SPICE IMPEX,DELHI V. INCOME TAX OFFICER, WARD-47(2), DELHI

ITA 2244/DEL/2024

AI Insights

M/s. Gold Spice Impex appealed against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, which confirmed the addition of Rs.1,15,00,000 as unexplained cash deposits under section 68 of the Income Tax Act, 1961, during the demonetization period. The Assessing Officer (AO) had made this addition after the assessee failed to provide detailed information on cash sales and deposits as requested. The Tribunal found that while the assessee did not fully comply with procedural requirements, a significant portion of the cash deposits could be justified as business income, leading to the partial allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787600 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 08-05-2024
• Other Referred Cases: SmtCharu Aggarwal v DCIT, Addl. CIT vs. Gurshant Rotary Compressor Ltd., Eland International (P) Ltd. vs. Dy. CIT, CIT v. Vishal Exports Overseas Limited, Deepak Sharma vs. ACIT, ITO vs. J.K. Wood India (P.) Ltd, Kalaneedhi Jewellers LLP, CIT v. Hirapanna Jewellers, Arun Garg v. ITO, Bharat Krishi Kendra v. Union of India, Balgopal Merchants (P.) Ltd. v. Principal Commissioner of Income Tax, Principal Commissioner of Income Tax (central)-2 v. BST Infratech Ltd., Rupal Jain v. Commissioner of Income Tax, Principal Commissioner of Income Tax (Central)- 1 v. NRA Iron & Steel (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Business income; Unexplained cash credit; Bogus purchase; Principle of natural justice; Bogus
• Section: 143(3); 142(1); 132; 68; 131

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES ‘B’: NEW DELHI. BEFORE SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.2244/Del/2024 (Assessment Year: 2017-18) M/s. Gold Spice Impex, vs. ITO, Ward 47 (2), 1879, Kucha Chelian, Khari Boali, Delhi. Delhi – 110 006. (PAN : AAPFG0688P) (APPELLANT) (RESPONDENT) ASSESSEE BY :Shri Rakesh Gupta, Advocate Shri Deepesh Garg, Advocate REVENUE BY : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 26.08.2025 Date of Order : 21.11.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. 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 17.01.2024 for the Assessment Year 2017-18 raising following grounds of appeal :- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate addition of Rs.1,15,00,000/- on account of cash deposits u/s 68 and taxing the same u/s 115BBE and that too by recording incorrect facts and findings and without following the principles of natural justice. Printed from counselvise.com 2 ITA No.2244/Del/2024 2. That in any case and in any view of the matter, action of Ld. CITCA) in confirming the action of Ld. AO in making aggregate addition of Rs.1,15,00,000/- on account of cash deposits u/s 68/115BBE, is bad in law and against the facts and circumstances of the case. 3. That having regards to the facts and circumstances of the case, the Ld. CITCA) erred in law and facts, in addition of cash deposited during demonetization period of admitted sales as per the audited books of account as well as per the returns filed under Delhi Value Added Tax leading to double addition and without providing relief of reduced sales and stock as per the Provisions of Income Tax Act, 1961. 4. That having regards to the facts and circumstances of the case, the Ld. \"CIT(A) erred in law and facts, in violating the principles of natural justice by not affording an opportunity before proceeding to pass an order as per the provisions of tile Income Tax Act, 1961. 5. That having regards to the facts and circumstances of the case, the Ld. CIT(A) erred in law and facts in proceeding with the matter without being reasonable, just and applying his mind. 6. That having regards to the facts and circumstances of the case, the Ld. Assessing Officer erred in law and facts, without prejudice to the above in treating the income of business as Income of Other Sources. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B, 234C and 234D of Income Tax Act, 1961.” 2. The assessee has raised solitary issue of addition made under section 68 of the Income-tax Act, 1961 (for short ‘the Act’) and taxing the same u/s 115BBE of the Act. The relevant facts of the issues raised by the assessee are, assessee filed its return of income for AY 2017-18 on 24.10.2017 declaring an income of Rs.68,540/-. The case was selected for scrutiny through CASS for the following reasons :- 1. Large cash deposit during demonetization period and abnormal increase in sales with decrease in profitability as compared to preceding previous year. Printed from counselvise.com 3 ITA No.2244/Del/2024 2. Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period. 3. Custom Duty paid as shown in the ITR is less than the duty paid as per export import data. 3. Accordingly, notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. Several notices were issued to the assessee to provide the information in particular format about opening stock, purchases, total sales, cash sales, credit sales and closing stock and specifically assessee was asked to provide statement of cash deposit and cash sales for three financial years i.e. 2015-16 to 2017-18. In response, assessee has not submitted the relevant information as asked by the AO in the above said particular format. Due to non-compliance of the above requirement, the AO observed that the case of the assessee was basically selected to verify the cash deposit made by the assessee during demonetization period and he came to the conclusion that the assessee has recorded concocted sales to declare the cash sales and accordingly, he rejected the contentions of the assessee and proceeded to make the addition u/s 68 of the Act to the extent of Rs.1,15,00,000/- u/s 68 of the Act and also invoked the provisions of section 115BBE. 4. Aggrieved assessee preferred an appeal before the NFAC, Delhi and filed detailed submissions. In the above said detailed submissions, assessee submitted that purchases and sales are duly recorded in the books of Printed from counselvise.com 4 ITA No.2244/Del/2024 account which are reconciliation and accepted with the VAT and FSSAI authorities making it properly clear that assessee has declared the same consistently and paid the applicable taxes on the same at every stage. It was submitted that assessee has not complied to the notices and summons u/s 131 was issued to the partners, Shri Tushank Bajaj and Anirudh Arora but none appeared even during second summons. The assessee has accepted that assessee has deposited Rs.1,15,00,000/- during demonetization period and these are of out of cash sales made by the assessee during the year. They objected to the fact that assessee has made 100% of the cash deposit which is added to the income of the assessee u/s 68 of the Act. After considering the submissions of the assessee, ld. CIT (A) dismissed the grounds raised by the assessee with the observation that in spite of repeated notices / explanations sent by the AO for the submissions of relevant details explaining source of cash deposit made in the bank account during the demonetization period and assessee has not submitted any such detail. Further he observed that assessee has not explained the source of cash deposit during the demonetization period in the course of appellate proceedings also. Accordingly, he sustained the additions made by the AO. Aggrieved assessee is in appeal before us. 5. At the time of hearing, ld. AR of the assessee brought to our notice relevant facts of the issue and also brought to our notice details of sales Printed from counselvise.com 5 ITA No.2244/Del/2024 and cash sales recorded by the assessee to the extent of Rs.1,14,03,500/-. He also brought to our notice audited Balance Sheet and Profit & Loss account including inventories maintained by the assessee. He also brought to our notice auditor’s report and also audit report on quantitative details of goods traded and movements. Further it was submitted that cash sales declared by the assessee is only 6.1% of the total turnover as assessee firm being the wholesaler of goods, its sales in bulk to dealers through banking channel only. All these details were part and parcel of the paper book submitted by the assessee along with copy of reconciliation statement of VAT and FSAAI authorities. Assessee has submitted detailed fact sheets in the form of written submissions with regard to observations of the AO and CIT (A) for non-submissions of details. In this regard, he submitted as under :- 1. Ld. AO has mentioned in para 8.2 at page 4 of the assessment order that concocted cash sale has been booked by the assessee to adjust undisclosed income during the demonetization period. In this regard it is submitted that Ld. CIT(A) has held in para 4.2 at page no. 5 of the impugned order “that there is no finding by the AO on concocted sales made by the Appellant. The AO has simply made as observation about concocted sales made by the Appellant without bringing out any evidences in this regard.” Further. once the Learned CIT(A) has accepted the genuineness of the sales, it logically follows that the realisation of the corresponding sale proceeds is also genuine and beyond further dispute. IN SmtCharu Aggarwal v DCIT [2022]96 ITR(T) 66 (Chandigarh Trib.)[25- 03-2022] it was held that where cash deposited post-demonetization by assessee was out of cash sales which had been accepted by Sales Tax/VAT Printed from counselvise.com 6 ITA No.2244/Del/2024 Department and not doubted by Ld. AO then cash deposits could not have been treated as undisclosed income of assessee. PB 78 is the copy of written submission dated 19.07.2023 before Ld. CIT(A) stating that purchases/sales are reconciled and accepted with VAT & FSSAI. Further it is submitted that the Ld. AO has not pointed out any discrepancies in the books of accounts which was also confirmed by Ld. CIT(A) in impugned order(para 4.2 at page no. 7 of the appeal order).Therefore, there was no justification for making addition on account of the balance cash deposit which was from that very sale, which has been accepted in the impugned order. Therefore, reliance is placed on the following judicial precedents, wherein it has been held that no additions can be made of sales already disclosed and offered to tax by the assessee:- - Addl. CIT vs. Gurshant Rotary Compressor Ltd. 15 DTR 429(Del’C’)(TM) Income—Cash credit----Alleged sale consideration of goods---Amount of alleged sale consideration of books though not established by assessee to be genuine, same having been credited to the P&L a/c by assessee, it was neither required to be added nor deleted. - Eland International (P) Ltd. vs. Dy. CIT 26 DTR 113(Del.’C’) - CIT v. Vishal Exports Overseas Limited (Gujarat High Court) Tax Appeal No. 2471 of 2009 Thus, impugned additions will only result in double taxation which is not permissible in the eyes of law. 2. Ld. CIT(A) has mentioned in para 4.3 at page 9 of the appeal order that appellant has not submitted any details/explanation explaining source of cash deposits in the demonetization period. In reply, assessee respectfully submits that the allegation regarding non- explanation is not factually correct. During the appellate proceedings, the assessee has duly explained the relevant facts and submitted all material documents as required which is evident from the above evidences also. In view of the above, it is submitted that this observation of Ld. CIT(A) may please be ignored. In view of the above, it is respectfully submitted that the addition made by Ld. AO is without any basis, evidence or material and is merely based on surmises and conjectures and may please be deleted. Printed from counselvise.com 7 ITA No.2244/Del/2024 Reliance is placed on the following decisions for cash deposit during the demonetization period and also for the aspect of cash sales: -  Deepak Sharma vs. ACIT, ITA No. 2886/Del/2022, Order dated 26.03.2025 “Once the purchases declared in the books of accounts were duly accepted then no subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained cash credits taxable under section 68 of the Act. It is settled law that once the books of accounts, sales have been accepted, the same could not be regarded as unexplained credits.”  ITO vs. J.K. Wood India (P.) Ltd,(2024) 158 taxmann.com 208 (Delhi - Trib.) “The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account. Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment. The assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and it is not the case of the Assessing Officer that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period”.  Kalaneedhi Jewellers LLP [2022] 96 ITR 66 ( Chandigarh-ITAT) “Wherein, there was issue of cash deposits in the regular bank account of the assessee out of sales as reflected in trading account and it was held that if the opening stock, purchases, sales and closing stock have not been doubted and cash is received against such sales, then the addition cannot be said to be justified.”  CIT v. Hirapanna Jewellers [2021] 96 ITR 24 ( Vishakhapatnam-ITAT) “ Where AO made addition under section 68 on account of huge cash amount deposited by assessee-jeweller in its bank account post demonetization, since assessee had explained source of said cash deposits as sales of jewellery, produced sale bills and admitted same as revenue receipt as well as offered it to tax and assessee also represented outgo of stocks which was matching with sales, impugned addition was to be deleted”  Arun Garg v. ITO[2022] 98 ITR 508 (Chandigarh-ITAT) “They had made cash deposits out of their independent sources and furnished necessary proof for same and, thus, source stood justified - Further, opening stock, purchases, sales and closing stock in hands of assessee was accepted by Assessing Officer and its books of account was also not rejected - Such entries related to parties in effect stood accepted - Whether, on facts, impugned additions made by Assessing Officer was unjustified – Held, yes.” In view of the above, it is submitted that this observation of Ld. CIT(A) may please be ignored. In view of the above, it is respectfully submitted that the addition made by Ld. AO is without any basis, evidence or material and is merely based on surmises and conjectures and may please be deleted.” Printed from counselvise.com 8 ITA No.2244/Del/2024 6. On the other hand, ld. DR of the Revenue submitted in response to the submissions made by the ld. AR as under :- “In the above appeal, without prejudice to the oral arguments of the undersigned before the Hon'ble Bench, the relevant judgements of Hon'ble Supreme Court and Hon'ble High Courts, which favour the revenue are summarized as hereunder and may kindly be considered. Here, in this case, assessee failed to do compliance of summon issued under section 131 during the AO proceedings. Even, assessee also failed to submit relevant details in particular format as asked by the AO. The onus was on the assessee to comply with the 131 inquiry & same was not discharged by the assessee and even no adjournment was filed. AO even issued 131 reminder which was also not complied. Therefore AO have n other option but to add this demonetization cash deposit. Even not complained before CIT (A). 131. Power regarding discovery, production of evidence, etc. The [Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for certain words (w.e.f. 1.4.1988).] [Deputy Commissioner (Appeals)] [Substituted by Act 4 of 1988, Section 2, for certain words (w.e.f. 1.4.1988).], [Joint Commissioner] [ Substituted by Act 21 of 1998, Section 3, for Deputy Commissioner\" (w.e.f. 1.10.1998).][, Commissioner (Appeals)] [Inserted by Act 29 of 1977, Section 39 and Schedule V (w.e.f. 10.7.1978).][, Chief Commissioner or Commissioner and the Dispute Resolution Panel referred to in clause (a) of sub-section (15) of section 144-C] [ Substituted by Act 33 of 2009, Section 50, for \" and Chief Commissioner or Commissioner\" (w.e.f. 1.10.2009).] shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:- (a) discovery and inspection;{Q}enforcing the attendance of any person, including any officer of a banking company and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions.[(I-A) ] [Inserted by Act 41 of 1975, Section 34 – w.e.f. 1.10.1975).][If the Director General or Director or] [ Substituted by Act 26 of 1988, Section 33 for \"If the Assistant Director of Inspection\" (w.e.f. 1.6.1988).][Joint Director] [ Substituted by Act 21 of 1998, Section 3, for\" Deputy Director\" , \" Assistant Commissioner\" and \" Assistant w.e.f 1.10.1998).][or Assistant Director or Deputy Director] [Substituted by Act 21 of 1998, Section 3 for \" Deputy Director\" , \" Assistant Commissioner\" and\" Assistant Director\" (w.e.f. 1.10.1998] [or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that sub-section] [ Substituted by Act 26 of 1988, Section 33, for\" If the Assistant Director of Inspection\" (w.e.f. 1.6.1988).][, has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or Printed from counselvise.com 9 ITA No.2244/Del/2024 investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income- tax authority.] [Inserted by Act 41 of 1975, Section 34 (w.e.f. 1.10.1975).][* * * ] [ Sub-Section (2) omitted by Act 4 of 1988, Section 36 (w.e.f. 1.4. 1989).] Subject to any rules made in this behalf, any authority referred to in sub- section (1) [or sub-section (1-A)] [ Inserted by Act 41 of 1975, Section 34 (w.e.f. l.1 0.1975).] may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act. Provided that [an] [Substituted by Act 41 of 1975, Section 34, for\" an Income-tax Officer\" (w.e.f. 1.10.1975).][Assessing Officer] [Substituted by Act 4 of 1988, Section 2, for certain words (w.e.f. 1.4.l988).][or an] [Substituted by Act 41 of 1975, Section 34, for \" an Income- tax Officer\" (w.e.f. 1.10.1975).][[Assistant Director or Deputy Director] [Substituted by Act 4 of 1988, Section 2, for certain words (w.e.f. 1.4.1988).] shall not- (a) impound any books of account or other documents without recording his reasons for so doing, or (b)retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of [the Chief Commissioner or Director General or Commissioner or Director therefor, as the case may be] [ Substituted by Act 26 of 1988, Section 33, for\" the Commissioner or Commissioners thereof\" (w.e.f. 1.6.1988).]. The following decisions may kindly be considered in this case, in respect of assessee failing to compliance of summons issued under section 131: - • Judgment of High Court of Chhattisgarh - Bharat Krishi Kendra v. Union of India [2022] 136 taxmann.com 245 (Chhattisgarh) • Judgment of Hon'ble Calcutta High Court - Balgopal Merchants (P.) Ltd. v. Principal Commissioner of Income Tax [2024] 162 taxmann.com 465 (Calcutta)/[2024] 468 ITR 136 (Calcutta)[13-05-2024] • Judgment of Hon'ble Calcutta High Court - Principal Commissioner of Income Tax (central)-2 v. BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta) • Judgement of Supreme Court of India- Rupal Jain v. Commissioner of Income Tax[2023] 152 taxmann.com 346 (SC):- • Judgement of Supreme Court of India- Principal Commissioner of Income Tax (Central)- 1 v. NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48 (SC)” 7. In rejoinder to the submissions of the ld. DR, ld. AR submitted a sunder :- Printed from counselvise.com 10 ITA No.2244/Del/2024 1. …. 2. Ld. CIT(A) at page 5-7 of the appeal order has found that Ld. AO erred in rejecting the books of accounts and that finding has attained finality and thus, if there had been any non-compliance as alleged, Ld. CIT(A) would not have demolished the case of the Ld. AO in rejecting the books of accounts. 3. Even impugned assessment order has been passed u/s 143(3) which also proves that there was no non-compliance of any material requirement because if there had been any non-compliances alleged, assessment order could not have been passed u/s 143(3) as held by Hon’ble High Court in the case of Maya Debi Bansal vs. CIT, (1979)117 ITR 125 (Cal). 4. Non-compliance of summon could have led at best, to imposition of penalty which too has not been imposed in the instant case which proves that there was no non-compliance as alleged, as to the material thing which had bearing on the issue at hand. 5. Ld. Dr has mentioned in his submissions about the non-filing of details in particular format whereas the fact of the matter is that PB 13 shows quantitative details of opening stock, purchases, sales and closing stock and thus allegation of Ld. AO does not have any substance. 6. The case laws relied upon by the Ld. DR have got no bearing on the issue at hand. 7. In any case addition made by Ld. AO is double addition in as much as it has already been shown in the amount of sale. In view of the above, it is humbly prayed that the appeal of the assessee may please be allowed.” 8. Considered the rival submissions and material placed on record. We observe that AO has asked for specific detail on cash sales and cash deposit during the period for three years i.e. 2015-16 to 2017-18, however Printed from counselvise.com 11 ITA No.2244/Del/2024 assessee could not supply the above said information and also not responded to the notices u/s 131 of the Act issued to the partner of the firm. Due to non-submission of above details, the AO proceeded to observe that assessee has booked the concocted cash sales in the books of account to the extent of cash deposit made by the assessee during the demonetization period merely for the reason that assessee has not submitted the relevant information. The same was sustained by the ld. CIT (A). After considering the detailed submissions submitted before us, we observe that assessee has maintained proper books of account and submitted the VAT and FSSAI reconciliation statement which proves that books of account maintained by the assessee is proper and assessee also demonstrated which justifies the total sales made by the assessee in their books of account. The only issue under consideration is that assessee has deposited Rs.1,15,00,000/- on 11.11.2016 in the Axis Bank. After analyzing the bank statement submitted by the assessee which is placed at pages 54 to 56 of the paper book, we observe that the assessee has deposited the cash on 11.11.2016 and subsequently the above said cash was utilized only for the purpose of business and not utilized the same for any other purpose. For the sake of brevity, the bank statement is reproduced below :- Printed from counselvise.com 12 ITA No.2244/Del/2024 Printed from counselvise.com 13 ITA No.2244/Del/2024 Printed from counselvise.com 14 ITA No.2244/Del/2024 9. We observe from the above statement that assessee has utilized all the payments for making remittances for imports and payment to the suppliers. It clearly shows that the cash deposit made by the assessee is out of business only. Assessee failed to submit the relevant details in the format as asked by the lower tax authorities. Since the above said bank statement clearly indicates that whatever cash deposited by the assessee is out of business only and it is aptly submitted by the cash sales recorded by the assessee during the year. Since the demonetization was announced, assessee has deposited the whole cash held by it on the same day i.e. 11.11.2016. Since the assessee has already declared the relevant sales in the books of account and only issue under consideration is non- compliance to the notice issued by the tax authorities. Therefore, considering the material facts available on record, we are inclined to Printed from counselvise.com 15 ITA No.2244/Del/2024 allow the claim of the assessee. At the same time, there is certain element of non-compliance from the assessee, therefore, for the sake of overall justice, we are inclined to sustain 10% of the cash deposit u/s 68 of the Act as reasonable and justified. Accordingly, the relevant grounds raised by the assessee are partly allowed. 10. With regard to applicability of section 115BBE, we observe that Hon’ble Madras High Court in the case of SMILE Microfinance Ltd. vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020 dated 19.11.2024 held that the said provision applied for transactions done on or after 01.04.2017 only. The Assessing Officer is accordingly directed to assess the income under normal provisions only. 11. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 21st day of November, 2025. Sd/- sd/- (VIMAL KUMAR) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21.11.2025 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 "