HINDUSTAN TRUST PRIVATE LIMITED,DELHI V. ITO,WARD-11(3), DELHI

ITA 4711/DEL/2024

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Hindustan Trust Pvt. Ltd. appealed against the order of the CIT(A) which upheld an addition of Rs. 24,00,000 to their income for the assessment year 2017-18, attributed to unexplained cash deposits during the demonetization period. The assessee argued that the cash was withdrawn for legitimate business purposes and was duly recorded in their books. The Tribunal examined the books of accounts, bank statements, and cash withdrawal records, finding no defects or discrepancies that would justify the additions made under section 68 of the Income Tax Act. Consequently, the Tribunal partly allowed the appeal, reducing the addition and adjusting the tax rate applicable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23586 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: CIV v. Kulwant Rai [2007] 291 ITR 36 (Delhi High Court), ACIT v. Baldev Raj Charla & Ors [2009] 121 TTJ 366 [ITAT Delhi Bench \\"C\\
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: ASHWANI KUMAR GARG; OBSERVING NO DOCUMENTS EVIDENCES
• Keywords: Unexplained cash credit
• Section: 143(2); 250; 68; 234B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.4711/Del/2024 (ASSESSMENT YEAR: 2017-18) Hindustan Trust Pvt. Ltd., 11, Darya Ganj, Delhi-110002 PAN-AAACH6188F Vs. Income Tax Officer, Ward-11(3), Delhi. (Appellant) (Respondent) Assessee by Shri Ashwani Kumar Garg, Adv. Department by Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 20/03/2025 Date of Pronouncement 20/03/2025 O R D E R PER MANISH AGARWAL, AM: This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeal) [CIT(A)], National Faceless Appeal Centre (NFAC), dated 30.08.2024 in Appeal No. CIT(A), Delhi- 4/10892/2019-20 for AY 2017-18 vide order passed u/s 250 of the Income Tax Act, 1961 (the Act). 2. Brief facts of the case are that assessee is a private limited company engaged in the business of wholesale trading in drugs and medicines. The return of income was filed on 02.10.2017 declaring total income at Rs. 26,10,940/-. The assessment was taken up for 2 ITA No.4711/Del/2024 Hindustan Trust Private Ltd. vs. ITO scrutiny by way of issue of notice u/s 143(2) of the Act. The assessment was completed vide order dt. 30.12.2019 passed u/s 143(3) at a total income of Rs. 56,10,940/- by making additions of Rs. 30,00,000/- on account of cash deposit in bank during demonetization period. In first appeal, vide impugned order dt. 30.08.2024, ld. CIT(A) has partly allowed the appeal of the assessee where the ld. CIT(A) has upheld the addition of 24.00 lacs out of the total addition of Rs. 30.00 lacs made by the AO towards cash deposited in bank during demonetization period. 3. Aggrieved from the said order of ld. CIT(A), assessee is in appeal before us by taking following grounds of appeal:- “1. That on the facts of the case, the learned CIT(Appeals) has erred in upholding the addition to the extent of Rs. 24 lacs out of total addition of Rs. 30 lacs made by assessing officer u/s 68 of the Act on account of allegedly unexplained cash credited in the books of the appellant. 2. That the learned CIT(Appeals) has erred in upholding the consequent tax on the aforesaid addition charged at the rate of 60 percent under s. 115BBE, surcharge at the rate of 25% of the tax, and interest under s. 234B. 3. The appellant craves leave to amend, modify or add to the above grounds.” 4. Before us, the Ld. AR of the assessee submitted that during the year under appeal assessee has made trading of drugs and medicines on wholesale basis. Regarding the immediate source of the cash, ld. AR stated that during the year under appeal assessee was planning to launch its products in the state of Haryana & MP and for promotional purposes, extensive travelling and meetings with the 3 ITA No.4711/Del/2024 Hindustan Trust Private Ltd. vs. ITO prospective distributors in these two states were required. For this purpose, cash on regular basis was withdrawn on various dates from the regular bank accounts totaling to Rs. 28.00 lacs and the same was duly available with the assessee as on the closing hours of 8.11.2016 when the demonetization was announced by hon’ble Prime Minister. In support, he drew our attention to the bank statements and cash books where such withdrawal of cash is duly recorded. He further submitted that due to demonetization, assessee postponed the launch of its products in two new states and the cash balance available with it was deposited in the bank account during the demonetization period being in SBN. He further submits that ld. CIT(A) has allowed the credit of Rs. 6.00 lacs withdrawn on 4.11.2016 and 7.11.2016 for Rs. 3.00 lacs each and solely on assumptions has confirmed the balance Rs. 24.00 lacs. Ld. AR further submits that the assessee has maintained regular books of account which were duly audited and no defect whatsoever was pointed out by the auditor. During the course of hearing before the AO, assessee has filed every price details as asked from time to time and the AO has not pointed out any defect in the details so submitted nor has doubted the genuineness of books of account produced before him. The cash so withdrawn was duly recorded in the said books of accounts. The Ld. AR further submitted that the AO has rejected the explanation of the assessee by observing no documents / evidences were filed with regard to proposed launch in two new states. When the cash balance was available as on the closing hours of 08.11.2016 in the cash book regularly maintained and such books were never 4 ITA No.4711/Del/2024 Hindustan Trust Private Ltd. vs. ITO rejected, deposit made out of such cash balance should not be treated as unexplained. He thus prayed for the deletion of the addition of Rs. 24.00 lacs upheld by ld. CIT(A). 5. Ld. AR placed reliance on the following case laws: 1. CIV v. Kulwant Rai [2007] 291 ITR 36 (Delhi High Court) 2. ACIT v. Baldev Raj Charla & Ors [2009] 121 TTJ 366 [ITAT Delhi Bench “C”] 3. Nikhil Nanda v. DCIT [ITA No.3644/Del/2013 (ITAT Delhi Bench “E” order dated 18.03.2015)] 4. Gordhan v. DCIT [ITA No.811/Del/2015 (ITAT Delhi Bench SMC-2 order dated 19.10.2015)] 5. Usha Narayan Chaware v. ITO [ITA No.377/Pun/2022 (ITAT Pune Bench order dated 24.2.2023] 6. GA Advisory Pvt. Ltd. v. ACIT [ITA No.3265/Del2023 (ITAT Delhi Bench ‘B’ order dated 4.3.2024)] 6. On the other hand, the Ld. Sr. DR vehemently supported the orders of the lower authorities and stated that the AO while dismissing the contention of the assessee has made detailed observations in para 8 of the assessment order wherein it is observed that assessee was not able to justify as to why cash was withdrawn on regular interval when sufficient cash balance was available with it. He further submitted that the assessee after the announcement by the Hon’ble PM about the demonetization concocted a story of launch of its product in further two states to support the withdrawal of cash however, no evidence of any effort taken till such date were filed before the lower authorities. He further stated that ld. CIT(A) has 5 ITA No.4711/Del/2024 Hindustan Trust Private Ltd. vs. ITO already allowed relief to the assessee and, therefore, the ld. CIT(A) was very much reasonable in confirming the addition of Rs.24.00 lacs which orders deserves to be upheld. 7. We have heard the rival submissions and perused the materials available on record. In the instant case, the books of accounts of the assessee are subject to audit and from the perusal of the financial statement, we find that neither the auditor has pointed out any deficiency in the maintenance of the books of accounts nor the Assessing Officer has pointed out any defects in the same who has accepted the books of accounts and had not disturbed the trading results declared by the assessee. We have also verified each withdrawal made from the bank which stood incorporated in the cash book maintained by the assessee. 8. Claim of the assessee was that it has deposited cash during the demonetization period out of the cash balance available as on the closing hours of 08.11.2016 i.e. the date when the demonetization was announced by the Hon’ble prime minister. Assessee has filed bank statements and copy of the cash book in support of the claim of cash withdrawals. At this juncture provisions as contained in section 68 is reproduced as under: “68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.” 6 ITA No.4711/Del/2024 Hindustan Trust Private Ltd. vs. ITO 9. From the perusal of the provisions of section 68 of the Act it is very clear that assessing officer can make addition u/s 68 only under two circumstances, i.e. (i) Appellant does not offer any explanation about nature and source of such credit; or (ii) Explanation offered by Appellant is not upto the satisfaction of Ld. AO. 10. In other words, whenever Appellant provides explanation, before rejecting the same ld. AO has to record dissatisfaction as to why the explanation furnished by Appellant is not acceptable. As is evident that assessee not only offered explanation regarding nature and source of such deposits but also substantiated the same with documentary evidences in the shape bank statements and Cash book. AO has not doubted the availability of funds in its bank account out of which Rs. 28.00 lacs were withdrawn on various dates. 11. In view of these facts, we are of the considered view that assessee has been able to prove the source of Rs. 28.00 lacs as cash withdrawn from the bank account which could not be doubted as unexplained cash credit and thus provisions of section 68 could not be invoked. Since the ld. CIT(A) has already allowed the credit of 6.00 lacs out of total cash withdrawal of Rs. 28.00 lacs, assessee is entitled for further relief of remaining 22.00 lacs withdrawn from bank. Accordingly, we direct to delete the addition of Rs. 22.00 lacs out addition of Rs. 24.00 lacs uphold by the ld. CIT(A) u/s 68 of the Act. The ground of appeal No. 1 of the assessee is partly allowed. 7 ITA No.4711/Del/2024 Hindustan Trust Private Ltd. vs. ITO 12. In ground of appeal No. 2 assessee has challenged the application of provisions of section 115BBE and further application of higher rate of tax and surcharges. In this regard Hon’ble Madras high court, Madurai Bench in the case of M/s S.M.I.L.E Microfinance Limited vs The Assistant Commissioner of Income, Central circle-1, in Writ petition (MD)No. 2078 of 2020 and W.M.P.(MD)No. 1742 of 2020 vide order dt. 19.11.2024 has held that “….the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax.” 13. The assessment year involved in present appeal is AY 2017-18 for which the previous year is 2016-17. Thus, by respectfully following the above judgement of Hon’ble Madurai bench of Madras high court, we direct the AO to charge tax @ 30% on the addition sustained by us while disposing the ground of appeal No. 1 of the assessee. Regarding charging of interest u/s 234B, since levy of interest u/s 234B is mandatory thus we direct the AO to charge the interest as per law on the income finally determined giving effect to this order of tribunal. The ground of appeal No. 2 of the assessee is partly allowed. 14. As a result appeal of the assessee is partly allowed. Order pronounced in open court on 20.03.2025. Sd/- Sd/- (MAHAVIR SINGH) (MANISH AGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 28/03/2025 PK/Sr. Ps 8 ITA No.4711/Del/2024 Hindustan Trust Private Ltd. vs. ITO Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "