HKT RETAIL VENTURES PRIVATE LIMITED,NEW DELHI V. ITO,WARD-11(2), NEW DELHI

ITA 1337/DEL/2024

AI Insights

The case involves M/s. HKT Retail Ventures Pvt. Ltd, which appealed against the order of the National Faceless Appeal Centre (NFAC) confirming the addition of Rs. 53,82,150 as unexplained money due to cash deposits during the demonetization period. The Assessing Officer (AO) had initially added this amount as unexplained under section 68 read with section 115BBE of the Income-tax Act, 1961, during the scrutiny assessment for the assessment year 2017-18. The Tribunal examined the submissions and evidence provided by the assessee, including audited books of accounts, VAT returns, and stock registers, and found that the cash deposits were adequately explained by the cash sales recorded during the festive season, particularly Diwali.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314379 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: SMILE Microfinance Limited vs ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: TARANDEEP SINGH
• Keywords: Business income; Rejection of books of accounts
• Section: 143(3); 68

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 1337/Del/2024 (Assessment Year: 2017-18) M/s. HKT Retail Ventures Pvt. Ltd, 5, Pusa Road, Karol Bagh, New Delhi Vs. ITO, Ward-11(2), Delhi (Appellant) (Respondent) PAN: AADCH8385B Assessee by : Shri Tarandeep Singh, Adv Revenue by: Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 07/04/2025 Date of pronouncement 07/05/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1337/Del/2024 for AY 2017-18, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2023- 24/1060559075(1) dated 06.02.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.12.2019 by the Assessing Officer, ITO, Ward-11(2), Delhi (hereinafter referred to as ‘ld. AO’). 2. Though the assessee has raised several grounds before us, we find that the only effective issue to be decided in this appeal is as to whether the Learned CITA was justified in confirming the addition made on account of cash deposits during the demonetization period in the facts and circumstances of the instant case. ITA No. 1337/Del/2024 M/s. HKT Retail Ventures Pvt. Ltd Page | 2 3. We have heard the rival submissions and perused the materials available on record. The Assessee Company is engaged in the business of retail trading of home décor products including furniture, sculptures, lights etc. The return of income for the assessment year 17-18 was electronically filed by the Assessee on 13-01-2018 declaring loss of Rs. 4,71,475/-. During the course of scrutiny assessment proceedings, the learned AO noted that Assessee had made cash deposits of Rs. 53,82,150/- in HDFC Bank Ltd, East Patel Nagar, Delhi during the demonetization period in specified bank notes. The Assessee submitted that the said cash deposits were made out of cash sales which are already disclosed in the books of accounts and in the income tax return. The assessee submitted that during the assessment year 2017-18, it had made cash sales of Rs. 53,50,422/- out of total sales of Rs. 58,37,645/-. The assessee also submitted that major part of cash sales had taken place in the months of October 2016 to 8-11-2016. The assessee explained the reason of huge sales made in cash during this period by attributing the same to various auspicious festival occasions including Diwali. Since the assessee was engaged in the business of selling of home decor items, it is the usual practice for the customers to make huge purchases of home decor items during the festive occasions including the period of Diwali. The assessee specifically stated that the sales made by the assessee had been duly disclosed in the audited books of accounts and also in the income tax return. The assessee had sufficient cash balance to explain the cash deposits and hence nothing could be treated as unexplained there on. The learned AO however disbelieved the entire contentions and observed that similar cash deposits were not made by the assessee in the earlier year. The assessee to buttress this argument submitted that the business itself was started only in October 2016 and hence the same is not comparable with that of the earlier year. The assessee specifically stated that the retail showroom in Delhi started in October 2016. This showroom was taken on rent from Mrs. Rajini Apan from July 2016, post which showroom fit outs took 3 to 4 months and the assessee being a new showroom, lot of retail sales took place during the months of ITA No. 1337/Del/2024 M/s. HKT Retail Ventures Pvt. Ltd Page | 3 October to 8th November 2016. The assessee also submitted the complete copies of sale bills, cash book, VAT returns (both original and revised) and purchase invoices. The assessee also submitted that it had sufficient stocks in its kitty as is evident from the stock register and to the extent of sales, the stocks were duly reduced and reflected in the books of accounts of the assessee. The learned AO however disregarded all these contentions and proceeded to add the cash deposits made in SBN during the demontization period in the sum of Rs 53,82,150/- as unexplained money under section 68 read with section 115BBE of the Act. This action of the learned AO was upheld by the learned NFAC. 4. We find that the lower authorities had not rejected the books of accounts and book results of the assessee. The assessee had made cash sales of home décor items from its new showroom started in October 2016 only. It is quite normal and usual practice for the customers to make purchase of home décor items during the festive occasions including Diwali that too from new showroom. It is a fact that assessee had made cash sales thereon and had duly reflected the sales in the books of accounts and in the income tax returns. On perusal of the cash book, we find that the said cash sales are duly reflected as receipts thereon and there is absolutely no negative cash balance with the assessee, meaning thereby – the cash deposits made during the whole year including the demonetization period is squarely covered and explained out of cash balance available with the assessee. To the extent of sales made by the assessee, the stocks of home décor items had been duly reduced. The assessee had furnished the sale invoices, purchase invoices, stock registers, VAT returns (both original and revised) cash book , entire books of accounts before the learned AO. None of these documents and records were even rejected by the learned AO. The assessee had filed revised VAT returns for the third quarter only to change the input tax credit figure thereon. The sales figure in original VAT returns and revised VAT returns remain unchanged. The sales made by the assessee had not been doubted by the revenue. Hence the revenue having accepted the sales made by the assessee, ought not to ITA No. 1337/Del/2024 M/s. HKT Retail Ventures Pvt. Ltd Page | 4 have made separate addition on account of cash deposits by treating it as unexplained. Otherwise, the same would amount to double addition made by the learned AO. On this count itself, the addition made on account of cash deposits deserves to be deleted. Further, the Hon’ble Madras High Court in the case of SMILE Microfinance Limited vs ACIT in WP (MD) No. 2078 of 2020 and WMP (MD) No. 1742 of 2020 dated 19-11-2024 had categorically held that enhanced rate of tax at 60% as provided in section 115BBE of the Act could be made applicable only from Assessment Year 2018-19 onwards and cannot be applied for earlier years. Hence we hold that cash deposits made by the assessee is duly explained and no addition is warranted thereon. Accordingly, the grounds raised by the assessee are allowed. 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 07/05/2025. -Sd/- -Sd/- (SATBEER SINGH GODARA) (M BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:07/05/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "