INCOME TAX OFFICER, DELHI V. R P MILKMADE PRODUCTS PRIVATE LIMITED, NEW DELHI

ITA 3414/DEL/2024

AI Insights

The case involves the Income Tax Officer appealing against the order of the NFAC, Delhi, which had deleted the addition made by the AO under section 68 of the Income Tax Act. The addition pertained to unexplained cash credits amounting to Rs. 1,66,13,000, which the AO had deemed unexplained due to the assessee's failure to satisfactorily explain the source of cash deposits during the demonetization period. The assessee, R.P. Milkmade Products Pvt Ltd, argued that these deposits were from the sale of scrap, a claim the AO initially rejected. The CIT(A) had ruled in favor of the assessee, leading to the Revenue's appeal to the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784573 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 22-07-2024
• Other Referred Cases: S.M.I.L.E. Microfinance Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: ANURAG SINHA
• Keywords: Unexplained cash credit
• Section: 68; 133(6)

Judgement Text

"Page 1 of 6 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘B’ BENCH, NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 3414/DEL/2024 [A.Y. 2017-18] The Income-tax Officer Vs. R.P. Milkmade Products Pvt Ltd New Delhi 3/16, West Patel Nagar New Delhi PAN – AAACR 7284 A (Applicant) (Respondent) Assessee By : Shri Anurag Sinha, Adv Department By : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 08.09.2025 Date of Pronouncement : 14.11.2025 ORDER PER NAVEEN CHANDRA, A.M:- This appeal by the Revenue is preferred against the order of the NFAC, Delhi dated 30.05.2023 for A.Y 2017-18. 2. The Revenue has raised the following grounds of appeal: “1. Whether on the facts and circumstances of the case, the Ld. NFAC erred in deleting the addition of Rs. 1,66,13,000/- made by the AO u/s 68 of the Act when the assessee failed to provide the Printed from counselvise.com ITA No. 3414/DEL/2024 [A.Y. 2017-18] ITO VS. R.P Milkmade Products Page 2 of 6 source of cash deposited in its bank accounts during the demonetization period which the assessee claimed to have received from sale of scrap when the assessee failed to furnish any logical justification for such unusually high cash sales of Rs. 1,79,92,454/- in the month of October 2016, just prior to declaration of demonetization whereas it had negligible cash sales of total of only Rs. 3,25,000/- during rest of the whole year. The Ld. NFAC has not appreciated the facts and findings of the AO with regard to source of cash deposits.\" 2. \"Whether on the facts and circumstances of the case, the Ld. NFAC erred in deleting the addition of Rs. 1,66,13,000/- made by the AO u/s 68 of the Act when the assessee failed to establish the genuineness of the scrap sale transactions made in cash claimed to be the source of cash deposits in the bank accounts of the assessee company during the demonetization period.\" 3. \"The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of the appeal.\" 3. Briefly stated, the facts of the case are that the assessee derives income from the business of manufacturing of ice cream under the name and style M/s R.P. Milkmade Products [P] Ltd. The assessee filed its Return of Income on 28.10.2017 declaring NIL income. Return was selected for complete scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee. Printed from counselvise.com ITA No. 3414/DEL/2024 [A.Y. 2017-18] ITO VS. R.P Milkmade Products Page 3 of 6 Assessment was completed determining total income at Rs. 1,66,13,000/- on account of disallowance u/s 68 r.w.s 115BBE of the Act treating it as unexplained cash credit. 4. During the course of scrutiny assessment proceedings, the Assessing Officer found that the assessee has deposited cash in its bank account. The assessee stated before the AO that the cash credits are out of sale of production plants which were sold as scrap. The AO, ultimately did not believe the assessee’s explanation as satisfactory, and he made an addition of Rs. 1,66,13,000/- u/s 68 r.w.s 115BBE of the Act as unexplained credit. 5. Aggrieved, the assessee went in appeal before the ld. CIT(A) who allowed the appeal of the assessee. 6. Aggrieved, the Revenue is before us. Before us, the ld. DR relied on the order of the Assessing Officer. 7. Per contra, the ld. counsel for the assessee vehemently stated that the assessee was in the business of ice cream which was closed during the assessee year and the plant and machinery of the factory manufacturing ice-cream was sold as scrap. All the documents filed before the Assessing Officer were rejected on the basis of which the ld. CIT(A)/NFAC decided the appeal in favour of the assessee. Printed from counselvise.com ITA No. 3414/DEL/2024 [A.Y. 2017-18] ITO VS. R.P Milkmade Products Page 4 of 6 8. We have heard the rival submissions and have perused the relevant material on record. In the instant case, we find that the assessee has attempted to prove the entire source of cash deposit during demonetization as coming out of scrap sales. Although the assessee, prima facie, appears to have discharged its onus of explaining source of cash deposit, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the AO found that the Assessee company neither could not produce the fixed asset register to show the deletion of assets nor could show any GR of transporter to prove movement of goods. The Assessee could not also provide any 'Kanta Parchi' (weigh slip) of any third party for any invoice, to show how it weighed the scrap material. The AO also found that the Assessee company could not provide cash books of the customers in response to notice u/s 133(6) of the Act which could show that they had sufficient cash balance for alleged purchase of scrap. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of scrap sales cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of ₹ 8 lakh only would be just and proper with a rider that the same shall not Printed from counselvise.com ITA No. 3414/DEL/2024 [A.Y. 2017-18] ITO VS. R.P Milkmade Products Page 5 of 6 be treated as a precedent, so as to cover all loopholes. The ground of appeal no 1 & 2 is partly allowed. 9. In so far as assessee's levy of tax at a higher rate under section 115BBE of the Act is concerned, we find that the Madras High Court in the Writ petition in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. Accordingly, we direct the AO to tax the addition under normal provisions of tax and not under the provisions of 115BBE. The additional ground raised by the assessee is allowed. 10. In the result, the appeal of the Revenue in ITA No. 3414/DEL/2024 is partly allowed. The order is pronounced in the open court on 14.11.2025. Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14th November, 2025. VL/ Printed from counselvise.com ITA No. 3414/DEL/2024 [A.Y. 2017-18] ITO VS. R.P Milkmade Products Page 6 of 6 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft order is placed before the Dictating Member 3. Date on which the typed draft order is placed before the other Member [in case of DB] 4. Date on which the approved draft order comes to the Sr. P.S./P.S. 5. Date on which the fair Order is placed before the Dictating Member for sign 6. Date on which the fair order is placed before the other Member for sign [in case of DB] 7. Date on which the Order comes back to the Sr. P.S./P.S for uploading on ITAT website 8. Date of uploading, inf not, reason for not uploading 9. Date on which the file goes to the Bench Clerk 10. Date on which the file goes for Xerox 11. Date on which the file goes for endorsement 12. The date on which the file goes to the Superintendent for checking 13. Date on which the file goes to the Assistant Registrar for signature on the order 14. Date on which the file goes to the dispatch section for dispatch the Tribunal order 15. Date of Dispatch of the Order 16. Date on which the file goes to the Record Room after dispatch the order Printed from counselvise.com "