INCOME TAX OFFICER, HISAR V. SURJINDER SINGH , HISAR

ITA 2466/DEL/2024

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the Commissioner of Income Tax (Appeals), which had deleted the additions made by the AO under section 68 of the Income Tax Act, 1961. The additions pertained to unexplained cash deposits amounting to INR 6,18,04,580 made by the assessee, Surjinder Singh, during the demonetization period. The assessee, engaged in the liquor trade, had claimed that these deposits were from legitimate business transactions. The Tribunal found deficiencies in the maintenance of branch-wise cash books and directed a detailed examination of the cash flow and deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775361 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Appeal Filed On: 16-05-2024
• Other Referred Cases: CIT vs. Durga Prasad More (82 ITR 540)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NARPAT SINGH
• Assessee Lawyers: H.S.HOODA; AKSHAT SHARMA
• Keywords: Set aside; Business income; FORM 26AS
• Section: 143(3); 68; 6

Judgement Text

"ITA No.2466/Del/2024 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.2466/Del/2024 [Assessment Year : 2017-18] ITO, Hisar, Haryana vs Surjinder Singh, 111, Main Gali, Azad Nagar, Hisar, Haryana-125001. PAN-BQTPS6292N APPELLANT RESPONDENT Appellant by Shri Narpat Singh, Sr. DR Respondent by Shri H.S.Hooda, Adv. & Shri Akshat Sharma, Adv. Date of Hearing 26.06.2025 Date of Pronouncement 12.09.2025 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by Revenue against the order passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] dated 27.03.2024 in Appeal No. CIT(A), Hisar/10514/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 29.12.2019 passed u/s 143(3) of the Act pertaining to assessment year 2017-18. Printed from counselvise.com ITA No.2466/Del/2024 Page | 2 2. Brief facts of the case are that the assessee is an individual and filed his return of income on 31.10.2017, declaring total income of INR 22,39,830/-. The assessee is engaged in the business of liquor trade and during the year under appeal, assessee has made cash deposits of INR 6,18,04,580/- in the bank accounts during demonetization period in Specified Bank Notes (SBN). Based on these large cash deposits, case of assessee was taken for scrutiny. The AO after considering the submission made by assessee, was of the view that out of INR 6,18,04,580/- deposited in the bank accounts in SBN claimed as cash balance available with the assessee only INR 20 Lakhs is justifiable and balance amount of INR 6,18,04,580/- was added u/s 68 of the Act r.w.s. 115BBE of the Act in the hands of assessee as unexplained cash. 3. Against the said order, an appeal was preferred before the Ld.CIT(A) who vide impugned order dated 27.03.2024, deleted the additions so made. 4. Aggrieved by the order of Ld.CIT(A), Revenue is in appeal before the Tribunal by taking following grounds of appeal:- 1 (i) “On the facts & in the circumstances of the case, the Ld. CIT(Appeals) has erred in deleting the addition of Rs.6,18,04,580/- made by the AO U/s 68 of the Income Tax Act, 1961 on account of cash deposits made by the assessee in his bank accounts, during the demonization period, exceeding the availability of the cash in hand as per Cash Book by the above amount. (ii) On the facts & in the circumstances of the case, the Ld. CIT(Appeals) has erred in deleting the above addition of Rs.6,18,04,580/-; ignoring the fact that the availability of cash in hand as on 08.11.2016 was merely at Rs.20,00,000/-, as against the Printed from counselvise.com ITA No.2466/Del/2024 Page | 3 huge cash deposits of Rs.6,18,04,580/- in the bank account of the assessee. (iii) The appellant craves leave to add, amend or modify the grounds of appeal subsequently, before the appeal is disposed of.” 5. Before us, Ld. Sr. DR for the Revenue supports the order of the AO and submits that assessee is having 43 branches of liquor shops and it was claimed that cash was available at the branch levels and after pronouncements of demonetization, same was deposited in the bank accounts. Ld. Sr. DR submits that no separate books of accounts of each and every branch was maintained and consolidated cash books was submitted wherein it could not be ascertained as to how much cash is available as per the said cash book at each branch. The cash in hand was claimed at INR 6,52,27,450/-, which the assessee claimed as sufficient to cover up the deposit made. Ld. DR submits that the assessee is regularly depositing cash in the bank accounts for purchases and license fee on almost daily basis. Thus, it is not acceptable that such a huge cash was kept with him and not deposited in the bank accounts. Ld. Sr. DR submits that cash book is not maintained branch-wise and from the perusal of the month-wise cash collection, it could be seen that upto the month of October, 2016, there was substantial increase in the cash balance available which if compared with immediately preceding AY, was not in parity and was substantially high as compared to immediately preceding AY. He thus, submits that the AO has rightly made the addition which deserves to be upheld. Ld.Sr.DR also filed a written submission wherein it is reproduced as under:- Printed from counselvise.com ITA No.2466/Del/2024 Page | 4 (i) “Erroneous Deletion of Addition under Section 68: The Ld. CIT(A) has erred in deleting the addition of Rs. 6,18,04,580 made under section 68 of the Income-tax Act, 1961. The Assessing Officer had rightly concluded, after analyzing the books and cash book, that the assessee failed to substantiate the availability of such a large cash balance as on 08.11.2016. The CIT(A)'s decision to delete the addition was based solely on the assessee's submissions without critically examining the inconsistencies highlighted in the assessment order. (ii) Inflated and Unsubstantiated Cash Balance: The CIT(A) ignored the core finding that the assessee's actual cash in hand, as reasonably inferred from the available records and business pattern, could not have exceeded Rs. 20,00,000. The claim of cash balance of Rs. 6,52,27,450 was unsupported by contemporaneous evidence and contradicted by the assessee's own financial flow. The AO had provided detailed reasoning-including mismatch with purchase payments reflected in Form 26AS and the absence of timely deposits prior to demonetization- establishing that cash deposits of Rs. 6,18,04,580 during the period were far iii) Mismatch Between Form 26AS and Claimed Cash Position: As per Form 26AS, the assessee had made purchases of Rs. 14,31,39,639 up to 08.11.2016. The AO rightly noted that if such payments had been made, the remaining cash could not still be Rs. 6,52,27,450. The CIT(A)'s reliance on bank payments ignores the fact that cash flow sufficiency must still be demonstrated. (iv) Lack of Commercial Prudence and Human Probability: The AO reasonably questioned the rationale of keeping over Rs. 6.5 crore in cash without any deposits prior to 08.11.2016, despite regular cash sales and availability of banking channels. It defies human conduct and business prudence. (v) Acceptance of Books Without Contemporaneous Cash Validation: The acceptance of audited books does not suffice to conclude the existence of such large cash balances. The entries in books must be corroborated with real-world conduct, which was missing in this case. The AO's conclusion was also supported by the principle of human probabilities laid down by the Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More (82 ITR 540). Printed from counselvise.com ITA No.2466/Del/2024 Page | 5 In view of the above submissions, it is respectfully prayed that the Hon'ble Tribunal may kindly set aside the order of the Ld. CIT(A) dated 27.03.2024 and restore the assessment order dated 29.12.2019, thereby confirming the addition of Rs. 6,18,04,580 made under section 68 of the Income-tax Act, 1961, as the assessee failed to satisfactorily establish the actual availability and source of cash deposits made during the demonetization period.” 6. On the other hand, Ld.AR for the assessee vehemently supported the order of Ld.CIT(A) and submits that when books of accounts were accepted and purchases and sales have not been doubted, there is no occasion for the AO to doubt cash balance available in the said books of accounts which is the accumulation of cash sales made. He further submits that in the liquor business most of the sales is made in cash and such cash was available with the assessee when demonetization was announced. He, therefore, requested for the confirmation of the order of Ld.CIT(A). Ld.AR further filed a detailed written submission. The relevant contents of written submission are reproduced as under:- (i) “On the facts & in the circumstances of the case, the Ld. CIT(Appeals) has erred in deleting the addition of Rs.6,18,04,580/- made by the AO U/s 68 of the Income Tax Act, 1961 on account of cash deposits made by the assessee in his bank accounts, during the demonization period, exceeding the availability of the cash in hand as per Cash Book by the above amount. Reply The Ground of appeal of appeal No 1 has been taken from the observation of the AO in the assessment order at Serial No 3 (i) and (ii) reproduced hereunder: (i) The assessee has stated that he has cash in hand on 08.11.2019 amounting to Rs. 6,52,27,450/-, this contention of the assessee is not correct due to the reason that nobody can dare to have such a large amount in his office or at home. The assessee should have deposited this amount in the bank to earn interest income and to Printed from counselvise.com ITA No.2466/Del/2024 Page | 6 secure the money. Therefore, this plea of the assessee cannot be believed and hence rejected. (ii) Further, from the cash book, it has been observed that assessee has not deposited the amount of cash sale into the bank and whole receipts stated to be kept at office. After demonetization, he has deposited cash of Rs. 6,38,04,580/- into the bank. No other amount has stated to be paid as apparent from perusal of cash book. When I perused the form No. 26AS of the assessee, it has come to notice that assessee has made payment of Rs. 14,31,39,639/- up to 8th November 2016 towards purchasing of liquor which includes TCS amounting to Rs. 14,31,396/-. Therefore, contention of the assessee that he had cash balance of Rs. 6,52,27,450/-is totally baseless and unwarranted. In the cash book, assessee has failed to mention this amount of Rs. 14,31,39,639/-. If this amount is subtracted from the total available cash as claimed by the assessee on 08.11.2016, the resulting figures went into negative figure. Therefore, I am constrained to add entire amount of cash deposits deposited during demonetization period. The appellant submitted reply to the above observation of AO before the CIT(A) reproduced as under: Regarding cash deposit during demonetization period, as we have already stated that in liquor business the excise duty is paid in cash, therefore huge amount of cash balance is maintained. However, this cash was maintained is at branch level and not carried to Head office on regular basis and brought to head office only at the time of deposit of duties and deposit in bank account. The closing balance of daily cash was not lying at head office but on more than 40 sales branches. Hence daily closing balance is not abnormal to looking the size of business transaction. Every branch was guarded by security person. Hence, there was no risk at branch level. Most of the branches are in rural areas where no bank facilities are available. Moreover, the assessee was maintaining current bank account and in the current account the bank is not crediting interest on bank closing. It is riskier for the assessee to carry cash from sale outlet to head office on daily basis. The cash could not be utilized same day and demonetization was declared on the eve of 8th November, 2019. Our cash maintenance is supported by our cash sale on monthly basis. For your better understanding and perusal, we are enclosing herewith the comparison with previous year: Printed from counselvise.com ITA No.2466/Del/2024 Page | 7 Our cash maintenance is supported by our cash sale on monthly basis. For your better understanding and perusal, we are enclosing herewith the comparison with previous year: Monthly cash received April 32021726.00 40049856.77 May 42396783.92 37651807.87 June 43181318.84 29010121.22 July 46797839.00 27072942.78 August 45927544.00 29054551.20 September 41693175.00 30272399.82 October 44616166.78 30644036.00 November 26295396.32 31335662.44 December 22854396.00 38420677.32 January 29119474.18 34786215.00 February 28936718.60 30522482.00 March 47151198.00 41158615.28 Details of monthly closing balalnce 2016-17 2015-16 April 96785.00 9428471.77 May 9163523.92 18724447.64 June 22653962.76 24528952.86 July 30551617.76 27809263.64 August 47187470.76 27019963.84 September 51956593.76 24634754.66 October 61394422.54 25472388.66 November 36122598.86 28186549.10 December 32605899.86 28901786.42 January 41651314.04 27515164.42 February 53796211.64 31833187.42 March 4522982.08 4818993.66 Total sale for the previous year 2015-16 was Rs. 395900192 and turnover for the financial year 2016-17 Rs. 449202554. This increase in turnover ratio of 13.5 percent is reflecting in our cash receipt and cash maintenance. Therefore, it is submitted that cash balance maintained is duly supported by business cash transactions and are not unrealistic figures. These figures fully comparable with previous year's figures. Therefore, it is requested that our cash deposited during demonetization period is to be considered as duly generated through genuine business transactions and are realistic keeping in view the nature of business, business requirement and volume of business. Printed from counselvise.com ITA No.2466/Del/2024 Page | 8 As regard to the comparison of AO to the Form 26AS up to 08.11.2016 amounting to Rs. 14,31,39,639/- including TCS amounting to Rs. 14,31,396/-with cash balance as on 08.11.2016 amounting to Rs. 6,52,27,450/- is totally baseless and not justified in any manner. The Form 26AS shows the figures of Purchase of liquor and TCS thereon and should be compared with the total sales made by the appellant person up to that date rather than cash in hand on the said date. The total turnover of the appellant is amounting for Rs. 302907825.19 up to 08.11.2016 against the purchases made by the appellant which is shown in Form 26AS. It is pertinent to note that all the purchases of liquor were made through Banking channel and not in cash. Hence purchases are naturally not reflected in the cash book but only bank deposits are reflected. The Id. Income Tax Officer has failed to appreciate that quantum of withdrawals from the bank neither in law and nor on fact can be a basis to suggest let alone conclude validly that cash balances reflected in the cash book is on paper only and is not supported by actual cash or the cash balances was artificially increased in the cash book. The findings are based on surmises, conjectures and suspicion. The appellant further submitted that once, the AO has accepted the sales and there is direct nexus with the closing stock and the sales along with movement of stock linked to purchases then such credit on account of sales cannot be added u/s.68. If the cash sales have been accepted, then deposit of the same cash in the bank account which is tallying with the entries in regular cash book cannot be treated as deposits made out of any undisclosed income. Addition u/s.68 on account of cash deposits cannot be made simply on the reason that during the demonetization period, cash deposits vis-a-vis cash sales ratio is higher. The appellant has maintained regular books of accounts which are duly audited a Chartered Account and the said books of accounts are not rejected by the AO, which imply that though the AO has accepted the sales to such retail customers as genuine Further, the appellant has produced contemporaneous documentation such as its books of accounts, availability of stock, details of sales etc. to demonstrate that the sales made to such retail customers were genuine sales. The appellant had also demonstrated that there was a direct correlation of cash outflow from the books of accounts with cash deposit in the bank accounts. Further, the appellant had also submitted day wise stock report, wherein the outflow of stock against sales was clearly reflected. Also, the appellant had produced documentation to demonstrate that its sales clearly matched with the sales declared for the purpose of Excise duty paid. The Learned CIT (A) NFAC Delhi has considered the reply and explanation of the Appellant and accordingly deleted the addition. Hence appellant is Printed from counselvise.com ITA No.2466/Del/2024 Page | 9 relied upon the order of CIT(A). It is prayed before your honor the ground of appeal of the department may kindly be dismissed.” 7. Heard the contentions of both the parties and perused the material available on record. In the instant case, assessee claim that cash was deposited out of cash balance available in cash book as on the date of demonetization. Assessee is a liquor contractor and carried business under the name and style of M/s. Choudhary & Co. having license from the Haryana Government. The assessee made purchase of INR 43,64,74,160/- of the liquor and disclosed the sale of INR 44,92,02,554/- after claiming rebate and discounts. The average sale of the assessee per month comes to INR 3.74 crores from all the 43 branches. However, it is an admitted fact that assessee has not maintained any cash book branch-wise which is a serious lapse on the part of assessee in maintenance of books of accounts. The assessee was not in the position to bifurcate the amount of purchase, expenses and sales made branch-wise nor was in a position to state how much cash was available at each branch office when the demonetization was announced. It was the claim of the assessee that cash has been brought to the head office for deposit. It is submitted by the assessee that most of the branches are in rural areas where no bank facilities are available and it is very risky to carry such huge cash from shops to head office on daily basis. However, it is not understandable that why this much of the large cash was kept by the assessee on daily basis at various branches when they were situated in rural areas. From the perusal of monthly cash balance chart given by the assessee in Printed from counselvise.com ITA No.2466/Del/2024 Page | 10 the written submission as reproduced herein above, we find that assessee is maintaining cash of only INR 96,785/- on 30.04.2016 which stood increased to INR 6,13,94,422/- on 31.10.2016. If this is balance is compared with corresponding period of immediately preceding year we find that cash balance was INR 2,54,72,388/-. One more glaring fact was that in both the years upto month of February, 2016, assessee was carrying heavy cash balance of more than INR 3.00 crores however, in the month of March, it was reduced to only INR 45 Lakhs or INR 48 Lakhs in both the years. The assessee is in the trade of liquor business where goods have been released only on the advance payments of cost of material and the license fee and the assessee is regularly depositing the cash amounts in the bank accounts. 8. It is not understandable as to what prevented the assessee to deposit the cash available with him in the bank when he was depositing cash on almost daily basis as is evident from the perusal of consolidated cash book produced nor any proper explanation is given as to why such huge cash more than of INR 6 crores was kept with him. The assessee also has not filed details of purchase made and goods released on daily basis. All these facts need to be considered before reaching to the conclusion of genuineness of the source of cash in hand as on the date of the demonetization. In view of these facts, we set aside the order of the lower authorities and remand the matter to the file of AO for verification of the source of cash deposits and payment made for the purchase of goods Printed from counselvise.com ITA No.2466/Del/2024 Page | 11 vis-a-vis daily sales on each branch and thereafter, take a view in accordance with law. With these directions, grounds of appeal raised by the Revenue are partly allowed for statistical purposes. 9. In the result, appeal of the Revenue is partly allowed. Order pronounced in the open Court on 12.09.2025. Sd/- Sd/- (ANUBHAV SHARMA) JUDICIAL MEMBER Date:- 12.09.2025 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "