INCOME TAX OFFICER, NEW DELHI V. SATISH KUMAR, NEW DELHI

ITA 2447/DEL/2024

AI Insights

The case revolves around the appeal by the Revenue against the order of the CIT(A) which had deleted the addition made under section 68 of the Income Tax Act concerning cash deposits by the assessee, Satish Kumar, during the demonetization period. The Assessing Officer had initially added the amount as unexplained cash credit, suspecting the source of the deposits. However, the CIT(A) found that the deposits were from recorded cash sales of the assessee's business in ghee and oil, which were audited and accepted by the tax authorities. The ITAT upheld the CIT(A)'s decision, emphasizing that the Revenue failed to substantiate its claims and did not reject the audited books of account.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 773800 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Appeal Filed On: 16-05-2024
• Other Referred Cases: CIT vs. Devi Prasad Vishwanath Prasad, M/s Ayyan Fire Works Factory Pvt. Ltd. Vs. DCIT, TamilNadu State Marketing Corporation Ltd. Vs. Hon'ble ITAT Chennai, Prathamika Krushi Pattina Sahakari Sangha Niyamitha Itagi Pkpssn Itagi vs. ITO, Sri Bhageeratha Patina Sahakara Sangha Niyamitha vs. ITO, Smt. Saraniyaa Karthick vs. ITO, DCIT vs. Sushil Kumar Sharma, JCIT vs. Marble City India Ltd., ACIT vs. Hari Om Retail Pvt. Ltd., M/s Shivam Industries vs. ACIT, Pilani Industrial Corporation Ltd. vs. ACIT, Lalchand Bhagat Ambica Ram vs. CIT, CIT vs. Kailash Jewellery House, CIT vs. Jindal Dyechem Industries Pvt. Ltd., DCIT vs. Bawa Jewellers Pvt. Ltd., ACIT vs. Ramlal Jewellers Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: PRAMOD JAIN; MUKUL GUPTA
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Question of law; Unexplained cash credit; Principle of natural justice; Bogus
• Section: 142(1); 68; 69; 28

Judgement Text

"ITANo.2447/Del/2024 SATISH KUMAR 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI M BALAGANESH, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.2447/Del/2024 िनधा रणवष /Assessment Year: 2017-18 INCOME TAX OFFICER, Room No.217, 2nd Floor, Vikas Bhawan, New Delhi. बनाम Vs. SATISH KUMAR X/1585, Rajgarh Colony, New Delhi. PAN No.AHEPK4309B अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent Assessee by Shri Pramod Jain, CA & Shri Mukul Gupta, Adv. Revenue by Shri Manish Gupta, Sr. DR सुनवाईक\bतारीख/ Date of hearing: 19.08.2025 उ\u000eोषणाक\bतारीख/Pronouncement on 26.09.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. This appeal is filed by the Revenue against the order of the Ld. CIT(Appeals), NFAC, Delhi dated 26.03.2024 for the AY 2017-18 in deleting the addition made u/s 68 of the Act in respect of cash deposits made during demonetization period. 2. Ld. DR made the following submissions: Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 2 “Assessment Order (i) The assessee is an individual engaged in the trading of ghee and oil under the proprietorship M/s Phool Chand Hari Kishan. He filed his return of income on 26.10.2017 declaring total income of Rs.4,58,120/- for the assessment year 2017-18. (ii) The case was selected for complete scrutiny through Computer Aided Scrutiny Selection (CASS) with the specific reason being “cash deposit during demonetization period.” (iii) During the relevant previous year, the assessee deposited Rs.4,93,13,500/- in cash in four different bank accounts. On verification, Rs.4,60,12,000/- was found to be deposited in Specified Bank Notes (SBNs), i.e., old currency notes of Rs.500 and Rs.1000, after 08.11.2016. (iv) The Assessing Officer issued repeated notices under sections 143(2) and 142(1) requiring the assessee to explain the source of cash deposits, provide denomination- wise breakup of SBNs, submit stock registers, VAT returns, and supporting documents for cash sales. Despite multiple opportunities and a final show cause notice dated 02.12.2019, the assessee failed to furnish the required evidence in a satisfactory and complete manner. (v) In response to the final show cause, the assessee merely reiterated general submissions of cash sales without submitting corroborative documentary evidence such as day-wise sales register, delivery challans, party- wise sale bills, inventory trail, or confirmations from buyers. No details were submitted to prove whether SBNs were actually received from customers, and if so, whether such acceptance was legally permissible. (vi) Accordingly, the Assessing Officer accepted Rs.15,72,520/- as cash in hand but treated the remaining Rs.4,44,39,480/- as unexplained and added the same under section 68 of the Income Tax Act,1961, to be taxed at the rate applicable under section 115BBE. CIT(A) order:- Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 3 The Ld. CIT(A) vide order dated 26.03.2024 allowed the appeal of the assessee and deleted the addition of Rs.4,44,39,480/-. The key findings of the Ld. CIT(A) are summarized as follows: (i) That there was a declining trend in cash deposits and cash sales as compared to the previous financial year, and hence there was no abnormal increase during the demonetization window; (ii) That the books of accounts were audited and no specific defects were pointed out by the AO; (iii) That the turnover and purchases declared by the assessee were not disputed by the AO; (iv) That the assessee deposited the cash from recorded cash sales and hence no addition under section 68 was warranted; (v) That even if there was a violation of RBI Notification in terms of accepting SBNs after 08.11.2016, it did not amount to unexplained cash credit under the Income Tax Act; (vi) That there were no adverse findings from VAT authorities and the entries were supported by audited financials. Aggrieved with the above, the department has filed appeal against the order of Ld.CIT(A) in ITAT. Grounds of Appeal (i) Whether on the facts and in circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made with regard to the unexplained cash deposit amounting to Rs.4,44,39,480/- u/s 68 of the IT Act as the business of the assessee was not covered under specified business to receive specified bank notes (SBN). (ii) Filed additional ground of appeal:- The Ld. CIT(A) has erred in deleting the addition of Rs.4,44,39,480/- made u/s 68 of the Income Tax Act, 1961 by accepting the additional evidences filed by the assessee before CIT(A) and also without providing any opportunity to the assessing officer to examine the additional evidences. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 4 Revenue’s appeal (i) The Ld. CIT(A) erred in ignoring that the assessee’s line of business (trading of ghee and oil) was not included under the categories permitted to accept SBNs under the RBI Notification dated 08.11.2016 and subsequent notifications. (ii) The assessee failed to furnish denomination-wise breakup of cash deposits, corresponding sale bills, or customer details to justify receipt of over Rs.4.60 crore in SBNs post-09.11.2016. (iii) Even assuming cash sales occurred, once the acceptance of SBNs after 08.11.2016 was legally restricted to only notified categories, any such receipt was impermissible and unaccounted in the eyes of law. (iv) In the absence of day-wise sales records, stock movement registers, delivery challans, or confirmations from customers, the assessee’s explanation that the cash deposits represented proceeds from regular business sales remains unsubstantiated. Mere summary statements or cash flow charts without underlying transactional evidence do not meet the standard of proof required under section 68. The assessee was given multiple opportunities during the assessment to produce these primary records but failed to do so. As such, the explanation offered lacks both credibility and evidentiary support, and the onus cast upon the assessee under section 68 to prove the nature and source of the cash credits remains un-discharged. (v) The Ld. CIT(A) has erred in law by deleting the addition of Rs.4,44,39,480/- u/s 68 on the basis of additional evidences which was not produced during assessment proceedings despite repeated opportunities, and which were admitted in appellate proceedings without recording any satisfaction under Rule 46A(1) and without affording the Assessing Officer an opportunity to examine or rebut the same through a remand report, thereby violating both the procedural mandate of Rule 46A and the principles of natural justice. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 5 In view of the above, it is respectfully prayed that the order of the Ld. CIT(A) deleting the addition of Rs. 4,44,39,480/- be set aside and the order of the Assessing Officer be restored. This is in view of the assessee, not being permitted under RBI norms to accept SBNs, failed to substantiate the genuineness of cash deposits during the demonetization period, and the addition rightly made under section 68.” 3. The Ld. Counsel for the assessee made the following submissions: S.No. Particulars Paper Book No(s). 1. Facts of the case • The appellant is engaged in the business of Ghee & Oil under his sole proprietorship business in the name of M/s Phool Chand Hari Kishan since many years including the year under appeal and thereafter too. And as per the analysis of the cash deposit in the bank of the assessee in relation to earlier year, assessee has deposited the cash in his bank account on regular basis. • That business of the assessee is such that it is regularly making cash sales since the start of its business. This is the regular practice being followed by the industry and the same is being followed by the assessee also. • During the FY 2016-17 also, assessee has made cash sales and deposited the proceeds in the bank account. During the demonetization period Rs.4,93,13,500/- were deposited in the bank account and the source of the same was from the sale proceeds made by the assessee from trading of Ghee and Oil 2. Case was selected for scrutiny due to abnormal increase in cash deposit • The case of the appellant has been selected for scrutiny through CASS for the reason of cash deposit during demonetization period and there was abnormal increase in cash deposits during demonetization period as Para 5.4 ofPageno.11 of the assessment order Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 6 compared to the average rate of cash deposits during pre-demonetization period. • The said fact is factually incorrect, the details of the cash deposit in the bank is given below: Particulars Amount of Cash deposited in Bank account 01.04.2015 to 31.12.2015 31.24 crore 01.04.2016 to 08.11.2016 (Pre- demonetization period) 13.65 crore 18.59 crore 09.11.2016 to 31.12.2016 (Demonetization period) 4.94 crore • Details of Cash Deposit is given below for the preceding year & previous year: Period FY 2015- 16 (In crore) FY 2016- 17 (In crore) Difference (In crore) 1st April to 8th November 24.35 13.65 -10.7 9th November to 31st December 6.89 4.94 -1.95 1st January to 31st March 17.70 2.38 -15.32 Total 48.94 20.97 -27.97 • During the demonetization period Rs.4.90 crore were deposited in the bank account from the sale proceeds made by the assessee in the year from his business namely Phool Chand Hari Kishan. • Hence, from the above it can be clearly seen that there was no abnormal increase in cash deposits during pre-demonetization period. • Therefore, the basis on which the case was taken for scrutiny is factually incorrect evidenced on the order of the Ld. AO itself. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 7 3. Addition u/s 68 of the Act • At the time of assessment proceedings as well as CIT(A) proceedings, assessee have duly explained the source of the cash deposit of Rs.4,44,39,480/- as arising from cash sales made in the ordinary course of business (sale of ghee and oil), which are duly recorded in the books of accounts. • These sales and corresponding cash receipts are recorded in the regular books of accounts, which were audited, and income- tax has been duly paid on the profits thereof. Hence, the addition leads to double taxation of the same income. • At the time of assessment proceedings, Ld.AO has not doubted the genuineness of the sales, the purchases, Ld. AO himself accepted the audited the financials and the declared income of Rs.4,58,120/- was assessed without modification. • It is to be noted that section 68 of the Act applies only when there is no satisfactory explanation for a credit in the books. Here, the explanation was clear and evidenced by documentary evidence (books, audit report), and the Ld. AO failed to bring any adverse finding. • Assessee had duly furnished the month wise details of sales and cash deposited into account for the year under consideration and preceding year. • Even if there was any procedural issue regarding demonetized notes, such contravention does not render the cash unexplained u/s 68 of the Act. • In various case laws Hon’ble High Court and Appellate Tribunals held that where cash deposits are from declared sales and properly accounted for, no addition u/s68 of the Act is warranted and if there is any addition that would lead to the double addition. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 8 • Since the cash deposits are explained, accounted for, audited and already taxed, the addition u/s 68 of the Act is unjustified and amounts to double taxation, which is impressible in law. 4. Addition based solely on acceptance of SBNs post 09.11.2016 is unjustified • The Ld. AO made the addition purely on the ground that the assessee accepted cash in Specified Bank Notes (SBNs) from 09.11.2016 onwards, without bringing any independent adverse material on record. “As the assessee could not have accepted the cash in SBNs from 09.11.2016 onwards, therefore, only inference can be drawn is that this the out of books of cash of the assessee as on 08.11.2016, which he has tried to explain as cash out of sales.” • The mere fact that SBNs ceased to be legal tender does not simply that’ sales proceeds received in such notes become un explained income u/s 68 of the Act. • It is to be noted that there was no prohibition under the Income Tax Act or any other law from accepting SBNs during the demonetization window up to 31.12.2016; RBI notifications and the Specified Bank Notes (Cessation of Liabilities) Act,2 2017 confirm this position. • At the time of Assessment proceedings and appellate proceedings, assessee has demonstrated that: • Cash sales were made in the regular course of business, • Cash was duly recorded in the books and cash book, • VAT returns were accepted by the Department, • Sales were out of stock and reflected in Para 6.2 of Page no. 11 of the assessment order. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 9 audited accounts, • Cash was deposited in the bank and accepted without objection. • Section 5 of the SBN Act prohibits dealing in SBNs only from 31.12.2016 onwards. Until then, SBNs had monetary value and were exchangeable at banks, hence had representational value and could be validly recorded in accounts. • In view of the above, the Ld. AO’s assumption that the amount was unexplained simply because it was received in SBNs is contrary to law and facts and deserves to be deleted. 5. • It is to be noted thatLd.CIT(A) has delete the addition u/s 68 of the Act on the following facts without accepting any additional evidence: a. Trend analysis of data with regard to cash deposits, b. Acceptance or otherwise of the books of accounts and the figures reported therein and c. Adjudication on the AO’s arguments on the grounds of addition. • Ld. CIT(A) noted that the assessee deposited Rs.4.94 crores during the demonetization period, which was actually lower than Rs.6.89 crores deposited during the same period in the previous year, and consistent with regular business activity. • With total depositsofRs.24.34 crore in the earlier year and significant cash sales/deposits even before demonetization (Rs.6 crores in April 2016, Rs.4.5 crores in May 2016), along with a declining turn over trend, the Ld. CIT(A) rightly held there was no unusual or unexplained spike in deposits. • Further, Ld. CIT(A) has said that the Ld. AO Para 5.2 of the CIT(A) order page 19 of 27 Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 10 accepted the audited books of accounts, declared turnover, purchases and cash sales. • Since the cash sales and source of deposits are recorded and accepted, addition u/s 68 is unjustified. Judicial precedents, including the Hon’ble Supreme Court’s decision in CIT vs. Devi Prasad Vishwanath Prasad, support that no addition can be made without rejecting the books u/s 145(3) or finding defects. • AO’s main ground rejected: The AO made the addition claiming the assessee accepted old currency (SBNs) after 09.11.2016, which was not allowed. However, courts have held that even if there’s a violation of RBI notifications, it does not automatically invoke section 68 of the Income Tax Act. • From the above, it is evident that the Ld. CIT(A) has rightly deleted the addition made u/s 68 of the Act after considering the factual matrix, including the consistent trend of cash deposits, acceptance of books of accounts, and absence of any adverse finding regarding sales, purchases, or profit margins. The cash deposits were clearly explained as arising from regular business sales, and merely accepting old currency notes post-demonetization does not invoke section 68, as supported by judicial precedents. S.No. Particulars Page No. 1. Objection for accepting additional ground • Ld. AO has made the application for accepting the additional ground that the Ld.CIT(A) while deleting the addition has erred in accepting the additional evidence without providing the opportunity of being heard to the Ld. AO in the form of Remand Report. • It is to be noted that Ld.CIT(A) has deleted the addition u/s 68 of the Act on Para 5.2 of the CIT(A) order page 19 of 27 Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 11 the following facts without accepting any additional evidence: a. Trend analysis of data with regard to cash deposits, b. Acceptance or otherwise of the books of accounts and the figures reported therein and c. Adjudication on the AO’s arguments on the ground of addition • Further, Ld. CIT(A) has said that the Ld. AO accepted the audited books of accounts, declared turnover, purchases and cash sales. • From the above, it is evident that the Ld. CIT(A) has rightly deleted the addition made u/s 68 of the Act after considering the factual matrix without relying on the any additional evidence (if any), which was claimed by the Ld. Sr. DR in the additional ground application, including the consistent trend of cash deposits, acceptance of books of accounts, and absence of any adverse finding regarding sales, purchases, or profit margins. • Therefore, the contention raised by the Ld. Sr. DR in the additional ground does not hold merit and deserves to be rejected. S.No. Citation Relevant Court Relevant extract of the case 1. M/s Ayyan Fire Works Factory Pvt. Ltd. Vs. DCIT, ITA No.2363/Chny/2024, dated: 05.02.2025 Hon’ble ITAT Chennai Held that when there is no significant change in cash deposits demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circulation/notification issued by Government of India & RBI, the source explained for cash deposits cannot be countenanced. 2. TamilNadu State Marketing Corporation Ltd. Vs. Hon’ble ITAT Chennai Held that when there is no significant change in cash deposits during demonetization period, Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 12 ACIT, ITA No.431/Chny/2023, dated07.10.2024 then merely for the reason that the assessee has accepted specified bank notes in violation of circular/notification issued by Government of India and RBI, the source explained for cash deposits cannot be rejected. Simpliciter violation of certain notification issued by RBI or demonetization scheme announced by Government of India on8.11.2016 ill not entitle the Revenue to make addition u/s 69 or 69A of the Act. 3. Prathamika Krushi Pattina Sahakari Sangha Niyamitha Itagi Pkpssn Itagi vs. ITO, ITA No.593/Bang/2021, dated 30.05.2022 Hon’ble ITAT Bangalore Hon’ble ITAT relied on the decision of the ITAT in the case of Bhageeratha Pattina Sahakara Sangha Niyamitha vs. ITO in which it was ruled that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68. 4. Sri Bhageeratha Patina Sahakara Sangha Niyamitah vs. ITO, ITA No.646/Bang/2021, dated 18.02.2022 Hon’ble ITAT Bangalore Held that the case of the A.O is that the assessee has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBL. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assessee. I am unable to understand the rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec.68 of the Act for making this addition. I also noticed that the assessee has also complied with the requirements of sec. 68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec.68 of the Act. 1 am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income tax Act. 5. Smt. Saraniyaa Karthick vs. ITO, ITA No.715/Chny/2023, Hon’ble ITAT Chennai Held that the assessee's sole source of income was the ticketing business. It found that the cash Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 13 dated 09.08.2023 deposits, including SBN, were received from clients booking tour packages using demonetized currency. Therefore, these receipts constituted legitimate business earnings and could not be deemed unaccounted money. 6. DCIT vs. Sushil Kumar Sharma, ITA No.1944/Del/2023, dated 14.05.2024 Hon’ble ITAT Delhi Merely because certain cash was deposited in the specified bank notes by the assessee during the demonetization period will not make the assessee tainted party when the very same transaction are being made by the assessee in the part as well as in the future. Annexure B: Case Laws wherein Hon’ble Tribunals have held that cash deposits in bank accounts form cash sales does not attract section 68 S.No. Citation Relevant Court Relevant extract of the case 1. M/s Agson Global P. Ltd. vs. ACIT, ITA No.3741 to 3746/Del/2019, affirmed by the Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd. (441 ITR 550) dated 19.01.2022 Hon’ble Delhi ITAT Held that mere addition made on this ground that there is deviation in ratio is not proper. When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incriminating is found contrary then addition of such cash sale would tantamount to double taxation 2. JR Rice India Pvt. Ltd. vs. ACIT, ITA No.2852/Del/2022, dated 31.07.2023 Hon’ble ITAT Delhi that none of the parameters mentioned in the SOP dated 21.02.2017 issued by the CBDT for assessment of demonetization cases is applicable. There is no abnormal jump in cash sales during demonetization period as compared to earlier history; there is no abnormal jump in percentage of cash sales; the cash deposit was made only on two dates i.e., on 10.11.2016 of Rs.20,60,000/-and on 11.11.2016 of Rs.32,00,000/- in specified bank notes in two different bank accounts; there is Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 14 sufficient stock available with the assessee, and there was no occasion to inflate the stocks by introducing fictitious purchases by the assessee; there was no transfer of deposited cash to another account or other entity which are not relevant for the assessee. Hence, even as per the SOP dated 21.02.217 issued by the CBDT which is mandatorily to be followed by the Revenue authorities, no addition could be made in the instant case. 3. S. Balaji Mech-Tech Private Ltd. vs. ITO, ITA No.556/Del/2024, dated 25.09.2024 Hon’ble ITAT Delhi Held that the AO/CIT(A) cannot invoke the provisions of section 68 or 69A when the assessee is already declared the source for cash deposit in the books of accounts and the lower authorities without their being any material to support on their contrary view, the provisions of section 68 or 69A cannot be invoked. 4. DURGA FIRE WORK VS. ITO CITATION: 2024 TAXSCAN (ITAT) 792 Hon’ble ITAT Delhi Hon'ble Bench of Income Tax Appellate Tribunal (ITAT) deleted the addition under section 68 of the Income Tax Act, 1961 made on cash deposits during the demonetization period. The bench observed that the AO except stating that the assessee has not furnished bills and vouchers for purchases has not found fault with the books of account maintained by the assessee, the cash book, purchases, sales register, stocks, etc. The AO did not reject the books of accounts of the assessee. Has observed that there cannot be any addition under Section 69A of the Income Tax Act in respect of cash Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 15 deposits made by the assessee into its bank account as unexplained income in the case of the assessee. 5. JCIT vs. Marble City India Ltd., ITA No.189/Del/2024, dated 30.04.2025 Hon’ble Delhi ITAT Confirmed the order of the Ld. CIT(Appeals) and held that once the books of accounts are accepted by the AO and the cash sales recorded therein were considered in arriving at assessed income of the assessee then treating the cash deposited in banks against such cash sales as undisclosed income of the assessee is not justifiable. None of these findings of the Ld. CIT(Appeals) were rebutted by the Revenue. In the circumstances, we uphold the order of the Ld. CIT(Appeals) and reject the grounds raised by the Revenue. 6. ACIT vs. Hari Om Retail Pvt. Ltd., ITA No.1700/Del/2024, dated 28.08.2024 Hon’ble ITAT Delhi Thus where the books of account of the assessee- company have been audited and accepted by the assessing officer. The assessing officer has not disputed the cash sales made during the year which were duly recorded in the regular books of account, quantitative details of stock were being maintained, including the sales effected in cash Thus, all the purchases, stock, sales (including cash sales) were accepted by the assessing officer. Then sales were fully recorded in books and also corroborated with VAT returns which have been accepted by the sales tax/ VAT authorities, with VAT/ sales tax having been paid thereon. Assessee had sufficiently discharged the onus, and same has been duly examined by the Ld. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 16 CIT(A). 7. DCIT vs. Akshardham Jewellers P. Ltd., ITA No.2631/Del/2022, dated 31.10.2023 Hon’ble ITAT Delhi Held that in the preceding and subsequent year the assessee has made cash sales during the month of November. Merely because demonetisation was in progress cannot be the basis to suspect the genuine business transactions. The Revenue has not brought any material to controvert the finding of the Id.CIT(A). Therefore, we do not see any infirmity in the impugned order. The same is hereby affirmed. 8. ACIT vs. Delhi Spot Bullion Trading Co. Pvt. Ltd., ITA No.1965/Del/2021, dated 23.04.2024 Hon’ble ITAT Delhi The Id. CIT(A) has duly analyzed the sales & purchases, stock, cash and compared it with F.Y. 2014- 15, F.Y. 2015-16 and also F.Y. 2016-17. The day wise cash book has been examined, the same have been incorporated in this order. The comparative data of purchase and stock for four years to determine the regularity of the cash sales has been examined. No defects have been pointed in purchase, sale and stock. There have been substantial cash sales in all the four years and the AO has accepted sales in cash for all the years except for the period between 11.11.2016 to 15.11.2016. In the other years, about 88% of the stock has been sold in cash and the same cash has been deposited in the bank for which the revenue has no objection. No discrepancy in the VAT return has been found out. No specific defects in the books of accounts of the assessee have been found out and there was no negative stock on any of the dates which only goes to Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 17 prove that the cash sales have been made against the available stock. Further, the Assessing Officer has accepted the sales and hence the proceeds of the sales cannot be considered u/s 68 of the Income Tax Act, 1961. 9. M/s Shivam Industries vs. ACIT, ITA No.1612/Del/2021, dated 27.02.2024 Hon’ble ITAT Delhi Held that the Assessee's books of account were duly audited and not rejected by the AO. Despite the lower cash deposits and the absence of disruption in sales, the CIT(A) failed to provide a valid rationale for sustaining the addition. Consequently, the ITAT Delhi concluded that the addition of Rs. 8,00,000/- was unjustified and ordered its deletion. 10. Pilani Industrial Corporation Ltd. vs. ACIT, ITA No.1606/Del/2023, dated 29.04.2024 Hon’ble ITAT Delhi The ITAT Delhi, referencing the precedent set by the Supreme Court in Lalchand Bhagat Ambica Ram vs. CIT, emphasized the importance of genuine entries in books of account. It ruled that treating cash deposits as unexplained solely based on entries in the books without rejecting them is legally impermissible. Thus, the ITAT set aside the assessment order and the appellate order, allowing the appellant's appeal. 11. Siddharth Mehta vs. ITO, ITA No.2656/Del/2023, dated 15.01.2024 Hon’ble ITAT Delhi Held that Cash deposits in bank accounts, when adequately explained and substantiated, should not be hastily deemed as unexplained credits. 12. DCIT vs. Manuvel Malabar Jewellers Pvt. Ltd. ITA No.1011/Del/2022, dated 18.08.2023 Hon’ble ITAT Delhi Held that as long as existence of stocks with the assessee is not doubted by the Id. AO and cash sales made by the assessee is accepted by the Id. AO, in our considered opinion, the entire cash deposits made during the period Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 18 09.11.2016 10 31.12.2016 in the sum of Rs.3,43,50,000/- stands duly explained and there is no case for making any addition u/s 68 read with section 115BBE of the Act. 13. ITO vs. Rajesh Kumar Channalal Patel, ITA No.2159/Ahm/2016, dated 21.04.2023 Hon’ble ITAT Ahmedabad with all the cash deposits in the Jalgaon Bank account of the assessee admittedly treated as sales by the assessee and the sales and purchases found to tally quantitatively also, there cannot be any case for treating any portion of the cash deposits as unexplained income of the assessee. 14. ACIT vs. Ramlal Jewelleresm Pvt. Ltd. ITA No.1600/Mum/2023, dated 26.07.2023 Hon’ble ITAT Mumbai Held that Once, AQ has accepted the sales and there is direct nexus with the closing stock and the sales alongwith 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. 15. Lalchand Bhagat Ambica Ram Vs. CIT [1959] 37 ITR 288 (SC). Hon’ble Supreme Court The Hon'ble Apex Court decided the matter in favour of assessee of the ground that it was dear on the record that the assessee maintained the books of accounts according to the mercantile system and there was sufficient cash balance in its cash books and the books of account of the assessee were not challenged by the Assessing officer. If the entries in the books of accounts are genuine and the balance in cash is matching with the books, it can be said that Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 19 the uses has explained the nature and source of such deposit. 16. CIT vs. Kailash Jewellery House in Appeal No.ITA 613/2010 Hon’ble Delhi High Court Hon'ble Tribunal observed that the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The findings of the Commissioner of Income-tax (Appeals) and the Tribunal, which are purely in the nature of the factual findings, do not require any interference and, in any event, no substantial question of law arises for our consideration. The appeal is dismissed. 17. CIT vs. Jindal Dyechem Industries Pvt. Ltd. (2012) 81 CCH 025 Del HC Hon’ble Delhi High Court held that the AO has not proved that the assessee received something over and above what was entered in the books of accounts maintained. No specific defect was pointed out in the audited accounts. In such circumstances, it was not upto him to add back assessee is return of fictional income. 18. DCIT vs. Bawa Jewellers Pvt. Ltd., ITA No.352/Del/2021, dated 09.06.2023 Hon’ble ITAT Delhi held that the cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the AO, there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of the sales. So, respectfully following the aforesaid referred to orders by the various Hon'ble High Courts and the Coordinate Benches of the ITAT, we are of the view Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 20 that the impugned addition made by the AO and sustained by the Ld. CITCA) was not justified. Accordingly the same is deleted. 19. CIT vs. Vishal Exports Overseas Ltd., Tax Appeal No.2471 of 2009 Hon’ble Gujarat High Court Hon'ble Bench upheld the deletion of Rs.70 lakhs under section 68 of the Act observing that when the assessee had already offered sales realization and such income is accepted by the Assessing Officer to be the income of the assessee, addition of the same amount once again under section 68 of the Act would tantamount to double taxation of the same income. 20. CIT vs. Associated Transport Pvt. Ltd. (1995) 212 ITR 417 (Cal.) (HC) Hon’ble Calcutta High Court held that if the assessee is able to show sufficient cash Balance, addition on account of deposit of High Denomination was rightly deleted. 21. Asstt. CIT vs. M/s Hirapanna Jewellers, ITA No. 253/Viz/2020, dated 12.05.2021 Hon’ble Vishakhapatnam ITAT held that that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to affect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. 22. Purani Hospital Supplies Pvt. Ltd. vs. DCIT, ITA No.489/Chny/2022, dated 31.05.2023 Hon’ble ITAT Chennai There is no significant change in the pattern of cash sales, cash collection and cash deposit during demonetization period, when compared to earlier period in the same financial year and also during immediate preceding financial year therefore, Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 21 assessee has satisfactorily explained source for cash deposit made during demonetisation period in specified bank notes and thus, the AO is completely erred in making additions u/s 69. 23. M/s Dewas Soya Ltd., Ujjain vs. Income Tax, ITA No. Appeal No.336/Ind/2012 Hon’ble Indore ITAT held that \"The claim of the appellants that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit & loss account) and on the other hand amounts received from above parties has also been added us, 68 of the Act. This view has been held by the Hon'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969) 72 ITR 194 (SC) that \"It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed\". The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again. 24. Bhagwant Merchants P. Ltd. vs. ITO ITA No.2614/Kol/2019 Hon’ble ITAT Kolkata Held that the assessee has disclosed the sale of shares in its books of account. Once the sale is declared as income by the assessee, the question of treating the same amount as a cash credit u/s 68 of the Act results in double addition. Moreover, the gross receipt cannot be brought to tax, specifically when the assessee had acquired the shares to an allotment as Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 22 evidenced by the letter of allotment payment details etc. Thus, the addition is also bad on merits. 25. Shree Sanand Textiles Industries Ltd. vs. DCIT vide ITA No.1166/Ahd/2014 Hon’ble Ahmedabad ITAT Held that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. It was also accepted that there is not even iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding-In view of the above the order of CIT(A) was set aside and Assessing Officer was asked to delete the additions. 4. The Ld. CIT(A) considering the submissions of the assessee and the evidences placed on record and also the remand report of the Ld. Assessing Officer deleted the addition observing as under: “5.2 I have perused the submissions of the appellant along with the supporting documents. The framework within which this appeal is to be decided is threefold, (i) trend analysis of data with regard to cash deposits, (ii) acceptance or otherwise of the books of accounts and the figures reported therein and (iii) adjudication on the AO's arguments on the grounds of addition. 5.2.1 i) trend analysis of data with regard to cash deposits: Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 23 It is seen from the reported figures that the cash sales in the relevant assessment year is approx. at Rs.21,00,00,000/- which was approx Rs.49,00,00,000/- in the previous year. Further it is seen that the cash deposit from 01.04.2015 to 31.12.2015 was approximately Rs.31,00,00,000/-. This in contrast to the cash deposits from 01.04.2016 to 31.12.2016 which is at Rs.18,00,00,000/- approximately. At the outset there is merit in the appellant's claim that both the cash sales and cash deposits are substantially lower than the previous year, which prima facie rules out any abnormality in the cash figures which can be lead to doubting the reported figures as per books. Further it is also seen that cash deposits between 01.04.2016 to 08.11.2016 is approximately Rs.13.64 crores against the deposit of approximately Rs.4.9 crores during the demonetization period from 9.11.2016 to 31.12.2016. The corresponding figure of total cash deposited from 01.04.2015 to 08.11.2015 wasapprox. Rs.24.34 crores. There is no abnormal deviation in the cash deposits in the aforementioned periods on a proportionate basis. It is also significant to know that the cash deposited in bank from 09.11.2015 to 31.12.2015 (corresponding period in the previous year) was Rs.6,89,18,000/-, against Rs.4,94,11,200/- during the demonetization period. In summary it is seen that there is a decrease/declining trend in all the parameters and there is no abnormality or abrupt deviation which can raise suspicion about the nature and source of the cash deposits. It is also seen that the cash deposits made in November and December 2016 are not abnormal as the appellant has made cash sales and corresponding cash deposits approx. to the tune of Rs.6 crores in April 2016 and approx. Rs. 4.5 crores in May 2016 as well, prior to demonetization. All this against the fact that the reported turn over for the year under consideration is Rs.24,20,37,584/-. The corresponding total turnover for the previous year 2015- 16 was approx. Rs.54.93 crores. 5.2.2 ii) acceptance of the books of accounts: The appellant has contended that the reported turnover has been accepted by the AO and the sales are out of the Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 24 available stock and the purchases which have been duly recorded in the books of accounts and audited. It is seen from the records that the AO has accepted the cash sales as reported. There is nothing on record to show that either the purchases or the sales have been proven to the bogus. The AO has accepted the GP and the NP as declared and there is no discrepancy found or amendments made to the declared GP & NP ratios. The Assessing Officer has not pointed any defects in the audited books, or the cash statement produced before him. The appellant has also placed on record that the VAT returns have been audited, filed and accepted by the concerned department. Once the cash sales have been duly accepted by the AO by accepting the books of accounts, the addition u/s 68 is unjustifiable since the nature and source of the cash deposit stands explained and accepted. There are enough Judicial Precedents (cited in the appellant’s submission) wherein it has been held that sales cannot be added u/s 68 of the Act. These judicial precedents cited by the appellant in its submissions are applicable to the facts of this case. Reliance is also placed on the following judicial precedents on the issue of such addition made without rejecting the books of account u/s 145(3) of the Act, and/or pointed out any specific defect in the books calling for such additions: a) Hon’ble Patna High Court In case of Lakshmi Rice Mills vs. CIT {1974} 97 HR 258, wherein it was held that where the books of accounts were accepted is genuine, the feet that, there is sufficient cash balance in the books, no addition can be made. b) Hon’ble Allahabad High Court in case of CIT vs. Neel Giri Krishi Farms Pvt Ltd. (38 taxmonn.com 69) c) Hon’ble ITAT Mumbai In ACIT vs. Ram Lal Jewellers Pvt. Ltd., ITA no. 1600/Mum/2023 d) Hon'ble Chandigarh Tribunal in Charu Agrawal vs. DCIT (2022) 140 taxmann.com 588 e) Hon'ble ITAT Vishakhapatnam in the case of M/s Hira Panna Jeweller In ITA No. 253/Via/2020 that “once Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 25 there is no defect in the purchase and sales and the same are matching with in flow and outflow of stock, there is no reason to disbelieve the same.” f) Hon’ble Jaipur Bench of ITAT in the case of ACIT, Central Circle-2, Jaipur Vs. M/s Motisons Jewellers Ltd. g) Hon’ble Amritsar Bench of ITAT in the case of Rajkumar (Radhika Sales Corp.) Vs. ITO (ITA No. 195/Asr/2022). h) The ITAT Ahmedabad In the case of Chirag Nareshbhai Soni Vs. ITO in ITA No. 19/Ahd/2022 has specifically visited the issue and observed as follows: \"generally the instances for fie rejection of the books of account include when entries in respect of certain transactions are all together omitted or incorrect or where the accounts show an abnormally low rate of profit or where there is an inherent lacuna in the system of accounting.” 5.2.2.1 In view of the above and respectfully the following judicial precedents including the decision of the Hon'ble Apex Court in the case of CIT vs. Devi Prasad Vishwanath Prasad, once the books of account have been accepted and no discrepancy found in the reported figure therein the addition made u/s 68 of the Act is not found to be correct. 5.2.3 iii) AOs arguments on the grounds of addition: Finally coming to the arguments of the AO in favour of making the impugned addition. The AO has primarily made the addition on ground that the assessee has accepted cash in SBM after 09.11.2016 which it was not permitted to do so. The appellant’s reply on this issue is reproduced below: 11. Addition was made only for the reason that the assessee has accepted the cash in SBNs from 09.11.2016 onwards Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 26 11.1. Ld. AO made the addition without having any basis and merely stated that at Para 6.2 Page no 11 of the Assessment order; “As the assessee could not have accepted the cash in SBNs from 09.11.2016 onwards, therefore, only inference can be drawn is that this is the out of books cash of the assessee as on 08.11.2016, which he has tried to explain as cash out of sales.\" 11.2. From the perusal of the assessment order, it can be clearly seen that the Ld. AO has made the addition only for the reason that the assessee have accepted the cash in SBNs from 09.11.2016 onwards. 11.3. Merely because demonetized notes ceased to be legal tender, it does not mean that the amount collected by the assessee from its sales would become unexplained money of the assessee. 11.4. It is pertinent to note that nowhere “The income Tax Laws” impose any restrictions on Indian citizens and prohibiting them to make the sale and acceptance of old currency during demonetization period. 11.5. In the current scenario, the assessee was engaged in cash sales, subsequently depositing the proceeds into his bank account. These transactions were duly acknowledged and incorporated into the audited financial statements of the assessee. 11.6. Nothing adverse against the appellant firm has been brought in record by the Ld. AO and the appellant has proved that: 11 6.1. The cash deposited is from the proceeds of cash sales and is not unexplained. 11.6.2. The said deposits were duly accepted by the banks itself. 11.6.3. Sales were made out of stocks maintained by the appellant firm in normal course of business. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 27 11.6.4. Cash received was duly recorded in cash book, i.e., books of accounts maintained by the appellant 11.6.5. Government VAT department has duly accepted the VAT returns acknowledging the sales made during the year, 11.6.6. The books of accounts were duly audited by an independent auditor. 11.6.7. Cash sales were duly accepted by the Ld. AO himself. 11.7. SBNs were accepted and allowed for the purpose of transactions can be derived from the Notifications enacted pursuant to Demonetization: a. Point No. 2 of the Notification No. 2652 dt. 8th November 2016 states that the specified bank notes held by a person other than a banking company referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may be exchanged at any Issue Office of the Reserve Bank or any branch of public sector banks, private sector banks, foreign banks. Regional Rural Bonks, Urban Cooperative Banks and State Cooperative Banks for a period up to and including the 31st December, 2016. b. The words used are ‘may be' and not \"shall be”. Thus, the person is allowed to use SBNs other than exchanging at the modes specified. c. Further the Notification does not explicitly prohibit holding, transferring or receiving any specified bank note upto 31st December, 2016. 11.8. The above view attains finality from plain reading of the Specified Bank Notes (Cessation of Liabilities) Act, 2017, implemented pursuant to the Demonetization exercise: a. Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 states that “0n and from the appointed day, no person shell, knowingly or voluntarily, hold, transfer or receive any specified bank note,\" Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 28 b. Section 2(1)(a) in Specified Bank Notes (Cessation of Liabilities) Act, 2017 states that “appointed day” means the 31st day of December 2016. c. Further Section 3 of Specified Bank Notes (Cessation of Liabilities) Act, 2017 states that “On and from the appointed day, notwithstanding anything contained in the Reserve Bank of India Act, 1934 or any other law for the time being in force, the specified hank notes which have ceased to be legal tender, in view of the notification of the Government of India in the Ministry of Finance, number S.O. 3407(E), dated the 8th November, 2016, issued under section 26(1) of the RBI Act, 1934, shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under section 26(1) of the said Act\". 11.9. From the above, it is clear that use of Specified Bank Notes (SBN) pursuant to 8th November, 2016 up to 31st December, 2016 was always allowed. It was never the intention of the Law to prohibit its use for transaction up to 31st December, 2016. 11.10. The contention of the Ld. AO is entirely contrary to the above-mentioned provisions of law, for the reasons mentioned below: Section 3 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 clearly states that the specified bank notes shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under section 26(1) of the said Act from the appointed date, i.e. 31st December, 2016, 11.11. Therefore, the contention of the AO regarding SBNs on or after 9th November is incorrect in law. 11.12. The expression 'money' has different shades of meaning. In the context of income-tax provisions, it can only be a currency token, bank notes or other circulating medium in general use, which has representative value. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 29 Therefore, the currency notes on the day when they were found to be in possession of the assessee should have had the representative value, namely, it could be tendered as money, which has intrinsic value. The RBI is bound to exchange the SBNs when they were tendered for exchange until 31st December 2016. Hence these notes cannot be termed as pieces of papers that bear no value. 11.13. The SBNs of 500 and 1000 rupee denominations can be measured in monetary terms sicnew the guarantee of Central Government and liability of Reserve Bank of India does not cease to exist until 31st December 2016 in lieu of the 500 and 1000 rupee SBNs. 11.14. Since the RBI is obligated to exchange the SBNs of 500 and 1000 and the liability can be measured with certainty amounting to the values imprinted on these bank notes, these bank notes do possess value and be recorded in the books of accounts. 11.15. Hence the contention that it cannot be journalized in the books of accounts based on the SBNs having no monetary value is not valid. Therefore, the same cannot be treated as unexplained money u/s 66 and brought to tax. 11.15.1. Chennai ITAT Rubs in favor of assesses, deletes Addition of Demonetization Deposits Despite RBI Notification Violation has eliminated the addition of cash deposits made during the demonetization period, despite a violation of RBI notification. The ITAT concluded that the assessee’s genuine explanation for the source of the cash deposit should not be rejected solely due to the violation of the RBI/Government of India notification regarding specified bank notes The assesses, involved in the distribution of pharmaceutical goods, surgical and diagnostics goods, underwent scrutiny for the Assessment year 2017-16 due to substantial cash deposits during the demonetization period and significant cash receipts from third parties. 11.15.2. Hon’ble ITAT Chennai in case of Smt. Saraniyaa Karthick vs. ITO held that the assesee’s sole source of income was the ticketing business, it found Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 30 (that the cash deposits, including SBN, were received from clients booking tour packages using demonetized currency. Therefore these receipts constituted legitimate business earnings end could not be deemed unaccounted money. 11.15.3. Hon’ble ITAT Bangalore in case of Sri Bhageeratha Pattina Sahakara Sangha Niyamitha Vs ITO, ITA no. 646/Bang/2021, dated 18 02.2022 heid that the case of the AO is that the assesses has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBI. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assesses, I am unable to understand the rationale in the view taken by AO. I noticed that the AO has invoked the provisions of sec. 68 of the Act for making this addition, I also noticed that the assesses has also complied with the requirements of sec. 68 of the Act. The AO has also not stated that the assesses has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec. 68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income Tax Act. 11.15.4. Hon’ble ITAT in case of Prathamika Krushi Pattina Sahakari Sangha Niyamitha Itagi Pkpassa Itagi vs. ITO, ITA No.593/Bang/2021, dated 30.05.2022 relied on the decision of the ITAT in the case of Bhageeratha Patiina Sahakara Sangha Niyamitha vs. ITO in which it was ruled that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68. 11.15.5. Hon’ble ITAT Chennai in the following cases observed that even though there is certain violation of any other Acts or Rules, AO cannot make additions towards cash deposits: a. Vidhiyasekaran Pradeep Mallira vs. ITO, ITA No. 698/Chnny/2022, dated 07.02.2023 Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 31 b. Mr. Ganapathy Palaniyappan vs. DCIT (ITA No.557/Chny/2022 dated 04.01.2023). c. Sri Madheswara Agencies vs. ITO (ITA No.551/Chny/2022 dated 21.07.2022). d. Hence, the appellant strongly objects to the fact that the addition made by the Ld. AO which is purely on the only basis of acceptance of cash in SBNs from 09.11.2016 onwards.” 5.2.3.1 I find merit in the appellant’s submission. Respectfully following the Judicial precedents on this issue, triggering the provision of section 68 simply on the ground that the assessee has accepted cash in SBNs post 9.11.2016, is unsustainable. There is merit in the appellant’s submission on the interpretation of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 and the direct judgments on this issue, wherein it has been held that even if, there is any contravention of the notifications issued by the RBI, it would in no cash attract the provisions of section 68 of the Income Tax Act. Further, as discussed in the above paragraphs, once no discrepancy has been found in the reportd figure of cash sales against stock available and purchase, there is no justifiable reason to add back the cash deposit during the relevant period as undisclosed income. The appellant has fairly justified the availability of the cash balance out of sales. 5.3 In summary, in view of the judicial precedents and the entirety of the facts and circumstances of the case, I hold that the addition u/s 68 is not justified. Accordingly, the AO is directed to delete the addition of Rs.4,44,39,480/- u/s 68 of the Act. Ground no. 1 to 4 is allowed.” 5. Heard rival submissions and perused the material placed before us and the orders of the authorities below. Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 32 6. On careful perusal of the order of the Ld. CIT(Appeals), we find that the Ld. CIT(A) deleted the addition for the reason that the AO did not reject the audited books of account, did not point out any defects in sales, purchases stocks and placing reliance on various judicial precedence on the issue of such addition made without rejecting books of account and/or pointing any specific defect in the books, no addition can be made. Ld. CIT(A) also placed reliance on the decision of the Apex Court in the case of CIT vs. Devi Prasad Vishwanath Prasad, wherein their lordships have held that once the books of account have been accepted and no discrepancy found in the reported figures therein the addition made u/s 68 of the Act is found to be incorrect. Thus, we hold that there is no good reason to interfere with the findings of the Ld. CIT(A) in deleting the addition made u/s 68 of the Act in respect of cash deposits made during demonetization period. Hence, we sustain the order of the Ld. CIT(A) and reject the grounds raised by the Revenue. 7. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 26.09.2025 Sd/- Sd/- (M BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 26.09.2025 Printed from counselvise.com ITANo.2447/Del/2024 SATISH KUMAR 33 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "