ITO, DELHI V. M/S RANYAL TRADERS PVT LTD, DELHI

ITA 5725/DEL/2025

AI Insights

The case involves the Income Tax Department (ITO) appealing against the decision of the CIT(A), which had deleted the addition made by the Assessing Officer (AO) under sections 68, 69, and 69A of the Income Tax Act, 1961. The addition pertained to unexplained cash deposits amounting to Rs 1,37,00,000 made during the demonetization period. The AO had initially treated these deposits as unexplained cash credits, suspecting them to be unaccounted income. The CIT(A) reversed this decision, leading to the Revenue's appeal. The tribunal found that while the assessee had partially discharged its burden of proof regarding the source of the cash deposits, some elements of the cash deposits remained unexplained, justifying a lump-sum addition of Rs 5 lakh.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839222 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2026
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Appeal Filed On: 16-09-2025
• Other Referred Cases: S.M.I.L.E. Microfinance Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Unexplained cash credit
• Section: 143(3); 68; 133(6)

Judgement Text

"5725_DEL_2025_ITO VS RANYAL TRADERS 1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE MS. MADHUMITA ROY, HON’BLE JUDICIAL MEMBER & SHRI NAVEEN CHANDRA, HON’BLE ACCOUNTANT MEMBER ITA No. 5725/DEL/2025 ; Assessment Year: 2017-18 ITO Vs M/s Ranyal Traders Pvt. Ltd. J-4, Rajouri Garden, New Delhi- 110027 (APPELLANT) (RESPONDENT) PAN No. AIHPJ8874E Assessee Represented by : Sh. Vikas Jain, Adv., Sh. Hardik Jayal, Adv., Sh. Paras Gilhotra, Adv. Revenue/Department Represented by : Sh. Manish Gupta, Sr. DR Date of Hearing: 28.01.2026 Date of Pronouncement: 18.02.2026 ORDER PER NAVEEN CHANDRA [A. M]: The above captioned appeal is preferred by the revenue against the orders dated 28.07.2025, by Ld. CIT(A)/NFAC, Delhi u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for A.Y. 2017- 18. The assessment is framed by the Assessing Officer [for shot, AO] u/s 143(3) of the Act. 2. The revenue has raised following grounds of appeal: Printed from counselvise.com 5725_DEL_2025_ITO VS RANYAL TRADERS 2 | P a g e “ 1. Whether the CIT(A) erred in law and on facts in deleting the addition made u/s 68/69/69A of the Act, despite the assessee's failure to furnish cogent evidence regarding the genuineness and source of cash deposits of Rs 1,37,00,000 during the demonetization period? 2. Whether the CIT(A) erred in holding that the assessee had discharged the initial onus, merely by stating that the deposits were out of cash sales, without corroborating evidence such as stock register, sales invoices, customer details, VAT/GST records, and without examining the abnormal rise in cash sales during the period of demonetisation? 3. Whether the CIT(A) was correct in law in holding that the onus shifted upon the AO, when the assessee had not substantiated its explanation with verifiable documentary evidences? 4. Whether the CIT(A) erred in law in holding that section 115BBE is not applicable on cash deposits treated as unexplained, ignoring that the assessee failed to prove genuineness of sales and nexus between cash deposits and recorded business turnover? 5. Whether the CIT(A) was justified in deleting the addition solely on the ground that books of account were not rejected by the AO, despite the fact that unexplained cash deposits are independent of book rejection and are required to be explained u/s 68/69/69A? 6. Whether the order of the CIT(A) is perverse and contrary to evidence on record, inasmuch as it accepted the assessee's version without any verification of actual sales, stock movement, or customers' identity? 7. The appellant craves to be allowed to add any fresh ground(s) of appeal and or deleted or any of the ground(s) of appeal.” 3. The Brief facts of the case is that the assessee company, incorporated on 06.11.1991, is engaged in trade of import-export and supply of clothing, hosiery, readymade garments, fabrics, textiles, trading and allied activities under the trade name of 'Ranyal Impex International\". It filed its ITR u/s 139(1) for A.Y 2017-18 dt 05.07.2017 declaring a taxable income of Rs 20,40,800/-. 4. The assessee, during the year under consideration, made total sales of Rs. 11,85,46,713/- which included Rs 10,28,58,072/-on credits and Rs 1,56,88,641/- in cash and out of such sales proceeds Rs Printed from counselvise.com 5725_DEL_2025_ITO VS RANYAL TRADERS 3 | P a g e 1,37,00,000/- was deposited into its regular bank. The AO held this cash deposit of Rs 1,37,00,000/- as unexplained cash credit during the demonetization period and added the same u/s 68 of the Act. On appeal the CIT(A) deleted the said addition. 5. Aggrieved the Revenue is before us. The ld DR vehemently argued that the assessee failed to furnish cogent evidence regarding the genuineness and source of cash deposits of Rs 1,37,00,000/- during the demonetization period and could not discharge the initial onus of substantiating the deposits as being out of cash sales and no corroborating evidence such as stock register, sales invoices, customer details, VAT/GST records were filed. The CIT(A) deleted the addition without examining the abnormal rise in cash sales during the period of demonetisation. 6. On the other hand, the ld counsel of the assessee submitted that the cash sales during the relevant year amounted to ₹1,56,88,641/-, and the cash-in-hand as on 08.11.2016 (the date of demonetisation) stood at ₹1,40,54,829/-, inclusive of imprest balance. The ld AR explained that cash sales constituted only 13.23% of the total sales. The Ld. AO had issued notices under section 133(6) of the Act to various credit customers, all of which were duly complied with and accepted. Accordingly, the genuineness of the Assessee's business as a dealer in trading and textiles stands admitted even by the Ld. AO. Printed from counselvise.com 5725_DEL_2025_ITO VS RANYAL TRADERS 4 | P a g e 7. 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 cash 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 abnormal rise in cash sales during the period of demonetisation. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales and disclosure under IDS scheme, 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 ₹ 5 lakh only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The ground of appeal no 1 to 6 is partly allowed. 8. 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 Printed from counselvise.com 5725_DEL_2025_ITO VS RANYAL TRADERS 5 | P a g e direct the AO to tax the addition under normal provisions of tax and not under the provisions of 115BBE. The ground 4 raised by the Revenue is dismissed. 9. In the result, appeal of Revenue in ITA No. 5725/DEL/2025 is partly allowed. Order pronounced in the Open Court on 18-02-2026. Sd/- Sd/- (MADHUMITA ROY) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 18.02.2026 Pooja Mittal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "