ITO,WARD-11(1), NEW DELHI V. HONEY PORTFOLIO PVT. LTD., DELHI

ITA 2827/DEL/2022

AI Insights

The case involves the Income Tax Officer, Ward-11(1), New Delhi as the appellant and M/s Honey Portfolio Pvt. Ltd. as the respondent. The dispute centered on the addition of Rs. 2,06,50,000 made under section 68 of the Income Tax Act, 1961, due to cash deposits in bank accounts during the demonetization period. The CIT(A) had deleted this addition, leading to the revenue's appeal. The Tribunal examined the evidence presented, including the cash book and bank statements of the assessee, and found that the assessee had substantiated the source of the cash deposits, which were primarily from installment payments by auto drivers financed by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47277 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: ARJUN CHADHA
• Section: 143(3); 143(2); 250; 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘B’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.2827/Del/2022 (ASSESSMENT YEAR 2017-18) Income Tax Officer, Ward-11(1), New Delhi Vs. M/s Honey Portfolio Pvt. Ltd., 26, Park Area, Basement, Karol Bagh, New Delhi-110005 PAN: AAACH3404J (Appellant) (Respondent) Assessee by Sh. Arjun Chadha, CA Department by Shri Rajesh Kumar Dhanesta, Sr.DR Date of Hearing 18/03/2025 Date of Pronouncement 09/04/2025 O R D E R PER MANISH AGARWAL, AM, This is an appeal filed by the revenue against the order of the ld. Commissioner of Income Tax (Appeal) [CIT(A)], National Faceless Appeal Centre (NFAC), dated 10/11/2022 in Appeal No. CIT(A), Delhi-4/10753/2019-20 for AY 2017-18 vide order passed u/s 250 of the Income Tax Act, 1961 (the Act). 2. Brief facts of the case are that assessee is a private limited company and is a NBFC duly registered with RBI. The return of income was filed on 30.10.2017 declaring total income at Rs. 20,21,550/-. The assessment was taken up for complete scrutiny by way of issue of notice u/s 143(2) of the Act. The reason for scrutiny were 1. High value receipt of cash from third parties in 2 ITA No.2827/Del/2022 ITO vs. Honey Portfolio Pvt. Ltd. response data and 2. Large value cash deposit during the demonetization period reported. The assessee has deposited total cash in SBN of Rs. 2,06,50,000/- on two bank accounts (Rs. 1,03,44,000/- in City Union ank A/c No. 512120020000876 and Rs. 1,03,06,000/- in City Union Bank in A/c No. 102109000067620). During the course of assessment proceedings various quarries were raised with regard to the source of the SBN deposited in the bank account and finally the assessment was completed vide order dt. 30.12.2019 passed u/s 143(3) at a total income of Rs. 2,30,66,491/- wherein additions of Rs. 2,06,50,000/- was made u/s 68 of the Act on account of cash deposit in bank during demonetization period. Further a disallowance of Rs. 3,94,941/- out of business promotion expenses was also made. In first appeal, vide order dt. 10.11.2022, ld. CIT(A) has partly allowed the appeal of the assessee where the ld. CIT(A) has deleted the addition of Rs. 2,06,50,000/- made u/s 68 of the Act towards cash deposited in bank during demonetization period and uphold the disallowance made by the assessee out of business promotion expenses. 3. Aggrieved by the said order of ld. CIT(A), revenue is in appeal before us by taking sole ground of appeal. “The ld. CIT(A) has erred in deletion of the addition of Rs.2,06,50,000/- made by Assessing officer on account of cash deposit during demonetization.” 4. Before us, the Ld. Sr. DR submitted that the AO during the course of assessment proceedings, assessee had failed to submit the details of month wise instalments due from various customers in the month of October 2016 and November 2016. 3 ITA No.2827/Del/2022 ITO vs. Honey Portfolio Pvt. Ltd. Further details of number of instalments due vis-à-vis number of instalments received from various customers were not filed. He further argued that the assessee has made deposit of cash in SBN of Rs. 10,00,000/- on 2.11.2016 and Rs. 2,99,000/- on 7.11.2016 which clearly established that assessee was having only two days receipts of instalments on 08.11.2016 when demonetization was announced, thus deposit of cash in SBN of Rs. 2,06,50,000/- is not justifiable. Regarding the contention of the assessee that it has large cash balance available, ld. Sr. DR drew our attention to the fact that assessee is a NBFC and as per the RBI guideline, it can disburse the loan through banking channel only thus there is no requirement to keep such a large cash balance. At the most some cash could be held for day to day expenditure. 5. Ld. Sr. DR further submitted that assessee has made deposit on various dates during the demonetization which is quite surprising as when the assessee was having cash balance on the closing hours of 08.11.2016 when the demonetization was announced by the Hon’ble PM, why such cash was deposited on various dates in small amounts. This clearly leads to the believe that assessee had received instalments in cash in SBN even after 08.11.2016 when the same was not the legal tender. Ld. DR further submitted that ld. CIT(A) without appreciating these facts has deleted the addition wherein ld. CIT(A) has wrongly observed that the acceptance of SBN was permissible upto 31.12.2016. Therefore, ld. DR prayed for the restoration of the addition made by the AO. 4 ITA No.2827/Del/2022 ITO vs. Honey Portfolio Pvt. Ltd. 6. Per contra, ld.AR submitted that during the year under appeal assessee was working as RBI approved NBFC. Regarding the immediate source of the cash, ld. AR stated that assessee has financed to the small persons like auto drivers who normally make the payment of the due instalments in cash. During the course of assessment proceedings, assessee has filed the copy of the cash book wherein the cash received from each individual loanee was duly recorded with the reference of their respective auto registration number. As per ld.AR if the AO had doubts, he could have made enquiries from such loanees by issuing summons u/s 133(6) of the Act, which he failed to do so. The Ld. AR also drew our attention to the reply of the assessee regarding the explanation for large cash deposited which is available in the paper book pages 93 to 156, wherein the precise details of each person from whom the cash instalment received was mentioned, such as their name, addresses, vehicle no, amount received etc. Ld. AR thus submitted that assessee has duly discharged the burden casted upon it of establishing the source of the cash deposits which was duly appreciated by ld. CIT(A) while deleting the addition made on this account. Accordingly, ld.AR prayed for the confirmation of the order of the ld. CIT(A). 7. We have heard the rival submissions and perused the materials available on record. In the instant case, the books of accounts of the assessee are subject to audit and from the perusal of the financial statements, we find that neither the auditor has pointed out any deficiency in the maintenance of the books of accounts nor the Assessing Officer has pointed out any defects in the same who has accepted the books of accounts. 5 ITA No.2827/Del/2022 ITO vs. Honey Portfolio Pvt. Ltd. 8. Claim of the assessee was that it has deposited cash during the demonetization period out of the cash balance available as on the closing hours of 08.11.2016 i.e. the date when the demonetization was announced by the Hon’ble Prime Minister. Assessee has filed bank statements and copy of the cash book in support of the cash balance available which is the accumulation of the instalments paid by various person to whom the assessee had financed. These loanees are mainly to auto driver and in the cash book vehicle number of each loanee is mentioned with each individual instalment received from them which has not been doubted by the AO. The assessee has also filed the details of such persons in the response given to the department in compliance to the notice issued to explain the cash transaction during the demonetization, the said details are available in the paper book pages 93 to 156 filed by the assessee. It appears that the AO has failed to make independent enquiry from these auto drivers who had made payment of the instalments in cash of the loan taken from the assessee. When the assessee has filed all the details of the loanees who had repaid their instalments in cash, without there being any contrary evidence and without making any enquiry the Ld. A.O erred in invoking the provision of section 68 of the Act. The AO can make addition u/s 68 only under two circumstances, i.e. (i) Appellant does not offer any explanation about nature and source of such credit; or (ii) Explanation offered by Appellant is not upto the satisfaction of Ld. AO. 9. In other words, whenever Appellant provides explanation, before rejecting the same, the AO has to record his dissatisfaction 6 ITA No.2827/Del/2022 ITO vs. Honey Portfolio Pvt. Ltd. as to why the explanation furnished by Appellant is not acceptable. As is evident that assessee not only offered explanation regarding nature and source of such deposits, but also substantiated the same by filing every precise detail of the loanees such as their name, address, vehicle number, amount received etc. Ld. CIT(A) after considering all the details, deleted the additions made by the AO. Before us, the revenue has failed to controvert the finding given by ld. CIT(A) nor any instance was brought to our notice that the claim of the assessee of receipt of the installment from any particular auto driver is incorrectly recorded in the cash book. 10. In view of these facts, we find no infirmity or error in the order of ld. CIT(A) in deleting the addition made on account of cash deposits during demonetization period, Accordingly, we find no reason to interfere with the impugned order, which is hereby upheld. Finding no merits in the ground of Appeal of the Revenue, the same is hereby dismissed. 11. In the result, appeal of the Revenue is dismissed. Order pronounced in open court on 09.04.2025 Sd/- Sd/-/- (MAHAVIR SINGH) (MANISH AGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated 09.04.2025 PK/Sr. PS Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 7 ITA No.2827/Del/2022 ITO vs. Honey Portfolio Pvt. Ltd. 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "