JCIT(OSD), CIRCLE 111, DEHRADUN, SUBHASH ROAD V. M/S SURYANCHAL FURNITECH, BAHADRABAD INDUSTRIAL AREA, HARIDWAR

ITA 82/DDN/2025

AI Insights

The case involves the JCIT(OSD), Circle-111, Dehradun as the appellant and M/s Suryanchal Furnitech as the respondent. The dispute arose from the CIT(A)/NFAC's order reversing the Assessing Officer's addition of Rs.2,78,62,397 as unexplained cash credits under Section 68 read with Section 115BBE of the Income Tax Act, 1961, for the Assessment Year 2017-18. The cash deposits were made during the demonetization period, claimed to be from cash sales to M/s AK Enterprises and M/s Manoj Enterprises. The Assessing Officer found these transactions unverifiable, leading to the addition. The Tribunal, referencing various judicial precedents, found that the cash deposits could not be treated as unexplained, given the regular business activities and the documentation provided by the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 830577 (ITAT-DEHRADUN)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2026
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 02-05-2025
• Other Referred Cases: Sumati Dayal vs. CIT, CIT Vs. Durga Prasad More, PCIT vs. NRA Iron & Steel Pvt. Ltd., Smt Charu Agarwal Vs CIT, Jitendra Kumar Tahilramani vs. Income-tax Officer, Subhash Chand Gupta vs. ACIT, S. Balaji Mech-Tech (P.) Ltd. vs. Income-tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. S. RANA
• Assessee Lawyers: HIMANSHU SHARMA
• Keywords: Business income; Unexplained cash credit; Rejection of books of accounts; Procedural lapse
• Section: 143(3); 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH, DEHRADUN Before Sh. Satbeer Singh Godara, Judicial Member & Sh. Manish Agarwal, Accountant Member ITA No. 82/DDN/2025 : Asstt. Year: 2017-18 JCIT(OSD), Circle-111, Dehradun-248001 Vs M/s Suryanchal Furnitech, F-104, Bahadrabad Industrial Area, Haridwar-249402 (APPELLANT) (RESPONDENT) PAN No. ABOFS3475L Assessee by : Sh. Himanshu Sharma, Adv. Revenue by : Sh. A. S. Rana, Sr. DR Date of Hearing: 15.01.2026 Date of Pronouncement: 21.01.2026 ORDER Per Satbeer Singh Godara, Judicial Member: This Revenue’s appeal for Assessment Year 2017-18, arises against the CIT(A)/NFAC, Delhi’s DIN & order No. ITBA/NFAC/S/250/2024-25/1074074259(1) dated 05.03.2025, in proceedings u/s 143(3) of the Income Tax Act, 1961. 2. Heard both the parties at length. Case file perused. 3. Coming to the Revenue’s/appellant’s sole substantive ground raised herein, we note that it is aggrieved against the CIT(A)/NFAC’s lower appellate discussion reversing the Assessing Officer’s action treating the assessee’s cash deposits during demonetization amounting to Rs.2,78,62,397/- as Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 2 unexplained cash credits u/s 68 r.w.s. 115BBE of the Act; reading as under: “6 Decision: I have perused facts of the case, assessment order of the AO, submission of the appellant and the documents available on record & after considering the same, adjudication of various grounds of appeal is as under: 6.1 Ground No.1 pertains to addition made by AO u/s 68 of the Act of Rs.2,78,62,397/-. During the course of assessment proceedings, the appellant was asked to substantiate the cash deposits made during demonetization period. In response to the same, the appellant stated that cash deposit during demonetization period is out of cash available in hand due to cash sales made in A.Y.2016-17 & 2017-18. It was noticed by the AO, that the appellant has shown cash receipts before the demonetization period against the sales made to mainly two parties i.e. M/s AK Enterprises and M/s Manoj Enterprises. Appellant had shown cash sales of Rs.1,95,70,897/- to M/s AK Enterprises and cash sales of Rs.82,91,500/- to M/s Manoj Enterprises. Appellant was asked by the AO to prove the worthiness and confirmation of these parties. In response to the same appellant furnished the copy of Form ‘C’ issued by Directorate of Commercial Taxes, Government of West Bengal, Sales Tax Return filed by the appellant, copy of invoices, ledgers, sale register cash book and challan of Tax Collected at Source against the sales of goods. However, on thorough perusal of the details furnished by appellant, it was observed by the AO that the appellant firm is manufacturing in the state of Uttarakhand and the cash sales to the parties as shown by appellant belongs to the state of West Bengal which is having a distance of approximately 1500 Kms, appellant failed to furnish the details of transportation i.e. how the finished goods were transferred to these parties. Thereafter, to verify the veracity of the transactions shown by the appellant, notice u/s 133(6) of the Act was issued by the AO to M/s A.K. Enterprises & M/s Manoj Enterprises through registered post. However, the same were received back unserved. The notices were also sent on registered mail IDs of the two parties and were Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 3 successfully delivered. However, no reply and confirmation was received from both the parties. Further, on records available with the department, it was observed by the AO that both the parties have not filed return of income for A.Y. 2017-18. Since, the sales transactions as shown by the appellant remained unverifiable, a show cause was issued by the AO to the appellant asking as to why the transaction with the aforesaid two parties may not be considered as unexplained. In response, the appellant furnished reply on 23.12.2019 in which the appellant stated that it had submitted copy of ledgers, sale register, cash books, sale tax return with commercial tax department (Govt. of Uttarakhand), Form C issued by Govt. of West Bengal to the AO and reiterated that sales made to the two parties are genuine. The reply of the appellant was not accepted by the AO. The AO in the order stated that the appellant has deposited cash of Rs. 42,14,950/- in A.Y. 2016-17. However, in A.Y. 2017-18, the appellant deposited cash of Rs. 3,08,89,500/- which is a significant rise with no reason. Further, the AO stated that appellant has failed to furnish any documentary evidence to prove the creditworthiness of the parties and genuineness of the transactions. Both parties were not traceable at the address given by the appellant and no response has been submitted by the parties in response to notice u/s 133(6) delivered on mail. Accordingly, the AO held that the appellant has failed to substantiate that cash was received from M/s A.K. Enterprises and M/s Manoj Enterprise and they had worth to pay such a large amount of Rs. 2,78,62,397/- in cash. Therefore, addition of Rs. 2,78,62,397/- was made to the income of the appellant u/s 68 of the Act. 6.1.1 The appellant in submission has stated that it had filed copy of cash book, bank statements, sale tax returns, sale register, copy of invoices of sales made, ledger of A.K enterprise for F.Y.2015-16 & 2016-17 & ledger of Manoj Enterprises for F.Y. 2016-17 before the AO. Further, the appellant stated that it had submitted copy of Form C issued by Directorate of Commercial tax, Govt. of West Bengal as evidence for interstate sales made to AO. Further, the appellant contended that it had sold goods to A. K. Enterprises in F.Y. 15-16 and 16-17 and to Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 4 Manoj Enterprises in F.Y. 16-17 and received Form C against interstate Sales. Further, list of sundry debtors as on 31.03.2016 along with audited books of accounts/ Balance Sheet for A.Y. 2016-17 was also submitted before AO from which it can be seen that A.K. enterprises was a sundry debtor as on 31.03.2016. The appellant stated that it had received cash of Rs.1,95,70,897/- from A.K. enterprises in respect of sales made in F.Y.2015-16 & F.Y.2016-17. In case of Manoj enterprises, the appellant stated that it had received cash of Rs. 82,91,500/- from Manoj enterprises in respect of sales made during the year under consideration. It was also noticed that appellant has shown both the parties as debtors for A.Y. 2017-18 in its audited books of accounts. In addition to above, the appellant stated that it had discharged its primary onus u/s 68 by establishing identity, genuineness and creditworthiness of the parties by providing their PAN, TIN No & Form C of the parties to whom sales were made, sales register, cash books, copy of invoices/ sale bills, Ledgers foe F.Y.15-16 and 16-17, sales tax returns etc. to the AO. 6.1.2 On perusal of submission made by the appellant, it is noticed that appellant has stated that it had received cash from A.K. enterprises & Manoj Enterprises before 08.11.2016 against sales made in F.Y. 2015-16 & F.Y. 2016-17( in case of A.K. Enterprises) and F.Y.2016-17 (in case of Manoj Enterprises). Sales made were duly recorded in books of account and sales register furnished by the appellant. Copy of quarterly sales tax return filed with Commercial Tax Department (Govt. of Uttarakhand) was submitted by the appellant to the AO. It was noticed that the appellant in reply to show cause notice had submitted list of Sundry debtors for F.Y.2015- 16 to the AO where it can be seen that A.K. enterprises was a sundry debtor having balance receivable of Rs.1,23,47,250/- as on 31.03.2016. The list of sundry debtors as on 31.03.2016 submitted by the appellant to the AO is as under: Printed from counselvise.com The appellant stated that it had filed return of income along with audited financial statements and list of sundry debtors for A.Y.2016 08.11.2016 i.e. date of declaration of demonetization and in the return of income it had shown A.K. enterprise as a debtor. From the records, it is evident that return of income along with audited financial statements of A.Y.2016-17 was file well before the date of declaration of demonetization on 08.11.2016. Perusal of this balance sheet and its annexures clearly shows that name of A.K. enterprises has been duly declared as sundry debtor and accepted by the department. Hence, it is clear that showing this party as debtor as on 31.03.2016 in the return filed on 29.09.2016 cannot be an afterthought and name of the party as a debtor had been shown only on the basis sales made in F.Y. 2015 Further, it was also noticed that the appellant has also shown both the parties as sundry debtors in his audited books of accounts for F.Y. under: ITA No. 82/DDN/2025 5 The appellant stated that it had filed return of income along with audited financial statements and list of sundry debtors for A.Y.2016-17 on 29.09.2016 i.e. before 08.11.2016 i.e. date of declaration of demonetization and in the return of income it had shown A.K. enterprise as a debtor. From the records, it is evident that return of income along with audited financial statements of 17 was filed by the appellant on 29.09.2016 i.e. well before the date of declaration of demonetization on 08.11.2016. Perusal of this balance sheet and its annexures clearly shows that name of A.K. enterprises has been duly declared as sundry debtor and accepted by he department. Hence, it is clear that showing this party as debtor as on 31.03.2016 in the return filed on 29.09.2016 cannot be an afterthought and name of the party as a debtor had been shown only on the basis sales made in F.Y. 2015-16. Further, it was also noticed that the appellant has also shown both the parties as sundry debtors in his audited books of accounts for F.Y. 2016-17 having balance as ITA No. 82/DDN/2025 Suryanchal Furnitech The appellant stated that it had filed return of income along with audited financial statements and list of i.e. before 08.11.2016 i.e. date of declaration of demonetization and in the return of income it had shown A.K. enterprise as a debtor. From the records, it is evident that return of income along with audited financial statements of d by the appellant on 29.09.2016 i.e. well before the date of declaration of demonetization on 08.11.2016. Perusal of this balance sheet and its annexures clearly shows that name of A.K. enterprises has been duly declared as sundry debtor and accepted by he department. Hence, it is clear that showing this party as debtor as on 31.03.2016 in the return filed on 29.09.2016 cannot be an afterthought and name of the party as a debtor had been shown only on the basis sales Further, it was also noticed that the appellant has also shown both the parties as sundry debtors in his audited 17 having balance as Printed from counselvise.com From the above, it can be noticed that appellant has shown Manoj enterprises Rs.2,84,01,897/- total sales declared by the appellant to this party during the F.Y.2016-17 was to the tune of Rs. 3,66,93,397/ amount claimed to be received in cash of Rs. 82,91,500 and balance receivable as Rs.2,84,01,897). Although the AO has made addition u/s 68 stating that identity, creditworthiness and genuineness of the party is not verifiable. However, if AO was of the view that sales have actually not been made to the abovementione then he should have rejected the books of accounts maintained by the appellant and should have added the whole sale declared by the appellant to these parties including the debit balances as reflected in the balance sheet. However, the AO has no Further, it is noticed that appellant has submitted the PAN No, address, Tin No, and Form C issued by Directorate of Commercial Taxes, Govt identity of the parties regarding genuineness of the transaction, the appe for F.Y. 2015-16 & 2016 of invoices of sales made to A.K. Enterprises & Manoj Enterprises, C form as proof of interstate sale duly recorded by both parties in their books under Commer Tax department, Govt Return for F.Y. 15 ledger accounts of both parties. ITA No. 82/DDN/2025 6 From the above, it can be noticed that appellant has shown Manoj enterprises as a debtor having balance of - as on 31.03.2017 which means that total sales declared by the appellant to this party during 17 was to the tune of Rs. 3,66,93,397/ amount claimed to be received in cash of Rs. 82,91,500 lance receivable as Rs.2,84,01,897). Although the AO has made addition u/s 68 stating that identity, creditworthiness and genuineness of the party is not verifiable. However, if AO was of the view that sales have actually not been made to the abovementioned parties, then he should have rejected the books of accounts maintained by the appellant and should have added the whole sale declared by the appellant to these parties including the debit balances as reflected in the balance sheet. However, the AO has not done so. Further, it is noticed that appellant has submitted the PAN No, address, Tin No, and Form C issued by Directorate of Commercial Taxes, Govt. of West Bengal to prove the identity of the parties regarding genuineness of the transaction, the appellant submitted copy of sales register 16 & 2016-17, cash ledger, cash book, copy of invoices of sales made to A.K. Enterprises & Manoj Enterprises, C form as proof of interstate sale duly recorded by both parties in their books under Commer Tax department, Govt. of West Bengal, Copy of Sales Tax Return for F.Y. 15-16 and all quarters of F.Y. 16- ledger accounts of both parties. ITA No. 82/DDN/2025 Suryanchal Furnitech From the above, it can be noticed that appellant has as a debtor having balance of as on 31.03.2017 which means that total sales declared by the appellant to this party during 17 was to the tune of Rs. 3,66,93,397/-( amount claimed to be received in cash of Rs. 82,91,500 lance receivable as Rs.2,84,01,897). Although the AO has made addition u/s 68 stating that identity, creditworthiness and genuineness of the party is not verifiable. However, if AO was of the view that sales have d parties, then he should have rejected the books of accounts maintained by the appellant and should have added the whole sale declared by the appellant to these parties including the debit balances as reflected in the balance Further, it is noticed that appellant has submitted the PAN No, address, Tin No, and Form C issued by Directorate of of West Bengal to prove the identity of the parties regarding genuineness of the llant submitted copy of sales register cash book, copy of invoices of sales made to A.K. Enterprises & Manoj Enterprises, C form as proof of interstate sale duly recorded by both parties in their books under Commercial of West Bengal, Copy of Sales Tax -17 and Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 7 Regarding AO’s contention that appellant failed to furnish the details of transportation as the appellant was manufacturing the state of Uttarakhand and sales were made to parties located in West Bengal, it is noticed that appellant had filed Form C given by A.K. enterprise (TIN No. 19533921014) & Manoj Enterprises (TIN No. 19661581841) issued by Commercial Tax Department, Govt. of West Bengal for interstate sales made to Manoj enterprises and A.K. Enterprises which was issued by specified authority after ensuring due verification. 1. 6.1.3 Thus, on the basis of facts of the case, submission filed by the appellant & material on record, following observations are made: 1. As regards to identity and existence of the parties to whom sales have been shown, the appellant has submitted their PANs, proof of address, TIN No (issued by Sales Tax Department) and form C issued by Commercial Tax Department, Govt. of West Bengal Govt. 2. Regarding genuineness of the sales transactions claimed, the appellant has submitted Sales register, Cash ledger/ cash book, ledger accounts, copy of quarterly sales Tax return along with Annexure 3 for F.Y. 2015-16 & 2016-17, copy of invoices of parties to whom sales were made, C Form issued by Commercial Tax Department in respect of interstate sales transactions. 3. As regards to A.K. enterprises, the appellant had declared substantial sales to this party in F.Y.2015-16 also for which the appellant has shown the party as debtor in his audited books/balance sheet /list of debtors for F.Y. 2015-16 and these audited accounts alongwith ITR for A.Y.2016-17 were filed on 29.09.2016 well before the date of declaration of demonetization on 08.11.2016. Hence, there is no point in doubting the existence and sales made for F.Y. 2016-17 when the sales made to this party during F.Y.2015-16 have already been accepted and appellant has also stated that it has received cash from A.K. Enterprises in respect of debit balance outstanding as on 31.03.2016 and sales made during F.Y.2016-17. 4. Regarding Manoj enterprises, it is noticed that appellant has shown Manoj enterprises as a debtor having balance of Rs.2,84,01,897/- as on 31.03.2017 Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 8 which means that total sales declared by the appellant to this party during the F.Y.2016-17 was to the tune of Rs. 3,66,93,397/- (amount claimed to be received in cash of Rs. 82,91,500 and balance receivable as Rs.2,84,01,897). Although the AO has made addition u/s 68 stating that identity, creditworthiness and genuineness of the party is not verifiable. However, if AO was of the view that sales have actually not been made to the above-mentioned party, then he should have rejected the books of accounts maintained by the appellant and should have added the whole sale declared by the appellant to this party including the debit balances as reflected in the balance sheet. However, the AO has not done so. 5. Further, the appellant had submitted copies of sale invoices in respect of sales made to the above mentioned two parties and also produced original invoices before the AO for verification along with the respective ledgers, cash book & sales register for A.Y.2016-17 & 2017-18. 6. Further, books of accounts have not been rejected by the AO in respect of sales declared by the appellant. 6.1.4 In this respect, Hon’ble ITAT, Chandigarh in case of Smt Charu Agarwal Vs CIT [2022] 140 Taxmann 588 (Chandigarh-Trib.) has held that where cash deposited post-demonetization by assessee was out of cash sales which had been accepted by Sales Tax/VAT Department and not doubted by Assessing Officer and there was sufficient stock available with assessee to make cash sales, sales made by assessee out of existing stock were sufficient to explain deposit of cash (obtained from realization of sales) in bank account and, thus, cash deposits could not have been treated as undisclosed income of assessee. Further, Hon’ble ITAT Jaipur in case of [2025] 171 taxmann.com 229 (Jaipur - Trib.) Jitendra Kumar Tahilramani vs. Income-tax Officer has held that where assessee deposited huge cash during demonetization period in his bank accounts contending that said cash was proceeds of cash sales, since assessee furnished all sales invoices with complete year cash book, names, addresses and telephone numbers of person to whom cash sales were made, such sales could not be considered as unexplained money and that too when profit derived from those sales proceeds was already taxed as part of sales. Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 9 Also in case of Subhash Chand Gupta vs. ACIT [2024] 168 taxmann.com 76 (Delhi - Trib.) [18-10-2024], Hon’ble ITAT Delhi held that \"Where assessee deposited cash in bank account during demonetization period, assessee had made huge sales in cash which eventually stood deposited in bank account and entire cash sales made by assessee were duly reflected in VAT returns of assessee, addition made by Assessing Officer under section 69A was rightly deleted by Commissioner (Appeals). Further, in case of \" [2025] 170 taxmann.com 639 (Delhi - Trib.) [25-09-2024] S. Balaji Mech-Tech (P.) Ltd. vs. Income-tax Officer, Hon’ble ITAT Delhi held that in case of unexplained cash deposit during demonetization, where the AO neither rejected books of accounts or method of account adopted by the assessee and all purchase and sales were duly recorded and assessee has already declared cash sales in its books and explanation was already part of book results, there was no avenue for lower authorities to make addition under section 68. 6.1.5 Thus, in view of facts of the case as discussed in para 6.1.2 and 6.1.3 and judicial pronouncement of various tribunals as discussed in para 6.1.4, I am of the view that addition made u/s 68 of the Act by the AO is unwarranted in this case. Accordingly, the addition of Rs.2,78,62,397/- made by the AO is hereby deleted. Ground No.1 of the appeal is allowed.” 3.1 This is what leaves the Revenue aggrieved. 4. Both the learned representatives vehemently reiterate their respective stands against and in support of the impugned addition. The Revenue quotes various landmark judicial precedent in Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), CIT Vs. Durga Prasad More (1971) 82 ITR 540 and PCIT vs. NRA Iron & Steel Pvt. Ltd. (2019) 412 ITR 161 that we ought to examine the assessee’s relevant evidence and pleadings herein Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 10 regarding source of its’ impugned cash deposits in light of human probability(ies) after removing all blinkers. Mr. Rana next submits that the assessee herein had deposited the impugned cash during demonetization which was claimed as realized from sundry debtors in case of M/s A. K Enterprises and M/s Manoj Enterprises which was never proved to the entire satisfaction of the Assessing Officer. His case therefore is that the Revenue instant sole substantive ground raises a very serious question of genuineness of the impugned cash deposits which deserves to be accepted in the department’s favour. 5. The assessee on the other hand has drawn strong support from the CIT(A)’s foregoing detailed discussion holding it’s impugned cash deposits as part of regular business collection involving various sundry debtors as tabulated in the lower appellate discussion. Learned counsel could hardly dispute that the assessee took no steps to get all these clinching facts verified from the said twin parties namely, M/s A. K Enterprises and M/s Manoj Enterprises. The fact however remains that the assessee is engaged in regular business activity in furniture trading etc. who had also filed all the corresponding details of manufacturing and VAT registration, P&L account etc. Meaning thereby that because of some procedural lapses, it’s impugned Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 11 cash deposits could not be treated as an unexplained in entirety as well. 6. Be that as it may, we are of the considered view in this factual backdrop that a lump sum addition of Rs.15,00,000/- in the assessee’s case would be just and proper with a rider that the same shall not be treated as a precedent. The learned CIT(A)’s impugned lower appellate findings is deleting this entire cash deposits addition of Rs.2,78,62,397/- are upheld to the extent of Rs.2,63,62,397/- in other words. Necessary computation shall follow as per law. 7. So far as assessee’s assessment under Section 115BBE is concerned, we quote S.M.I.L.E Microfinance Limited Vs. The ACIT CC-1 in W.P.(MD) No.2078 of 2020 & W.M.P. (MD) No. 1742 of 2020 held that the said provision applied for transactions done on or after 01.04.2017 only. The assessee is accordingly directed to be assessed under normal provisions only. Printed from counselvise.com ITA No. 82/DDN/2025 Suryanchal Furnitech 12 8. This Revenue’s appeal is partly allowed. Order Pronounced in the Open Court on 21/01/2026. Sd/- Sd/- (Manish Agarwal) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 21/01/2026 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR Printed from counselvise.com "