KISHNA GEARS PRIVATE LIMITED,DELHI V. ITO, WARD-14(4), DELHI

ITA 2885/DEL/2024

AI Insights

The case involves M/s. Krishna Gears Private Limited, which appealed against the order of the CIT (A) sustaining the additions made by the AO under section 68 of the Income Tax Act, 1961, for unexplained cash deposits during the demonetization period. The AO had made additions based on the difference between cash withdrawals and deposits, questioning the source of the cash. The CIT (A) upheld the AO's decision, leading to the appeal before the Tribunal. The Tribunal examined the submissions and evidence provided by the assessee, including bank statements and balance sheets, and found that the assessee had explained the sources of the cash deposits, leading to the allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781252 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2016-2017
• Appeal Filed On: 07-06-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIPUL KASHYAP
• Assessee Lawyers: ROHIT TIWARI
• Keywords: Opportunity of being heard; Unexplained cash credit
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.2885/DEL/2024 (Assessment Year: 2016-17) M/s. Krishna Gears Private Limited, vs. ITO, Ward 14(4), 501/25, Lane W 21, Sainik Farms, Delhi. Delhi – 110 062. (PAN : AAACK0789) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Rohit Tiwari, Advocate REVENUE BY : Shri Vipul Kashyap, Sr. DR Date of Hearing : 05.08.2025 Date of Order : 24.10.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. This appeal preferred by the assessee is directed against the order of the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short ‘ld. CIT (A)] dated 30.03.2024 for Assessment Year 2016-17. 2. Brief facts of the case are, assessee field its return of income on 08.07.2017 declaring an income of Rs.1,63,750/-. The case was selected for scrutiny through CASS for limited parameters. Notices under section 143(2) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and Printed from counselvise.com 2 ITA No.2885/DEL/2024 served on the assessee through ITBA Portal. The assessee is engaged in the business of manufacturing of Gear Boxes for industrial use. During assessment proceedings, AO observed that assessee has deposited cash in Corporation Bank account which was not disclosed in its ITR and no explanation towards source of cash deposited was furnished. The AO reproduced the abovesaid current account at pages 2 to 5 of the assessment order and further observed that assessee also deposited cash in State Bank of India account to the extent of Rs.6,25,000/- and the relevant details are given at page 5 of the assessment order. Based on the above information, assessee was asked to explain the source of cash deposited. In response, assessee submitted as under ;- “It is submitted that during the year under assessment i.e. AY 2016-2017 there was no demonetization period. However, during the demonetization period i.e. 08.11.2016 to 31.12.2016 the assessee had deposited Cash of Rs.29,10,000/-. The cash deposited was out of Old Cash in hand held by the company and the same had been withdrawn from the banks on various dates. The old cash in hand can also be verified from the Balance Sheet for the FY 2015-2016. We are enclosing herewith the copy of bank statement for the period 08.11.2016 to 31.12.2016 for your kind perusal. We are enclosing herewith the detail of Cash Withdrawals and Deposits into Bank during the Period 01.04.2014 to 31.03.2015, 01.04.2015 to 31.03.2016 and 01.04.2016 to 31.12.2016. It can be verified from the details that at the end of the FY 2014-2015 net excess cash withdrawal was Rs.1,19,65,922.20. At the end of FY 2015-2016 net excess cash withdrawal was Rs.86,89,336.00 and at the end of the period 31.12.2017 net excess cash withdrawal was Rs.3,33,446/- Thus during the demonetization period the assessee had deposited the old cash which was previously withdrawn from the banks on various dates.” Printed from counselvise.com 3 ITA No.2885/DEL/2024 3. After considering the submissions of the assessee, the AO rejected the same and observed that assessee has withdrawn cash of Rs.31,62,000/- only whereas cash deposited in Corporation Bank is Rs.82,76,650/- and there is a difference of Rs.51,14,000/-. Further he observed that assessee has filed its return of income with a delay of one year after the demonetization and further observed that the assessee has not filed ITR for AY 2015-16 whereas assessee has furnished Balance Sheet through ITBA System showing cash-in-hand amounting to Rs.75,29,741/-, he observed that the figure shown in FY 2014-15 is an after-thought and rejected the closing balance shown in FY 2015-16. With the above observation, he gave another notice to assessee to explain the same. In response, assessee submitted as under :- “We had already filed before your honor the detail of Cash Withdrawals and Deposits into Bank during the Period 01.04.2014 to 31.03.2015, 01.04.2015 to 31.03.2016 and 01.04.2016 to 31.12.2016 and submitted that the cash deposited during demonetization period was deposited out of the old cash in hand which was previously withdrawn from the banks on various dates. It is further submitted that the assessee had not made any cash sales during the FY 2014-2015 and FY 2015-2016. We are enclosing herewith the Sales Ledger for the FY 2014-2015 and FY 2015- 2016 for your kind perusal. Further, it is submitted that the Inventory of the Company as on 31.03.2014 was Rs.8,69,45,9831-, as on 31.03.2015 was Rs.8,95,77,700/- and as on 31.03.2016 was Rs.9,51,87,9001-. Thus the inventory of the company had been increased during the FY Printed from counselvise.com 4 ITA No.2885/DEL/2024 2014-2015 and FY 2015-2016 and inventory had not been liquidated into cash or by any other means. That the source of cash deposited by the company was out of Old Cash in hand held by the company and the same had been withdrawn from the banks on various dates and duly accounted for in the books of accounts of the company.” 4. After considering the above submissions, the AO rejected the same and observed that assessee has not explained the source of cash deposited and the opening cash-in-hand shown in FY 2014-15 whereas no return of income and audit report for the abovesaid financial year was filed by the assessee. With the above observation, he proceeded to make the difference of cash deposited reducing the cash withdrawal made by the assessee during the year as unexplained cash deposited for the year under consideration and also proceeded to make the cash-in-hand declared by the assessee as opening balance for FY 2015-16 of Rs.77,46,537/-as unexplained amount u/s 68 of the Act. At the end, he made addition of Rs.1,34,86,187/- 5. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and filed a detailed submissions. After considering the submissions made by the assessee and material available on record along with assessment order, ld. CIT (A) observed that assessee has not furnished any written submissions in support of its claim and not submitted any explanation of cash deposit along with reliable evidence in Printed from counselvise.com 5 ITA No.2885/DEL/2024 support of its contention and grounds of appeal. Accordingly, he proceeded to sustain the addition made by the AO. 6. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- “1. That on the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming the order passed by the learned AO under section 143(3) of the Income Tax Act, dated 26.12.2018, by wrongly exercising jurisdiction and making additions on issues other than those identified for examination for Limited Scrutiny. 2. That on the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming the addition of Rs.1,34,86,187/- as unexplained cash credit under section 68 of the Income Tax Act, based on untenable grounds. 3. That on the facts and circumstances of the case and in law, the learned CIT (A) erred in confirming the addition of Rs.1,34,86,187/- without providing a proper opportunity of being heard, sufficient time to represent, and without confronting the material to the assessee on which the AO based the addition.” 7. At the time of hearing, ld. AR of the assessee brought to our notice page 2 of the assessment order wherein assessee has explained the details of cash deposit and also page 6 of the assessment order wherein AO has rejected the submissions of the assessee. He submitted that AO has not considered the opening balance of cash and prayed that the assessee has already explained the source of cash deposited which was in its possession and cash-in-hand which was deposited during the year as well as during demonetization period. Printed from counselvise.com 6 ITA No.2885/DEL/2024 8. On the other hand, ld. DR of the Revenue submitted that assessee has not submitted any relevant information before ld. CIT (A) and also he stressed upon that assessee has not provided the return of income and also the Balance Sheet was provided after one year of demonetization period. Therefore, he relied on the findings of the lower authorities. 9. Considered the rival submissions and material placed on record. We observe that the case of the assessee was selected for scrutiny with the limited mandate to verify the cash deposit made by the assessee during the year as well as during demonetization period. We observe that assessee has made cash deposit of Rs.82,76,650/- during the year, assessee has withdrawn cash of Rs.31,62,000/- and the above facts were already confirmed by the lower authorities and at the same time, we observe that assessee has filed Balance Sheet of AY 2015-16 with the closing cash balance of that year of Rs.75,29,741/- . As per the assessment order, the difference of cash deposited by the assessee is Rs.51,14,000/-. The source for the abovesaid cash deposited was out of cash-in-hand which was kept by the assessee and the same was carried forward from the previous assessment year. The AO has not acknowledged the opening cash balance for the current assessment year with the observation that assessee has not filed return of income for the previous assessment year and the information was submitted by the Printed from counselvise.com 7 ITA No.2885/DEL/2024 assessee only after one year which is an after-thought. After considering the facts available on record, we observe that reason for not accepting the opening cash balance was that assessee has not filed return of income for the AY 2015-16. We observe that assessee is a company and has to maintain its books of account. Assessee has maintained books of account and submitted relevant books of account for the year under consideration after duly audited. The assessee has explained sources of cash deposit for the year under consideration which includes cash withdrawal for the year under consideration and also out of opening cash balance maintained by the assessee for the year under consideration. In our considered view, assessee has explained the source of cash deposit for the year under consideration. As far as opening cash balance and not filing the return of income i.e. AY 2015-16, this is a matter which Department has to consider and take remedial action for the relevant AY i.e. 2015-16 and it cannot reject the books of account submitted for the year under consideration. Therefore, as far as cash deposit is concerned, assessee has already explained the source of cash deposit i.e. out of opening cash balance. Therefore, the AO is unjustified in making the addition of explained cash deposit of the year under consideration, also cannot proceed to make addition of opening cash balance as unexplained u/s 68 of the Act. In our considered view, the AO has made the addition of the Printed from counselvise.com 8 ITA No.2885/DEL/2024 opening balance as unsubstantiated due to the fact that assessee has not filed its return of income for the previous assessment year is unwarranted and unjustified. Therefore, we are inclined to allow the grounds raised by the assessee as the sources of cash deposits were already explained for the year under consideration and it is needless to say that Department can take other remedial action for the AY 2015-16, as it is an independent year to consider for the assessment. It cannot be the reason to reject the submissions for the year under consideration. There is no other material except presumptions. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 24th day of October, 2025 Sd/- sd/- (ANUBHAV SHARMA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24.10.2025 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "