STAR PLY LAM LIMITED,CHANDIGARH V. DCIT/ACIT CIR 1(1) CHANDIGARH, CHANDIGARH

ITA 692/CHANDI/2025

AI Insights

The case involves M/s Star Ply Lam Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs.33.26 Lacs to its income for the Assessment Year 2017-18. The addition was initially made by the Assessing Officer under section 143(3) of the Income Tax Act, citing discrepancies in the cash deposits during the demonetization period. The Tribunal examined the nature of the assessee's business, the regular cash flows, and the maintenance of proper books of accounts, ultimately deciding in favor of the assessee by deleting the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787281 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 12-05-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD KUMAR CHAUDHARY LD.
• Assessee Lawyers: PARIKSHIT AGGARWAL LD
• Keywords: Source of fund
• Section: 143(3); 68

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं. / ITA No. 692/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2017-18) M/s Star Ply Lam Limited SCO 34, Sector 26 Chandigarh-160019 बनाम/ Vs. DCIT/ACIT Circle 1(1) Chandigarh ˕ायीलेखासं./जीआइआरसं./PAN/GIR No. AAECS-3258-F (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) Assessee by : Shri Parikshit Aggarwal (CA) - Ld. AR Revenue by : Shri Vinod Kumar Chaudhary (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 13-11-2025 घोषणाकीतारीख /Date of Pronouncement : 17/11/2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 17-10- 2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 31-12-2019. The sole grievance of the assessee is confirmation of addition of cash deposit of Rs.33.26 Lacs during demonetization period. The registry has noted delay of 132 days in the appeal, the condonation of which has been sought by Ld. AR on the strength of condonation petition which is accompanied by affidavit of assessee’s Chartered Accountant Shri Manish Goel. It has been stated Printed from counselvise.com 2 that the appeal could not be filed due to mistake on the part of CA’s office. Considering the same, we condone the delay and proceed with adjudication of appeal on merits. 2. The Ld. AR advanced arguments and contended that the assessee’s nature of business is such that it carries out regular cash sales throughout the year. The deposits are stated to be sourced out of regular business sales proceeds. The Ld. Sr. DR controverted the arguments of Ld. AR and supported the findings of lower authorities. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. 3. From the facts, it could be seen that the assessee filed return of income declaring income of Rs.23.35 Lacs. To verify the source of cash deposits in assessee’s bank account, the case was subjected to scrutiny. The assessee being resident corporate assessee is stated to be engaged in sale of ply-boards etc. It transpired that the assessee deposited cash of Rs.42.19 Lacs in Specified Bank notes and accordingly, required to explain the sources thereof. In response, the assessee furnished monthly cash statement to demonstrate that it had sufficient cash balance to make these deposits. However, finding certain discrepancy in the same, Ld. AO alleged that the assessee manipulated its cash book. Finally, Ld. AO computed average cash balance for FYs 2015-16 to 2017-18 which came to be Rs.8.92 Lacs. The benefit of the same was granted to the assessee and the remaining cash deposit of Rs.33.26 Lacs was added u/s 68 r.w.s. 115BBE of the Act. 4. During first appeal, the assessee assailed the findings of Ld. AO and referred to various judicial decisions to support its contentions. However, the same could not find favor with Ld. CIT(A) who upheld the stand of Ld. AO against which the assessee is in further appeal before us. Printed from counselvise.com 3 5. It emerges that the assessee is a corporate entity and by statute, it is required to maintain proper books of accounts including its cash book. The assessee is engaged in sale of ply-boards and it supplies the material to small traders. The assessee’s nature of business is such that it generates regular cash flows out of business activities. The assessee has achieved turnover of Rs.5.83 Crores in AY 2016-17 which has increased to Rs.14.83 Crores in this year. The assessee has deposited cash of Rs.207.96 Lacs in FY 2015-16 whereas the quantum of cash deposit in this year is less i.e., Rs.162.67 Lacs. The assessee has made regular deposits in its bank account in all the months of this year and there is no abnormality in the same. The trading results of the assessee have been accepted by Ld. AO and no fault has been found in the books of the assessee. The assessee has supplied cash books in support of cash deposits. The assessee is not shown to have any other sources of income. It is trite law that no addition could be made on mere suspicion. Even the working made by Ld. AO by applying average cash balance is fallacious one since the addition could not be made in this manner by completely ignoring the books of the assessee. On these facts, we would hold that the impugned addition is not sustainable on facts. Therefore, we delete the same. 6. The appeal stand allowed in terms of our above order. Order pronounced on 17/11/2025 Sd/- Sd/- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 17/11/2025 Printed from counselvise.com 4 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "