SUGRIV AGGARWAL,NEW DELHI V. ITO, WARD-44(5), NEW DELHI

ITA 144/DEL/2023

AI Insights

The case involves Sugriv Aggarwal, the appellant, who contested the addition of Rs. 27,21,110 to his income for the assessment year 2017-18, which was treated as unexplained cash deposit by the Income Tax Officer under section 68 read with section 115BBE of the Income Tax Act. The addition was initially confirmed by the CIT(A). The appellant argued that the cash deposits were from legitimate cash sales of computer and computer parts business, which were documented and audited. The Tribunal, after reviewing the submissions and evidence, found merit in the appellant's arguments and deleted the addition, highlighting that the cash sales and deposits were almost the same with only a minimal increase during the relevant financial year.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472035 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Other Referred Cases: Commissioner of Income Tax vs. Kailash Jewellery House, DCIT, Central Circle 29, New Delhi vs. Subhash Chand Gupta, DCIT Circle 4(2), New Delhi vs. Bawa Jewellers Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR
• Assessee Lawyers: VED JAIN
• Keywords: Business income; Corroborative evidences; Unexplained cash credit; Principle of natural justice; Bogus
• Section: 143(2); 68

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘G’: NEW DELHI) BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No:- 144/Del/2023 (Assessment Year- 2017-18) Sugriv Aggarwal, 17/26, East Punjabi Bagh, Delhi-110026. Vs. Income Tax Officer, Ward-44(5), Delhi. PAN No: AADPA4193P APPELLANT RESPONDENT Assessee by : Shri Ved Jain, Adv. Ms. Uma Upadhyay, CA and Ms. Kirti Gupta, CA Revenue by : Ms. Harpreet Kaur, SR. DR Date of Hearing : 29.11.2024 Date of Pronouncement : 27.02.2025 ORDER PER SUDHIR PAREEK, JM This appeal by the assessee is directed against the order of Ld. National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the Ld. CIT(A)] vide order dated 29.12.2022, pertaining to assessment year 2017-18. The assessee has raised the following grounds of appeal: ITA No.- 144/Del/2023 Sugriv Aggarwal 2 “1. On the facts and circumstances of the case, the order passed by the learned Commissioner Income Tax (Appeals). National Faceless Appeal Centre (CIT(A), NFAC)) is bad, both in the eye of law and on the facts. 2 (i) On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on fact and in law, in confirming the addition of Rs 27,21,110/-made by the AO on account of cash deposited in the bank account treating the same as unexplained invoking section 68 read with the section 115BBE of the Income Tax Act. (ii) That the abovesaid addition has been confirmed rejecting the detailed submissions and explanation along with the evidences brought on record by the assessee explaining the cash was deposited out of the cash sales made by the assessee. 3. On the facts and circumstances of the case, the learned CIT(A), NFAC has grossly erred both on facts and in law in confirming the above additions by indulging in surmises without bringing on any direct evidence against the assessee, only on the basis of presumption and assumption. 4. On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in confirming the addition, despite the fact that the assessee has regularly maintained complete stock records, books of accounts are audited as per law and nothing adverse were pointed out both by the AO as well as CIT(A). 5. On the facts and circumstances of the case, learned CIT(A) NFAC has erred both on facts and in law in confirming the addition rejecting the contention of the assessee that the quantity purchased and sold being completely tallying, the addition made by the AO cannot be sustained. 6. On the facts and circumstances of the case, learned CIT(A) NFAC has erred both on facts and in law in confirming the addition rejecting the contention of the assessee that cash sales being already recorded by the assessee, further addition made by the AO will lead to double taxation of the same amount in the hands of the assessee. 7. The appellant craves leave to add, amend or alter any of the grounds of appeal.” ITA No.- 144/Del/2023 Sugriv Aggarwal 3 2. Heard and perused the rival submissions and scanned the material available on record. 3. Brief facts of the case may be summarized as that Return of income declaring taxable income of Rs 10,55,080/- was filed by the assessee on 08.10.2017 through e-filing vide acknowledgement number 243020321141017. The case of the assessee was selected for Complete Scrutiny through CASS with the main issue to examine the abnormal increase in cash deposits during demonetization period as compared to average rate of cash source of Cash deposited during Demonetization Period. Accordingly notice u/s 143(2) of the I.T. Act was issued on 16.08.2018 and 28.09.2018 and served upon assessee at his e-mail address available in ITBA portal. 3.1 The assessee in his reply letter dated 05.11.2019 has submitted that the assessee is engaged in trading in the business of Sales Purchase of Computer and Computer Parts. The 3CB and 3CD Report dated 05.10.2017 audited by Shri Vivek Gupta filed by the assessee through his e-filing account is available on record. Other submissions filed online by the assessee vide letter dated 05.11.2019 08.11.2019.13.11.2019. 15.11.2019. 16.11.2019, 12.12.2019. ITA No.- 144/Del/2023 Sugriv Aggarwal 4 16.12.2019 and 23.12.2019 through his e-filing account are placed on record. 4. The Ld. AR submitted that the Ld. CIT(A) erroneously confirmed the addition of Rs. 27,21,110/- made by the Ld. AO on account of cash deposit in the bank account treating the same as unexplained invoking section 68 r/w section 115BBE of the Income Tax Act, and while doing so, the Ld. CIT(A) rejected the detailed submissions and explanation along with the evidences brought on record by the assessee explaining the cash was deposited out for the cash sales made by the assessee and he simply confirming the addition indulging in surmises and conjecture without bringing on any direct or in direct evidence against the assessee, whereas the assessee regularly maintained complete stock record, books of accounts audited as per law and nothing adverse were pointed out before the both lower authorities. 5. Ld. DR has relied upon the orders of the authorities below. 6. The Ld. AO observed in his order that the assessee has made manipulation for the source of cash deposited during demonetization period and the cash deposit during above period is ITA No.- 144/Del/2023 Sugriv Aggarwal 5 nothing but the unexplained cash credits found in the books of accounts as per section 68 of the Act, so, the cash deposited of Rs. 86 lakhs during demonetization period source of which could not be proved. However aggrieving with the same, the assessee preferred an appeal before the Ld. CIT(A), and Ld. CIT(A) while disposing the appeal preferred by the assessee, found force in the submissions of the assessee with respect to deposit of demonetization currency in more than one transaction and stated that in view of submissions regarding detailed item wise stock summary in the form 3CA, there is no any adverse bearing in the case of appellant. The relevant part of the order of Ld. CIT(A) is reproduced as under: “6.2 The appellant has filed detailed written submissions in this regard rebutting the observations of the AO in the assessment order. As regards the first observation of the AO in the assessment order that why the assessee has not deposited all the cash in one bank account in a single day or may be in a single day in three bank account, it has been submitted that there were no guidelines issued by the Govt. of India or RBI at the time of demonetization to deposit cash in one go or within one day in a particular bank account. The days immediately succeeding demonetization were enveloped by an atmosphere brimming with panic, fear and uncertainty and insecurity wherein every person acted differently during the period of demonetization as per his own wisdom so far as cash deposits were concerned. Further, any person cannot take the irrational decision of carrying a very huge amount of cash with him since it puts him and his money at a considerable degree of risk of theft. Accordingly, the assessee chose not to deposit the entire quantum of cash held on a single day as the same involved travelling with the huge sum of cash. The appellant in this regard has also highlighted that that 10 th of November, 2016 was the first working day after the announcement of demonetization on 08.11.2016 on which the banks started accepting the deposits of ITA No.- 144/Del/2023 Sugriv Aggarwal 6 demonetized currency notes from general public and cash was deposited within four working days of demonetization. The act of depositing demonetized currency within four working days appears to be prudent behavior on the part of the appellant. Further I find force in the submission of the appellant with respect to deposit of demonetized currency in more than one transaction taking into consideration security concerns and risk involved in carrying big amounts of cash. As regards the observations of the AO with respect to the quantitative details of mobile phones not appearing in the quantitative details reported in the 3CD, it is noticed that in Form 3CD the goods traded are reported under major heads monitors, CVT/UPS/SMPS, computer card, drives, others, inverter and battery. The appellant in this regard has referred to the detailed item wise stock summary filed before the AO during the assessment proceedings vide reply dated 12.12.2019 placed at paper book page no. 529 to 538. On perusal of the same it is noticed that in the stock summary number of different items are being accounted for under the major heads of traded goods reported in the Form 3CD The inventory of mobile phones has been reported under line item others in the quantitative details reported in 3CD. In view of the sald submission filed before the AO during the assessment proceedings the observation of the AO in the assessment order has no adverse bearing in the case of the appellant. As regards, the observation of the AO with respect to the different trades reported in KYC submitted before the banks, the appellant has submitted that he is engaged in the trading of computer hardware, mobile phones and related components and accessories for which stock summary reflecting opening, purchase, sale and closing stock of these items were submitted before the AO along with purchase and sale invoices and the respective confirmation from debtor and creditors. The appellant has further submitted that the wrong trade reported in the KYC was mistake on the part of the bank not him which cannot be the basis to doubt the trade conducted by him which are otherwise supported by the documentary evidences. In this regard, I am of the view that the trade of computer hardware, mobile phones and related components and accessories conducted by the appellant in the year under consideration is not in doubt in view of the supporting evidences given during the assessment proceedings which has not been doubted by the AO in the assessment order. Further, mistake on the part of banker in mentioning the correct trade name in the KYC form cannot be taken adversely against the appellant specifically when the appellant has already substantiated its trade by filing the above mentioned documentary evidences. As regards the source of cash deposits made during the course of demonetization the appellant has submitted that the said cash pertains to the cash sales done in the month of July, August, September and October, 2016. The said fact has also been acknowledged by the AO in the assessment order. However, the AO has not raised any doubt with respect to the sales made in the month of July to September, 2016. Accordingly, it can be concluded that the cash sales to the extent of Rs.50,78,890/-made ITA No.- 144/Del/2023 Sugriv Aggarwal 7 in the months of July, August and September 2016 is not in doubt and accordingly there is no reason to question the cash deposits to the extent of Rs.50,78,890/- made out of the said available cash balance pertaining to these sales. Further, the observation of the AO with respect to the high cash sales made in the month of October, 2016 which is amounting to Rs.32,12,155/- is based on incorrect analysis of the facts. In this regard, the AO has analyze that the sale for the month of October, 2016 of Rs. 2,53,58,721/- has increased to 275% in comparison to the preceding year sales of the same month i.e. October, 2015. On perusal of the facts of the case that in this regard it is noticed that the said figures of sales mentioned by the AO in the assessment order is of total sales i.e. credit sales cash sales. The cash component in the said sales is Rs. 32,12,155/-, which is only in doubt and the remaining portion of credit sales is otherwise not in doubt. As regards the cash sales, there is no specific adverse remark of the AO in the assessment order, however the apprehension of the AO that the appellant must have made manipulation of said sales in its books of accounts so as to create source of cash deposit during demonetization cannot be completely ignored, since many traders/businesses were engaged in such practices during the demonetization so as to adjust their unaccounted money in the form of demonetized currency in their books of accounts. Accordingly, in the interest of natural justice and to secure the possibility of any revenue leakage in this regard, out of total cash sales of Rs. 32,12,155/- reported for the month of October 2016, sales of Rs. 8,00,000/- which approx. 25% of sales reported by the appellant in the month of October, 2016 is treated to be explained. In view of the above findings the addition made by the AO is deleted to the extent of Rs. 58,78,890/- (Rs.50,78,890 + Rs. 8,00,000/-) and the balance addition of Rs. 27,21,110/- is hereby confirmed.” 7. The Ld. CIT(A) deleted the addition made by the Ld. AO to the extent of Rs. 58,78,890/- but the balance addition of Rs. 27,21,110/- confirmed, which is questioned before us. 8. The Ld. AR submitted that during assessment proceedings, the assessee submitted all the relevant documents for kind perusal of the Ld. AO as under: ITA No.- 144/Del/2023 Sugriv Aggarwal 8 1) Copy of acknowledgment of return and computation of income for the relevant assessment year (PB Page no. 1-2) 2) Copy of audited financial statements (PB page no. 3-7) 3) Copy of tax audit report (PB page no. 8-25) 4) Details of bank account along with the details of deposit made (PB page no. 45) 5) Details of all the bank accounts maintained along with the account numbers of each bank account. 6) Copy of bank statement of account maintained with HDFC Bank (PB Page no. 48-51) 7) Copy of bank statement of account maintained with Kotak Mahindra Bank (PB Page no. 52-53) 8) Copy of bank statement of account maintained with SBI (Formerly, SBBJ) (PB Page no. 54-78) 9) Confirmation of a n of account of Debtors (PB Page no. 79-129) 10) Confirmation of account of Creditors (PB Page no. 130-139) 11) Note on cash deposits made during the year reproduced hereunder (PB Page no. 140) 12) Copy of Cash Book related to FY 2016-17 (PB Page no. 141-162) 13) Copy of Sales invoices for sales made from July 2016 to October 2016 (PB Page no. 163-385) 14) Details of Cash sales and cash deposit (PB Page no. 389) 15) Copy of purchase bills (PB Page no. 390-451) 16) Copy of detailed chart showing month wise sales and purchase summary for FY 2015-16 (PB Page no. 453) 17) Copy of detailed chart showing month wise sales and purchase summary for FY 2016-17 (PB Page no. 453) 18) Copy of confirmation of debtors and creditors regarding their balances (PB Page no. 455-481) 19) Detailed chart showing both cash and credits sales from July 2016 to December 2016 (PB Page no. 487-488) 20) Item/Quantity wise stock summary (PB Page no. 490-496) 21) Details of sundry creditors (PB Page no. 497) 22) Copy of acknowledgement of VAT returns reflecting the sales made for AY 2017-18 (PB Page no. 498-501) 9. The Ld. AR submitted that the assessee maintained proper book of account which are being subjected to audited and has been regularly filed income tax return and he has made cash deposit of Rs. 86 lakhs during F.Y. 2016-17 relevant to A.Y. 2017-18 and ITA No.- 144/Del/2023 Sugriv Aggarwal 9 having cash balance of Rs. 88,53,084/- as on 08.11.2016 and details of the sales in each of four months are as under: S. No Months Cash Sales (IN Ruppes) 1 July 2016 17,37,180/- 2 August 2016 16,36,160/- 3 September 2016 17,05,550/- 4 October 2016 31,12,155/- 10. There is material substance in the submissions advanced on behalf of the assessee that the addition was made without pointing out any defect in the books of account of the assessee and it cannot be ignored that the Ld. CIT(A) duly accepted the contentions of the assessee along with the evidences filed by the assessee, as mentioned hereinbefore and deleted the amount to some extent which is sales made from July 2016 – September 2016, confirmed the balance sales of Rs. 27,12,110/-, and Ld. AR submitted in this regard it was without any basis. 11. The Ld. AR further submitted that the by Ld. CIT(A), no adverse inference was drawn in respect to business activities of the assessee, stock details submitted by the assessee and even no defect / discrepancies found in the books of account prepared by ITA No.- 144/Del/2023 Sugriv Aggarwal 10 the assessee. It is relevant to mention here that while made addition, the Ld. AO is not rejected the book of accounts and not found any discrepancies in the stock, sales and purchases. 12. In strengthened the arguments advance on behalf of the assessee, the Ld. AR relied upon the judgment passed by the Hon’ble High Court in the case of Commissioner of Income Tax vs. Kailash Jewellery House, 2010(4) TMI 1070- Delhi High Court. In which Hon’ble Delhi High Court held at where the sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return, the cash sales could not be treated as undisclosed income and no addition could be made. 13. He also relied upon the order of Co-ordinate Bench in the case of DCIT, Central Circle 29, New Delhi vs. Subhash Chand Gupta, 2023(5) TMI 1110- ITAT Delhi, in ITA No. 1548/Del/2022, wherein it is held that the sales cannot be added u/s 68 unless they are proved as bogus on the basis of some reliable evidences. He also relied upon the order of Co-ordinate Bench of ITAT Delhi, in the case of DCIT Circle 4(2), New Delhi vs. ITA No.- 144/Del/2023 Sugriv Aggarwal 11 Bawa Jewellers Pvt. Ltd. 2023(7) TMI 494- ITAT Delhi, in ITA No.- 352/Del/2021, wherein it was held that whereas the Ld. AO did not point out any defects in the books of account, no discrepancies were found in the stocks, sales and purchases and simply the Ld. AO concluded that there are huge deposits in the bank account during demonetization period and assessee amply demonstrated with the evidences that the cash sales and the cash deposits during relevant FYs were almost same and there was only a minimal increase in cash deposits during the FY 2016-17 relevant to A.Y. 2017-18. The addition could not be made. 14. On the basis of foregoing discussions and establish principle of law, we find material substance in the submissions on behalf of the assessee and grounds of the appeal are deserve to be allowed and the addition in question is deleted. 15. In the result, appeal of the assessee is allowed. Order pronounced in the Open Court on 27.02.2025. Sd/- Sd/- (S. RIFAUR RAHMAN) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA No.- 144/Del/2023 Sugriv Aggarwal 12 Dated: 27 /02/2025 Pooja, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA No.- 144/Del/2023 Sugriv Aggarwal 13 1. Date of dictation of Tribunal order 14.02.25, 20.2.25 2. Date on which the typed draft Tribunal Order is placed before the Dictating Member 14.02.2025, 21.02.25 , 24.2.25 3. Date on which the typed draft Tribunal order is placed before the other Member 4. Date on which the approved draft Tribunal order comes to the Sr. PS/PS 5. Date on which the fair Tribunal order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr.PS/PS 7. Date on which the final Tribunal order is uploaded by the Sr.PS/PS on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal order 9 Date of killing off the disposed of files on the judisis Portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes to the Assistant Registrar for endorsement of the order 12. Date of Dispatch of the order "