AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1075
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....s selected for scrutiny to examine the issue of "abnormal increase in cash deposit during the demonetization period as compared to the pre- demonetization period and lower amount disallowed u/s 40(a)(ia) in ITR in comparison to Tax Audit Report". Subsequently, several notices u/s 143(2)/142(1) of the Incometax Act, 1961 (for short 'the Act') was issued from time to time. Against the said notice, the assessee had submitted details before the AO. After considering said details, the AO noticed that the assessee has claimed to have made purchases of Rs. 26,91,200/- from Unique Enterprises (PAN: AJAPG1418M) having registered address at C-7/142, Ground Floor, Sector-8, Rohini, Delhi-110085. To verify the said transaction, the AO deputed an Inspector, Shri Sanjay Kumar to carry out necessary enquiries at the said address. The said Inspector visited the said premise on 27.12.2019 and found it locked. As gathered some information by him during enquiry, it is noticed that the said shops usually remain closed and no actual business activities are carried out from that address. The AO observed that the books submitted by the assessee are self-managed to introduce his own unaccounted money unde....
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.... compared to cash deposit in the previous year F.Y. 2015-16 in the same period. Further, it is also observed that cash sale in the F.Y. 2016-17 increased up to 8172% in comparison to F.Y. 2015-16 and cash sale in F.Y. 2015-16 was only of Rs. 1,50,000/- against cash sale of Rs. 1,24,07,740/- in F.Y. 2016-17. In this regard, the appellant did not furnish comparative chart / balance sheet of preceding year as well as succeeding year before the AO as well as appellate authority. In the present case, the AO has also observed from the cash book that cash sale to the tune of Rs. 5,81,020/- instead of Rs. 58,11,020/- during the year. During the assessment proceedings, the appellant has also claimed to made purchase of Rs. 26,91,200/- from Unique Enterprises (PAN: AJAPG1418M) having registered address at C-7/142, Ground Floor, Sector 8, Rohini, Delhi-110085. To verify the said transaction, the AO deputed an inspector namely Shri Sanjay Kumar to carry out necessary enquiries at the said address. Shri Sanjay Kumar, inspector visited the said premise on 27.12.2019 and found it locked. As gathered some information by him during enquiry, the AO noticed that the said shops usually remains closed ....
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....mpletely failed to explain the source of cash deposits in bank account with credible documentary evidences. Therefore, I do not find any infirmity in the action of the AO in making addition of Rs. 1,23,97,000/- on a/c of unexplained cash deposit u/s 68 of the Act and levy of tax u/s 115BBE of the Act. Thus, these grounds of appeal of the appellant are dismissed." 4. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- "l. The action of the lower authorities in making an addition of Rs. 1,23,97,000/-out of cash deposited in the bank account of the assessee is unjust, illegal, arbitrary, illusory, unwarranted and addition deserves to be deleted. 2. The action of the lower authorities in making an addition of Rs. 1,23,97,000/- even after accepting the books of accounts is unjust, illegal, arbitrary, illusory, unwarranted and addition deserves to be deleted. 3. The action of the lower authorities in making an addition of Rs. 1,23,97,000/- by treating the same as unexplained deposits u/s 68 of the Income Tax Act is unjust, illegal, arbitrary, illusory, unwarranted and addition deserves to be deleted. ....
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....and arbitrary approach was adopted. * Throughout the assessment and appellate proceedings, the assessee filed all relevant documents, accounts, and evidences. Significantly, none of these materials were specifically doubted, contradicted, controverted or disbelieved by either the AO or the CIT(A). 6. With regard to the issue that no addition without rejection of books of account, ld. AR relied on the decision of Hon'ble Delhi High Court in the case of PCIT v. Pancham Realcon Pvt. Ltd. in ITA No. 295/2025 wherein Hon'ble High Court reinforced that "no addition under Section 68 can be made without rejecting the books of account or proving explanation unsatisfactory. The mere presence of cash deposits in the bank, matching with regular business turnover and supported by documentary evidence, does not justify addition. Further, double taxation of income already offered and assessed is illegal and unsustainable." 7. Further with regard to the issue of cash sales could not be treated as undisclosed income and provisions of section 69A cannot be invoked when the assessee has already declared the source for cash deposit in the books of account and the lower authorities w....
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....11. It is also fact on record that all the sales were recorded in the books, cash deposits are booked by cash book. The tax authorities had proceeded to make addition on the basis of presumption without there being any material. 12. On similar issues, we find force from the following case laws :- * The Hon'ble Delhi High Court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court): The Delhi High Court held that "cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same." under similar circumstances, deleted the addition made u/s 68 on account of cash deposit during the demonetization into bank by making following observations: "In the facts of above case cash of Rs. 24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. C....
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.... assessee be found with the money, the same is not recorded in the books accounts maintained by it for any source and not offers any explanation or such explanations are not found to be satisfactory to the AO. In this case, the assessee has already declared the cash sales in its books of account and offers the explanation as cash sales, which the lower authorities has accepted it as regular business transactions because they have not rejected the book results and brought to tax the total sales declared by the assessee in its books. Since the cash were already recorded and explanation is already part of the book results, there is no avenue for the CIT(A) to reject such explanations. This expression "explanation is found not satisfactory to the AO" is purely relates to the money found with the assessee which are not recorded in the books of account. In this case, the above expression has no relevance since the assessee had already declared the cash sales in its books. In the similar situation, the coordinate bench has held in the case of J.R. Rice India (P) Ltd as under: ''At the cost of repetition, to the extent of sales made, the stock position is also correspondingly reduc....