ACIT, Circle 34 (1) vs Priti Brijal Bhatia

PER S. RIFAUR RAHMAN, AM :

This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 26.09.2025 for the Assessment Year 2017-18.

At the time of filing of appeal, the Registry has pointed out a defect that appeal is time barred by 68 days. In response thereof, the ld. counsel for the assessee submitted that there was a reasonable cause for the delay in filing the appeal. Accordingly, he prayed that the delay in filing the appeal be condoned.

We have heard both the counsels on the issue of condonation of delay. In our considered opinion, there was a reasonable cause for the delay in filing the appeal. Therefore, we condone the delay in filing the appeal before the Tribunal.

Brief facts of the case are, assessee filed her return of income on 17.10.2017 declaring income of Rs.12,31,610/-. The case was selected for scrutiny through CASS. Accordingly, notices under section 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee. In response, assessee submitted information from time to time through ITBA Portal.

Assessee is engaged in the business of trading of gold, gold jewellery and diamond items. The assessee earned income from business in the name of M/s. Awesome Sparkles. During assessment proceedings, the AO observed that the assessee has made huge cash deposit of Rs.1.30 crores during demonetization period. When assessee was asked to substantiate the above cash deposit, in response assessee has submitted following chart :-

In reference to above chart, assessee submitted that the cash deposited by her in the current year is less compared to previous assessment year and also during demonetization period, assessee has deposited only Rs.1.3 crores compared to Rs.2.30 crores during the same period in the previous assessment year. It was submitted that cash sales and cash deposits in the bank account are regular feature of her business activities. After considering the same, the AO rejected the same and observed that the assessee has not furnished the details of cash sales and credit sales and cash purchase and credit purchases and further observed that opening balance of cash as on 01.04.2016 was just Rs.12,89,867/- and he tabulated month-wise closing cash balance paid during the period of demonetization from April to December as under :-

He observed that an average cash in hand in each month upto August was around Rs.10 lakhs but all of a sudden closing cash balance came to more than 20 times in September and 13 times in October just preceding month of demonetization.

Further assessee was asked to submit the details of invoice-wise and he observed that the transactions valued more than Rs.1 lakh was few compared to during October and November and also asked to submit details of sales month-wise, item-wise, value-wise and party-wise. Since assessee failed to submit relevant information and also not furnished copies of VAT return, based on the above observation, he proceeded to make the addition u/s 68 of the Act to the extent of Rs.1.30 crores.

Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and filed detailed submissions which are reproduced at pages 7 to 42 of the appellate order. After considering the same, ld. CIT (A) deleted the addition made by the AO by observing as under :-

Aggrieved with the above order, Revenue is in appeal before us raising following grounds of appeal :-

At the time of hearing, ld. DR of the Revenue brought to our notice detailed findings of the AO and brought to our notice details of cash deposits made by the assessee and also closing balance of each month. Ld. DR heavily relied on the findings of the AO that assessee has maintained closing cash balance of about Rs.10 lakhs before the demonetization period and suddenly closing balance is increased manifold as observed by the Assessing Officer. He submitted that assessee has not submitted proper documents before the AO and finally objected to the relief granted by the ld. CIT (A) who has not appreciated peculiar facts on record. He heavily relied on the detailed findings of the AO.

On the other hand, ld. AR of the assessee brought to our notice page 34 of the first appellate order wherein assessee has explained the details of cash deposit compared to previous assessment year and the cash deposit made by the assessee is lower by 13.95% before demonetization period and during demonetization period, the cash deposit was lower by 43.58% compared to previous year and subsequent to demonetization period, cash deposits were much higher compared to previous assessment year. He further submitted that cash deposit is made only out of cash sales made during the year. Therefore, assessee has demonstrated the source of cash and he heavily relied on the findings of the ld. CIT (A).

Considered the rival submissions and material placed on record. We observed that no doubt, assessee has maintained closing cash balance at the end of each month prior to demonetization period of about Rs.10 lakhs and habitually assessee deposited the cash sales in the bank account. During demonetization, assessee has cash sales and the same was deposited in the bank account during demonetization period. In our view, the closing cash balance cannot be the criteria to come to the conclusion that it is undisclosed source of income considering the fact that the assessee maintained proper books and whatever cash which was not deposited in the bank will be disclosed as closing cash balance. As per the books, assessee has recorded the sales and maintained proper cash book which shows that there is closing cash balance which was not deposited in the bank. Therefore, we noticed that the cash deposited by the assessee prior to demonetization period is lower by 13.95% and during the demonetization period i.e. 09.11.2016 to 31.12.2016, the cash deposited by the assessee is -43.58% compared to same period in previous assessment year. Since assessee has maintained proper books of account and demonstrated that cash deposits are out of its own business, the analysis and pattern of the AO in making the addition is not proper. Accordingly, we are inclined to uphold the findings of the ld. CIT (A).

In the result, the appeal filed by the Revenue is dismissed.