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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-NFAC, Delhi dated 20.09.2025 under section 250 of the Act (hereinafter referred as ‘the Act’) arising from the assessment order dated 27.04.2021 by the NFAC, Delhi under section 143(3) of the Act for the Assessment Year 2018-19.
The Revenue has raised the following grounds of appeal:
1.“On facts and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,83,76,907/- made by the Assessing Officer under section 68 of the lncome-tax Act, 1961, without appreciating that the assessee failed to discharge the primary onus to establish the nature and source of the cash credits.
2.The Ld. CIT(A)failed to appreciate that mere filing of bank statements or reconciliation does not establish genuineness of the cash deposits and that the assessee failed to produce corresponding sale invoices, stock records, cash book and other primary books of account.
3.The Ld. CIT(A) erred in holding that the cash deposits represented recorded business turnover, without verifying the veracity of the claimed sales or examining supporting documents.
4.The Ld. CIT(A) erred in law and on facts in deleting the addition solely on the basis of assumption and without rebutting the findings of the Assessing Officer regarding unexplained nature of the cash credits.
5.The order of the Ld. CIT(A) is perverse, contrary to evidence on record and deserves to be set aside.
6.The appellant craves leave to add, amend, modify, or withdraw any of the aforesaid grounds of appeal at any time before or during the course of the hearing.”
The brief facts of the case are that the assessee is a private limited domestic company based/located at Delhi incorporated during the financial year 2015-16. The business of the assessee is dealership in bikes i.e 2 wheeler bikes of “Harley Davidson Brand of Motor Cycles; sale of bikes, its spares and servicing”. For F.Y. 2018-19, the assessee filed its return of income on 31.10.2018 disclosing a net loss of Rs.2,86,98,130/-. The Assessing Officer passed an order U/s 143(3) of the Income Tax Act, 1961 and an amount of Rs.4,03,66,761/- was disallowed/added back to the total income. Out of total additions made by the assessing officer Rs.1,19,89,954/- has been added under the head Income from business and profession and balance Rs.2,83,76,907/- has been added as income u/s 68 of the Act on account of unexplained cash deposit during the period of demonetization. It is the addition u/s 68 of the Act which is in contest. Upon appeal, the CIT(A) deleted the addition. Aggrieved Revenue is before us.
The ld DR vehemently supported the order of the AO whereas the ld AR relied on the order of CIT(A).
We have heard the rival submissions and perused the material available on record. We find that the assessee is a retailer of “Harley Davidson Brand of Motor Cycles”, which are sold in the market. The assessee also gives services and trades in spares parts which generates the cash. The assessee has explained that the said cash was deposited in the bank and all the sales are duly recorded in the books of accounts which are duly audited. We also find that the Assessing Officer has not rejected the books of accounts and has not questioned the sales or purchase. In such facts and circumstances, the decision of the CIT(A) who after analyzing the facts of the case, deleted the additions as under, is acceptable:
6.9.7.The Assessing Officer treated the entire cash deposits of Rs. 2,83,76,907/- in the appellant’s HDFC current account as unexplained under section 68 merely on the presumption that, given the high cost of Harley-Davidson motorcycles, customers would not normally pay in cash. This addition was made without examining the appellant’s detailed explanations, cash sales records, or supporting documentary evidence. The appellant has consistently maintained that these deposits represent cash sales, advance bookings, service income, and sales of spare parts, accessories and merchandise, all of which are routine and integral to the automobile dealership business.
6.9.8.The appellant has produced complete day-wise cash books, sales invoices, and HDFC bank statements, reconciling the cash collections with the deposits. No discrepancy has been found in the audited books of account, nor has the AO identified any individual entry that is unverifiable or fictitious. It is settled law that once the assessee explains the nature and source of a credit and produces supporting evidence, the burden shifts to the department to prove that the explanation is false (CIT v. Orissa Corporation 159 ITR 78 SC). Section 68 cannot be invoked merely on conjecture or disbelief. The mere fact that the business involves high-value products does not prohibit cash receipts, particularly when the sales are within the statutory limit of section 40A(3) and properly recorded in the books. Further, cash receipts for service income, merchandise sales and booking advances are common industry practice and fully permissible under law. The AO has not brought on record any evidence of unaccounted purchases, on-money transactions, or diversion of funds to suggest that the cash deposits were from unexplained sources.
6.9.9.The appellant also points out that the bank statements were filed as additional evidence before the appellate authority to substantiate the reconciliation and demonstrate that every deposit has a corresponding sales or service entry. In view of the complete reconciliation, audited accounts, and judicial precedents, the addition of Rs. 2,83,76,907/- under section 68 is entirely unsustainable. The cash deposits represent recorded business turnover and cannot be taxed again as unexplained income. The addition therefore deserves to be deleted in full and the returned loss accepted.
We accordingly, find no reason to interfere with the order of the CIT(A). The grounds are dismissed.
In the result appeal of the Revenue in ITA No. 7776/DEL/2025 is dismissed.