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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order dated 06.02.2026, passed by Ld. CIT(A)-24, Delhi, u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”).
In this case, the Ld. AO, vide order dated 25.12.2019, passed an order u/s 143(3) of the Act, through which, after a detailed finding of fact, an amount of Rs.160,24,414/- was added u/s 68 of the Act r.w.s. 115BBE of the Act. In brief, the finding is that there was an abnormal increase in cash deposits just prior to and during the demonetization period, which was not in conformity with the details and evidences filed by the assessee. On this basis, the provisions of Section 68 of the Act were invoked and the impugned addition was made.
The aggrieved assessee approached the Ld. CIT(A) where he could not succeed on the basis of following finding in the impugned order:
“5.1.3However, upon careful examination of the facts and circumstances of the case, the contentions of the appellant are not found acceptable. The AO has brought on record specific and concrete evidence demonstrating the abnormal and suspicious pattern of cash sales during the demonetization period. The appellant gave contradictory explanations at different stages – first claiming that excess cash was due to fast recovery by sales representatives from rural areas of Bihar and UP, and later changing the stance to claim that new products were launched which became popular. No evidence of any advertising expenses or new product launch was provided despite specific queries. The pattern of cash sales before and after the suspicious period remained consistently low, with the spike occurring only in October 2016 and the first 8 days of November 2016, immediately before demonetization was announced. The claim that sales increased in rural areas of UP and Bihar is contradicted by the fact that the abnormal cash sales were shown in the Jaipur depot and not in Delhi depot which is closer to these areas. The structured nature of 61 sale bills on 08.11.2016 alone, each just below Rs.2 lakhs, clearly indicates manipulation of books of accounts. The AO has rightly rejected the books of accounts u/s 145(3) and the subsequent invocation of section 68 is justified as the assessee has failed to explain the source of huge cash deposits during demonetization period. The reliance placed by the appellant on various case laws in misplaced as those cases dealt with situations where the sales were found to be genuine and supported by proper evidence, which is not the case here. The acceptance of VAT returns by Commercial Taxes Department does not automatically bind the Income Tax authorities when there is specific evidence of manipulation and bogus entries. The AO has given due credit for estimated genuine cash sales of Rs.59,883/- and gross profit of Rs.11,10,803/- already offered to tax, and the balance addition of Rs.1,60,24,414/- is fully justified and sustainable. Accordingly, Ground No.1 stands DISMISSED.”
The aggrieved assessee is now before the ITAT with a single ground challenging the action of authorities below in adding the impugned amount u/s 68, r.w.s. 115BBE of the Act.
Before us the Ld. AR argued with the help of detailed paper books and written submissions. It was the submission that the assessee was having some sales in cash and the same was deposited in the bank account. It was the submission that the accounts were duly audited u/s 44AB of the Act and ample justification was provided to the Ld. AO for the cash deposits. It was stated by the Ld. AR that the assessee had substantial realization from debtors and also due to advertisement etc the product of the assessee saw a huge demand during the period when the cash deposits are seen. It was the submission that the books of account contained details of sales made and payments realized. The Ld. AR assailed the findings of the authorities below wherein it has been alleged that a very large proportion of cash sales has taken place in the months of October to December, 2016 even when the same have been reflected in the books of account.
The Ld. DR took us through the findings of then Ld. AO and specifically pointed out pages 14 & 15 of the Ld. AO where it has been mentioned that the assessee gave contradictory explanations at various stages. At first it was claimed that the excess cash was deposited due to efficient recovery from rural areas of Bihar and U.P. by the sales representative of the assessee. It was pointed out that the assessee changed his stance later on to claim that the cash deposits represented enhanced sales due to launch of new products and more efficient marketing. It was pointed out that no evidence of any advertising expenses or details of any new product being launched was provided before the Ld. AO. It was pointed out that if the sales representatives made better collection from rural areas of Bihar and U.P. then why the realizations are reflected in Jaipur depot and not the Delhi depot, which is geographically proximate to those two states. It was also pointed out that some 61 sale bills were recorded on 08.11.2016 alone, each below Rs.2,00,000/-, where details of the persons from whom such amounts were realized, were not produced before the Ld. AO. For this purpose, the Ld. DR took us through the finding on page 16 of the Ld. AO’s order.
We have considered the rival submissions and have gone through the records before us. We find that while the assessee has recorded the cash sales in his books of account and has also booked VAT on the same, we find that the explanation for enhanced sale or even better realization from debtors has not been specifically proved satisfactorily. In the absence of plausible evidences and explanations such contentions are merely self-serving arguments. Considering the totality of facts and circumstances of the case, it is felt that the facts deserve to be re-examined in this case and the Ld. AO needs to re-examine the contention of the assessee, and any evidence that he may file to justify the excessive cash sales during the period under consideration. For this purpose, we set aside the impugned order and remit this matter back to the file of Ld. AO. We also direct that the assessee would file details of all the debtors etc. realized during this period. Also, the basis of the 61 sale bills booked on 08.11.2016, would need to be presented before the Ld. AO with all underlying evidences. The Ld. AO would be free to conduct any enquiries as deemed fit. Needless to say, ample opportunities would be provided to the assessee for presenting his case.
In the result, the appeal is partly allowed for statistical purposes.