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Judgment
Per Mahavir Singh, Vice President:
This appeal by the assessee is arising out of the order of learned CIT(A), NFAC, Delhi in appeal No.CIT(A), Delhi-12/10864/2019-20, order dated 12th February, 2026. Assessment was framed by the Income Tax Officer, Ward-35(2), Delhi for the assessment year 2017-18 under Section 144 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide order dated 28th December, 2019.
The only issue raised by the assessee in this appeal is as regards the order of learned CIT(A) confirming the addition made by the Assessing Officer of cash deposit during demonetization amounting to ₹2,47,91,057/-.
Brief facts of the case are that the assessee is having three saving bank accounts maintained with Oriental Bank of Commerce wherein assessee, during demonetization period, deposited total cash of ₹2,47,91,057/- in the financial year 2016-17. The Assessing Officer noted that as the SBN (specified bank notes) became invalid with effect from 8th November, 2016 and hence, assessee is not permitted to trade in old currency and assessee in the present case has deposited cash in multiple times in demonetized currency as the cash deposit in assessee's case has remained unexplained, he added the same under Section 68 of the Act read with Section 115BBE of the Act. Aggrieved, assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), the assessee explained the source of cash deposit into its bank accounts which was in the following source:-
| S.No. | Name of the Bank | Account number |
|---|---|---|
| 1 | Oriental Bank of Commerce | 50592010047010 |
| 2 | Oriental Bank of Commerce | 50595011000057 |
| 3 | Oriental Bank of Commerce | 50595015002073 |
The assessee, first of all, explained that cash deposit to the extent of ₹1,64,37,357/- was on account of sales deposit in bank account. For this, assessee submitted audited balance sheet for the year under consideration, copy of VAT returns and sample copies of sale invoices. The CIT(A) referred the matter back to the Assessing Officer for remand report and, in the remand report, the Assessing Officer, vide letter dated 17th December, 2025, noted that the assessee has not debited expenses to the profit & loss account although the assessee has paid salaries and bonus to the tune of ₹5,80,000/- in the year under consideration to the employees but no regular payments to the employees have been made. Therefore, the Assessing Officer disbelieved the assessee's documents submitted during remand proceedings and, vide his remand report paragraph Nos.5.1 rejected the assessee's contention as under:-
'5.1 The assessee has submitted that during the year under consideration, the assessee has made sales of ₹1,64,37,357/- in cash and deposited the same in the bank accounts. Further perusal of the expenses debited to profit and loss account and bank accounts of the assessee for the year under consideration, it has been noted that no such expenses has been debited in the bank accounts of the assessee. The assessee has submitted that accounting charges and audit fee has been paid during the year but debit entry could not been seen the bank accounts of the assessee. Debit entries for most of the expenses mentioned in the profit and loss accounts of the assessee could not been seen. The assessee has paid salary and bonus amounting to Rs.5,80,000/- during the year under consideration to the employee but no regular payments to the employee has not been found. If it is assumed that the expenses have been made in cash, then what was the source of payments for these expenses as all the sales made in cash has been deposited in the bank accounts and the cash withdrawn has also been re-deposited in the bank accounts by the assessee. Thus, it cannot be said that cash of Rs.1,64,37,357/- deposited in the bank account by the assessee for year under consideration is sales receipts.
Learned CIT(A), after taking into consideration the remand report, rejected the explanation of the assessee that the cash deposit is out of the business receipts or sales for the reason that no corroborative reconciliation is furnished by the assessee to correlate the cash deposits with corresponding sales, stock and cash balance. Aggrieved, assessee is in appeal before the Tribunal.
We have heard the submissions of both the sides and perused the material placed before us. We noted that assessee is engaged in the business of retail of pharmaceuticals and medicines. The assessee has furnished financials, balance sheet, profit & loss account, bank statements and VAT returns and also filed sample bills to prove that the cash sales is out of the stock and in bank account cash deposit is out of these sales. We noted that learned CIT(A) simply says that no corroborative reconciliation by the assessee is furnished to correlate the cash deposits with corresponding sales, stock and cash balance. We noted that the assessee has submitted complete financials, VAT returns and sample bills which are not self-serving documents as noted by the learned CIT(A). The assessee before us submitted copies of complete bank account statements, VAT returns and complete financials along with supporting sample invoices of sales. Neither the Assessing Officer nor learned CIT(A) could not find any defect in these documents and even none of the authorities below have resorted to the provisions of Section 145 of the Act for rejecting the books of account and once that is the case, the lower authorities have to accept the books of account as it is. Accordingly, we are of the view that the cash deposit is directly correlatable with the cash sales made during the demonetization period as the assessee is engaged in the business of retail of pharmaceuticals and medicines. We find that lower authorities have erred in not accepting the explanation and treating the documents as self-serving documents like VAT returns, bank statements, bills and vouchers, balance sheet and profit & loss account. Hence, we delete the addition and allow this ground of appeal of the assessee.
Coming to the next addition of cash withdrawals of ₹9,23,500/-, personal savings of ₹2,46,270/- and personal savings of family members of ₹72,00,000/- totaling to ₹83,69,770/-, the assessee has explained these cash withdrawals from the bank accounts as under:-
| Account Number and Date | Amount |
|---|---|
| 50595015002073 | |
| 25-Nov-16 | 24,000.00 |
| 13-Nov-16 | 10,000.00 |
| 12-Nov-16 | 10,000.00 |
| 13-Jul-16 | 1,07,500.00 |
| 25-May-16 | 4,90,000.00 |
| 6,41,500.00 | |
| 50595011000057 | |
| 19-Sep-16 | 20,000.00 |
| 25-Oct-16 | 14,000.00 |
| 10-Nov-16 | 10,000.00 |
| 16-Jan-17 | 24,000.00 |
| 16-Feb-17 | 10,000.00 |
| 03-Mar-17 | 30,000.00 |
| 1,08,000.00 | |
| 50592010047010 | |
| 16-Jan-17 | 24,000.00 |
| 10-Nov-16 | 10,000.00 |
| 21-Sep-16 | 1,40,000.00 |
| 1,74,000.00 | |
| Total | 9,23,500.00 |
The assessee has enclosed copies of bank accounts, statements and provided these documents to learned CIT(A) as well as Assessing Officer during remand proceedings.
As regards the personal savings of ₹2,46,270/-, the assessee submitted the withdrawals from personal savings bank account and savings in the bank account and also provided copies of personal savings bank account during remand proceedings as well as before learned CIT(A). Similarly, the personal savings of family members of ₹72,00,000/- was submitted by the assessee along with details of bank accounts as under:-
| S.No. | Name | PAN | Relation with Appellant | Amount | Remarks |
|---|---|---|---|---|---|
| 1 | Meenu | AKSPM5490N | Brother's Wife | 15,00,000 | Copy of ITR, Computation and Declaration Enclosed as enclosed as Annexure 6 |
| 2 | Vijay Kath | ANJPK6477B | Wife of Appellant | 16,00,000 | |
| 3 | Bimal Kath | AAIPK2360H | Brother of Appellant | 14,00,000 | |
| 4 | Aditi Kath | CQQPK2564P | Daughter of Appellant | 14,00,000 | |
| 5 | Himanshu Kath | EPZPK0245H | Son of Appellant | 13,00,000 | |
| 72,00,000 |
These documents when forwarded by the learned CIT(A) to the Assessing Officer, he rejected the assessee's claim vide paragraph Nos.5.2 to 5.5 of the remand report, as under:-
'5.2 Further, the cash of Rs.9,23,500/- has been withdrawn from the bank which has been deposited again. The assessee has not furnished the date wise withdrawals of cash and further, deposited the same into the bank account. Further the assessee has not furnished the purpose of the withdrawal of the cash from the bank and why the same has been deposited again in the bank accounts. No prudent persons will withdraw the case and after sometimes, the same will be deposited by him."
5.3The assessee has submitted that amounting to Rs.2,46,270/- has been deposited out of the personal savings but the assessee has not submitted the income and expenditure statement of the family members. In the absence of the income, the source of cash of Rs.2,46,270/- could not be said from the family savings.
5.4Further, the assessee has stated that the cash of Rs.72,00,000/- has been received from the Joint Family Members which has been deposited in the bank accounts. As per assessee, the cash gifts has been received from the family members as under:
From Relation with Rakesh Kumar Cash gift Meenu AKSPM5490N Rakesh brother's wife Rs.15,00,000/- Vijay Kath, ANJPK6477B Rakesh Wife Rs.16,00,000/- Bimal Kath, AAIK2360H Rakesh brother Rs.14,00,000/- Himanshu Kath, EPZPK0245H Rakesh son Rs.13,00,000/- Aditi Kath, CQQPK2564P Rakesh daughter Rs.14,00,000/- 5.5On perusal of the confirmation filed by the assessee as additional evidences, it has been noticed that the assessee has furnished one paper signed confirmation only from the every person mentioned in the table. The assessee has not submitted their ITR and bank accounts with the confirmations. Further, it has also been noticed that the assessee has not submitted the source of cash gift given to the assessee. The gift received from the Rakesh brothers' wife is also taxable above Rs.50,000/-. To justify the source of cash, the assessee has to be provided the business or profession of the above individuals, annual income and the bank accounts from which the cash has been withdrawn. If the source of cash is not withdrawal from the bank, then the assessee has to be submitted the source of cash generated which has been later on gifted to the assessee. If the bank accounts of the individual from whom cash gift has been received by the assessee have been taken, then it could be ascertained that whether any cash has been deposited by these persons during the demonetization period. Thus, the submission of the assessee is nothing but a colourable device for the cash deposited in the bank accounts whose source is not known."
Learned CIT(A) simply brushed aside and rejected the explanation of the assessee without any cogent reason.
We have considered the submissions of both the sides and perused the material placed before us. We have also gone through the documents and noted that the assessee is able to prove cash withdrawals, personal savings and personal savings of family members deposited. The assessee has supported these documents with bank accounts of these persons and availability of cash funds. The Assessing Officer in his remand report has not negated by any evidence that these are unaccounted. Even the learned CIT(A) could not negate the evidences filed by the assessee and simplicitor rejected the explanation of the assessee. We noted that the explanation submitted by the assessee along with evidence regarding the availability of cash is enough to prove the assessee's claim and we find no infirmity in the same. Accordingly, we accept the explanation of the assessee and delete the addition of ₹83,69,770/-.
In the result, the appeal of the assessee is allowed.
Decision pronounced in the open Court on conclusion of hearing on 7th July, 2026.