Kanchan Chopra Vs ITO (ITAT Delhi)
Assessee filed an appeal against NFAC order dated 19.08.2024 confirming addition of ₹1,66,70,000 u/s 68 r.w.s.115BBE, treating cash deposits during demonetisation as unexplained. An additional legal ground was also raised alleging absence of valid jurisdictional notice u/s 143(2), as the notice was issued by Ward-40(1) while the assessment was completed by Ward-43(6). AO furnished a detailed jurisdictional report confirming restructuring of charges under orders u/s 120, after which the case validly vested with Ward-43(6). Tribunal, satisfied with the explanation, rejected the legal challenge.
On merits, Tribunal examined whether the cash deposits represented unaccounted cash credits or were supported by genuine cash sales. Assessee, engaged in trading of multiple imported items, produced a complete quantitative stock movement, including opening stock, BOE-based import purchases, item-wise sales (cash & credit), VAT returns, sales ledgers, month-wise cashbook, and reconciliation of stock reduction with sales. Notably:
- Total sales of ₹5.39 crores (including cash sales) were accepted by the Department.
- Purchases were fully verifiable from customs BOEs; not a single purchase was doubted.
- VAT authorities accepted the turnover declared.
- The month-wise cashbook showed no negative cash balance on any day.
Cash sales formed an integral part of declared turnover, already taxed under normal business income.
Despite extensive evidence, the AO treated cash sales as “bogus” and invoked section 68. Tribunal held that where sales are part of audited books, duly subjected to VAT, accepted in assessment, and supported by stock records, cash realisations cannot again be taxed u/s 68, otherwise it results in double addition—once as sale income and again as unexplained cash.
Tribunal also relied on SMILE Microfinance Ltd. (Madras HC, 19.11.2024) holding that the enhanced tax rate u/s 115BBE applies only from AY 2018-19 and not to AY 2017-18.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No. 4205/Del/2024 for AY 2017-18, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024-25/1067743549(1) dated 19.08.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act’) dated 27.12.2019 by the Assessing Officer, ITO, Ward-43(6), Delhi (hereinafter referred to as „ld. AO’).
