Pret Study By Janak Fashions Private Limited Vs DCIT (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, arose from the order dated 12.11.2025 passed by the Commissioner of Income Tax (Appeals) [CIT(A)] under Section 250 of the Income-tax Act, 1961, for Assessment Year 2017-18. The impugned appellate order had originated from an assessment order passed under Section 143(3) of the Act on 30.12.2019.
The assessee had originally filed its return declaring total income of Rs.1,64,68,460, which was subsequently revised on 27.03.2018. During scrutiny assessment proceedings, the Assessing Officer (AO) issued notices under Sections 143(2) and 142(1), and the assessee participated in the proceedings. The AO noted that the assessee was engaged in the business of manufacturing and retailing readymade garments and carrying out tailoring work. It was observed that the assessee had deposited cash amounting to Rs.8,39,28,129 in its bank accounts during the demonetisation period from 09.11.2016 to 30.12.2016.
In response to the AO’s queries, the assessee furnished certain details but failed to produce the cash book. The AO observed that there had been an increase in cash sales immediately prior to demonetisation, accompanied by substantial cash balances and cash deposits. The AO further noted that the sales were unverifiable as the assessee had not provided the PAN details or addresses of customers. It was also observed that the assessee maintained large cash balances despite operating multiple bank accounts and having outstanding loans and overdraft facilities. Relying on the Supreme Court decision in Sumati Dyal v. CIT, the AO rejected the books of account and treated Rs.2,07,37,908 out of the cash deposits made during demonetisation as unexplained cash credits under Section 68 of the Income-tax Act. Additionally, the AO made a disallowance of Rs.17,500 under Section 14A read with Rule 8D of the Income-tax Rules, 1962.
