DCIT Vs Rai Bahadur Narain Singh Sugar Mills Ltd (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT) Delhi bench has partially allowed an appeal filed by the Revenue against Rai Bahadur Narain Singh Sugar Mills Ltd for the Assessment Year 2017-18. The dispute centered on an addition of ₹91.77 lakhs made by the Assessing Officer (AO) under Section 68 of the Income-tax Act, 1961, classified as unexplained cash credits during the demonetization period.
The assessee, a manufacturer of sugar, ethanol, liquor, and CO2 gas, had filed its return for AY 2017-18 declaring a total income of ₹17.81 crores. Following a scrutiny assessment, the AO added the disputed amount, citing a sudden spike in cash sales and disproportionate cash deposits in FY 2016-17 compared to the previous year. Notices issued under Section 133(6) to eight buyer parties remained largely uncomplied with. Only one buyer, Mr. Saksham Agarwal, responded, confirming a cash purchase of ₹750 against the assessee’s claim of ₹11.58 lakhs.
The assessee, in its defense, argued that the comparison of cash sales with FY 2015-16 was flawed. They cited a Government directive dated September 8, 2016, which mandated sugar stock liquidation, a distress sale scenario applicable specifically to FY 2016-17. The assessee maintained that the cash deposits stemmed from earlier bank withdrawals and these government-mandated distress sales. They further contended that Section 68 was inapplicable as the source and legitimacy of the cash deposits were explained. They also highlighted that VAT returns reconciled with financials, there were no stock discrepancies, and the tax audit report was unqualified.
