Lump-sum addition replaces full cash credit, while creditor proofs and input VAT are allowed.

By | July 24, 2026
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Lump-sum addition replaces full cash credit, while creditor proofs and input VAT are allowed.

Lump-sum addition replaces full cash credit, while creditor proofs and input VAT are allowed.

Issue

  1. Whether an addition under Section 68 read with Section 115BBE for cash deposits made during the demonetization period is justified when cash sales are recorded in books but show an unexplained surge.

  2. Whether a Section 68 addition on account of a sundry creditor is sustainable when the assessee submits the creditor’s ledger account and confirmation as evidence.

  3. Whether input VAT credit that is not claimed in VAT returns and forms part of the purchase cost is allowable as a business expenditure under Section 37(1).

  4. Whether the Assessing Officer is required to allow the set-off of brought forward business losses from a preceding assessment year against the income of the current assessment year.

Facts

  • Issue I (Demonetization Cash Deposits):

    • The assessee-company, engaged in trading solar panels, deposited ₹33.55 lakhs in cash during the demonetization period for AY 2017-18.

    • The AO treated the entire deposit as unexplained cash credit under Section 68 read with Section 115BBE.

    • The assessee claimed the deposits originated from regular cash sales duly backed by stock registers and purchase records. However, it failed to provide a satisfactory explanation for the sudden, disproportionate spike in cash sales right before demonetization.

  • Issue II (Sundry Creditors):

    • A trade liability of ₹72.48 lakhs due to M/s Goldi Solar Pvt. Ltd. was reflected as a sundry creditor in the assessee’s books for AY 2017-18.

    • The AO made a Section 68 addition after receiving no response to a Section 133(6) notice sent to the creditor.

    • Before the CIT(A), the assessee submitted the creditor’s ledger account and written confirmation as additional evidence to discharge its onus.

  • Issue III (Cessation of Input VAT Credit):

    • The assessee claimed a business deduction under “other expenses” for input VAT credit that was not claimed in its state VAT returns.

    • The assessee explained that this unclaimed input VAT was absorbed into the actual purchase cost of inventory and claimed as allowable business expenditure under Section 37(1). The AO disallowed the claim.

  • Issue IV (Set-Off of Brought Forward Losses):

    • For AY 2018-19, the assessee declared NIL income and sought to set off brought forward business losses pertaining to AY 2017-18.

    • The AO assessed the total income without giving effect to the set-off of these brought forward business losses.

Decision

  • Demonetization Cash Addition Restricted: The Tribunal held that neither the full addition by the AO nor complete relief to the assessee was justified. In the interest of justice, the addition under Section 68 was reduced to a lump-sum amount of ₹3.50 lakhs. (Partly in favour of assessee)

  • Sundry Creditor Addition Deleted: The Tribunal held that by furnishing the creditor’s ledger account and confirmation, the assessee successfully discharged its onus under Section 68; hence, the addition of ₹72.48 lakhs was deleted. (In favour of assessee)

  • Input VAT Credit Allowed: The Tribunal held that since the unclaimed input VAT formed part of the purchase cost, it was fully allowable as a business expenditure under Section 37(1). (In favour of assessee)

  • Loss Set-Off Remanded: The Tribunal directed the AO to recompute the income/loss for AY 2017-18 and grant the set-off of eligible brought forward business losses against the income of AY 2018-19. (Matter remanded)

Key Takeaways

  • Estimated Additions in Demonetization Surges: When books and stock registers support sales but fail to explain pre-demonetization cash spikes, tax authorities/tribunals may adopt a balanced, reasonable lump-sum addition rather than taxing total bank deposits.

  • Discharge of Onus for Sundry Creditors: Submitting valid third-party ledger confirmations and account statements satisfies the initial burden under Section 68, shifting the burden back to the Revenue.

  • Unclaimed Input VAT as Purchase Cost: Unutilized or unclaimed input VAT that adds to the acquisition cost of goods qualifies as a deductible business expense under Section 37(1).

IN THE ITAT DELHI BENCH ‘E’
Patanjali Renewable Energy (P.) Ltd.
v.
Dy. CIT*
SATBEER SINGH GODARA, Judicial Member
and Naveen Chandra, Accountant Member
IT Appeal Nos. 606 & 607 (Del) OF 2026
[Assessment years 2017-18 and 2018-19]
JUNE  29, 2026
Salil Aggarwal, Sr. Adv. and Shailesh Gupta, Adv. for the Appellant. Ms. Ankush Kalra, Sr. D.R. for the Respondent.
ORDER
Naveen Chandra, Accountant Member. – The above captioned appeals are preferred by the assessee against the order dated 17.11.2025, passed by Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)/NFAC], under section 250 of the Income Tax Act, 1961 [hereinafter referred to as, ‘Act’] arising out of the separate assessment orders dated 09.12.2019 passed by the DCIT, Circle-19(2), Delhi (hereinafter referred as ‘the AO’) u/s 143(3) of the Act for Assessment Year 2017-18 & assessment orders dated 05.03.2021 passed by the National e-Assessment Centre, Delhi u/s 143(3) r.w.s 143(3A) & 143(3B) of the Act for Assessment Year 2018-19.
2. The grounds of appeal raised by the assessee in ITA No.606/Del/2026 are as under:
1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining an assessment u/s 143(3) of the Act at a total income of Rs.33,55,000/- as against the returned loss of Rs. 82,89,975/-.
2. That the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in arbitrarily upholding the findings and sustaining the addition made by the learned A.O. of a sum of Rs.33,55,000/- u/s 68 r.w.s 115BBE of the Act on account of unexplained cash credit, as a result of cash deposit of Rs. 33,55,000/- during demonetization period only on the basis of suspicion, conjecture and surmises, without rebutting the documentary evidences so furnished by the assessee – appellant.
2.1 That while doing so, the Learned CIT (A) has failed to appreciate the fact that the cash of Rs. 33,55,000/- was deposited during demonetization period i.e. 09.11.2016 to 31.12.2016 out of past cash withdrawals and appellant (not in available cash in the books of accounts of assessee dispute and not rejected) and as such, the addition so made is unjustified and uncalled for and is liable to be deleted.
2.2 That the learned Commissioner of Income Tax (Appeals) has relied on judgments totally inapplicable to the facts of assessee appellant and has also based his findings on mere suspicion and surmises which are contrary to material available on record and as such, the addition so sustained needs to be deleted.’
2.3 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the fact that section 115BBE was not applicable with regards to transactions incurred during the impugned assessment year and as such, computation of tax (if any) should have been made as per the normal provisions of the Act.
3. That the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in arbitrarily upholding the findings and sustaining the addition made by the learned AO of a sum Rs. 72,47,927/- on account of alleged unexplained sundry creditor M/s Goldi Green Technologies Pvt. Ltd., further, the findings so recorded are contrary to material available on record and needs to be deleted, as such.
3.1 That while doing so, learned CIT (A) has failed to appreciate the fact that the assessee appellant had furnished requisite documentary evidences in the shape of confirmation of the said party along with ledger account in the books of assessee company and addition so sustained is wholly based on assumptions and presumptions without rebutting the documentary evidences so furnished by the assessee appellant.
3.2 That in doing so, the learned CIT (A) has failed to appreciate the fact that requisite documents/evidences were filed and explanations were tendered by the assessee appellant with regards to complete purchases and sales made during the impugned assessment year, but the learned AO based his conclusion on mere subjective opinion (without conducting adequate enquiry or investigation of its own) which is wholly unsustainable and untenable in law and as such, the addition so made should be deleted.
4. That the learned Commissioner of Income Tax (Appeals) has further erred both on facts and in law in arbitrarily upholding the findings and sustaining the addition made by the learned AO of Rs. 53, 6477-on No way of VAT demand for AY 2013-14 under the head other expenses being disallowed and added to the total income of the assessee-appellant company.
5. That the learned Commissioner of Income Tax (Appeats) has further erred both on facts and in law in arbitrarily upholding the findings and sustaining the addition made by the learned A.O. of Rs. 9,62,780/- on account of disallowance of expenses of cessation of input VAT credit.
6. The learned Commissioner of Income Tax (Appeats) has violated the principles of natural justice as the assessee-appellant has not been given a fair opportunity of being heard and also the additional evidence, replies, written submissions of the assessee-appellant were either completely brushed aside and/or were not considered properly i.e. without proper application of mind.
7. The assessee craves to leave add, alter, and modify any other ground of appeal at the time of hearing.”
3. Brief fact as culled from the record are that the income tax return was filed by the assessee company on 28.09.2017 showing loss of Rs.82,89,975/- under normal provision of Act and loss of Rs.(-) Rs.2,38,93,726/- under section 115JB of the Act. The assessee-company claimed to have income from Trading of solar panels and also engaged in development of New Solar Project. Subsequently, the case was selected for scrutiny assessment through CASS.
4. Ground Nos. 1, 2 and sub grounds are with regard to the addition of Rs.33,55,000/- as unexplained cash deposit in bank account during the demonetization period under section 68 r.w.s 115BBE of the Act. Before us, the ld. counsel for the assessee vehemently submitted that the cash deposits in the bank account during the period of demonetization were out of sales and duly recorded in the books of account.
5. Per contra, the ld. DR relied on the orders of the authorities below.
6. We have heard the rival submissions and have perused the relevant material on record. In the instant case, we find that the assessee has attempted to prove the entire cash deposit during demonetization period as being out of sales and recorded in the books of account. Although the assessee, prima facie, appears to have discharged its onus of explaining the cash deposits, it’s contentions to prove the cash deposits during the demonetization period, hardly deserves to be accepted in entirety especially when the assessee could not give satisfactory explanation for the disproportionate increase in cash sales just before demonetization period. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposits are supported by stock register, purchase records, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash sales, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of Rs. 3.50 lakh only would be just and proper with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The assessee’s ground on this count is partly allowed.
7. Ground Nos.3 and sub ground is with regard to the addition made at Rs.72,47,927/- on account of unexplained sundry creditor M/s Goldi Green Technologies Pvt. Ltd. Before us, learned Counsel for the assessee submitted that the assessee had filed additional documentary evidences in form of confirmation of the said party along with ledger account in the books of assessee company before the CIT(A). The learned AO however, had made addition questioning the genuineness of the sundry creditors only on account that the party M/s Goldi Solar Pvt. Ltd. did not response to notice u/s 133(6) and no confirmation was received from this party. The learned CIT(A) affirmed addition made by the AO on the basis of AO’s findings.
8. Per contra, learned DR relied upon the order of the AO/CIT(A).
9. We have heard the rival submissions and perused the material available on record. We find that the AO had sent notice under section 133(6) to M/s. Goldi Solar Pvt. Ltd (now known as M/s Goldi Green Technologies Pvt. Ltd) and in absence of any confirmation, made the addition. The assessee states before us that they had furnished the confirmation as well as ledger account in the books of account of the assessee as additional evidences before the CIT(A) which the AO did not accept vide remand report dated 27.10.2025, during the remand proceedings as the name was not matching and no supporting invoices or corresponding bank statement was furnished. We, however find that the assessee had submitted before the CIT(A), vide letter dated 14.07.2025 and 30.09.2025, all such documents available at pages 110 to 151 of the paper book. We, therefore, are of the considered view that the assessee has discharged its onus of establishing the credits from M/s. Goldi Solar Pvt. Ltd in its books of accounts. Therefore, Ground Nos.3 and sub grounds are allowed.
10. Ground No.4 is not pressed and hence this ground is dismissed.
11. Ground No.5 is with regard to disallowance of expense of Rs.9,62,780/- on account of cessation of input VAT credit. Before us, learned Counsel for the assessee explained that VAT credit is not claimed in the VAT Return filed as it becomes part of purchase cost and can be debited into purchase account. The assessee instead of debiting purchase account has treated it as cessation of input VAT account in other expenses and shown in P & L account for identification purpose. Therefore, it is liable to be allowed as expense under section 37(1) of the Act. In such factual matrix of the instant case, we are of the considered view that the input VAT has become part of purchase cost and is allowable u/s 37(1) of the Act. We order accordingly. ground no.5 is allowed.
12. In the result, appeal filed by the assessee in ITA No.606/Del/2026 is partly allowed.
13. The grounds of appeal raised by the assessee in ITA No.607/Del/2026 are as under:
1. “That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining an assessment u/s 143(3) of the Act at an assessed total income of Rs. 16,88,889/- as against the returned income NIL.
2. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in upholding the decision of the AO by not allowing brought forward business loss of AY 2017-18 of a sum of Rs. 26,76,126/-without appreciating the fact that the assessee -appellant is eligible to claim the aforesaid loss.
3. The learned Commissioner of Income Tax (Appeals) has violated the principles of natural justice as the assessee-appellant has not been given a fair opportunity of being heard and also the replies, written submissions of the assessee-appellant were either completely brushed aside and/or were not considered properly i.e. without proper application of mind.
4. The assessee craves to leave add, alter, and modify any other ground of appeal at the time of hearing.”
14. Before us, learned Counsel for the assessee submitted that above appeal is consequential in nature as brought forward business loss for A.Y. 2017-18 of Rs.26,76,126/- has not been allowed to the assessee. With the decision rendered hereinabove, the AO is directed to calculate the loss/income of AY 2017-18 and allow the brought forward business loss if any, for A.Y. 2017-18 from the income of A.Y. 2018-19. The appeal is disposed of in the aforesaid terms.
15. In the combined result, appeal filed in ITA No.606/Del/2026 is partly allowed and in ITA No.607/Del/2026 is allowed for statistical purposes.