ITAT: Cash Deposits from Sales Already Offered to Tax Cannot Be Added Again as Unexplained Income u/s 68/69

Brief Facts of the Case

The assessee, Shivansh Dairy Products Private Limited, filed an income tax return for the Assessment Year 2017-18. The case was selected for complete scrutiny because of an “abnormal increase in cash deposits during demonetization period”. The assessee had deposited ₹48,48,186 in cash between November 9, 2016, and December 31, 2016.

The Assessing Officer (AO) rejected the assessee’s claim that the cash was from sales, observing that the company’s stock records showed negative stock in December and March, implying sales were made without corresponding purchases⁴. The AO also noted that cash sales vouchers exceeding ₹25,000 lacked names and addresses⁵. Consequently, the AO made an addition of ₹48,48,186 under Section 68 of the Income-tax Act, treating it as unexplained income⁶⁶⁶⁶. This decision was later upheld by the Commissioner of Income-tax (Appeals) [NFAC].

Decision of the Tribunal

The ITAT allowed the appeal, ruling in favor of the assessee. The Tribunal delivered the following key findings:

Flawed Stock Calculation by AO: The Tribunal found that the method used by the Assessing Officer to calculate the closing stock was “not proper”⁹. The AO’s calculation was incorrect because it failed to consider the gross profit earned from the sales and the direct expenses debited to the trading account.
Correct Reconciliation by Assessee: The assessee submitted a revised chart that properly accounted for gross profit and direct expenses. The Tribunal accepted this revised calculation, concluding that it correctly reflected the closing stock on an accounting basis.
Sufficient Stock Justified Sales: Based on the correct reconciliation, the Tribunal concluded that the assessee had enough stock on hand to make the cash sales during the demonetization period, thereby proving the genuineness of the source of the cash deposits.
Voucher Details: The Tribunal also noted that there is no requirement to maintain names and addresses for sales below ₹2 lakhs, countering the AO’s objection regarding the sales vouchers.

Ultimately, the addition made by the AO was deleted.

Case Citation

Shivansh Dairy Products Private Limited vs. Income Tax Officer

Appeal Number: ITA No.1087/DEL/2024
Date of Judgment: 13th October 2025
Tribunal: Income Tax Appellate Tribunal, Delhi Bench ‘G’

Source :- Judgement