Addition under Section 69A unsustainable where demonetization-period cash sales were recorded in assessee's books and explanations accepted

ITAT held that the Assessing Officer erred in invoking s.69A for cash receipts during the demonetization period because the transactions were recorded in the assessee's books. Section 69A applies only where money or valuables are found unrecorded; since sales were reflected in the books and the assessee offered explanations, the addition under s.69A was unsustainable. The tribunal accepted the assessee's ground and quashed the assessment order.

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Issues:
1. Addition of cash deposited during demonetization period
2. Applicability of sections 69A and 115BBE
3. Legal ground of additional appeal

Issue 1: Addition of cash deposited during demonetization period

The appeal was filed against the order of the CIT(A) confirming the addition of Rs. 7,68,000 made by the Assessing Officer for cash deposited during the demonetization period. The assessee argued that the provisions of section 69A and section 115BBE, invoked by the Assessing Officer, were not applicable as the cash deposits were not undisclosed or unexplained. The assessee maintained that the deposits were recorded in the books of account and hence, could not be considered unexplained. The counsel highlighted that section 69A applies to unexplained investments outside the books of account, which was not the case here. The CIT(A) upheld the addition by stating that accepting old currency after demonetization could not be considered as part of sales since the old currency was no longer legal tender. The appeal was made on the grounds that the sales were not denied and the addition was unjustified.

Issue 2: Applicability of sections 69A and 115BBE

The additional ground of appeal raised by the assessee challenged the invocation of sections 69A and 115BBE. The assessee argued that section 69A was not applicable as the transactions were duly recorded in the books of account, which is a requirement for invoking this section. The Tribunal examined the provisions of section 69A, which state that unexplained money or assets not recorded in the books of account may be deemed as income. Since the sales were recorded in the books of account, section 69A was deemed inapplicable. Consequently, the assessment order was quashed based on the acceptance of the additional ground of appeal. The regular grounds taken by the assessee were dismissed as infructuous due to the decision on the additional ground.

Issue 3: Legal ground of additional appeal

The Tribunal accepted the additional ground of appeal raised by the assessee, emphasizing that section 69A was not applicable in this case as the transactions were recorded in the books of account. The Tribunal ruled in favor of the assessee, quashing the assessment order passed by the Assessing Officer. As a result, the appeal of the assessee was partly allowed, and the regular grounds were dismissed.

The judgment by the Appellate Tribunal ITAT Lucknow in this case focused on the applicability of sections 69A and 115BBE in the context of cash deposits made during the demonetization period. The Tribunal ruled in favor of the assessee, highlighting that the deposits were recorded in the books of account, rendering section 69A inapplicable. The decision underscores the importance of maintaining proper records to avoid tax implications related to unexplained income or assets.

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