Appellant wins appeal, ITAT deletes addition under Income Tax Act section 68.

The ITAT allowed the appellant's appeal, ruling in favor of the appellant and deleting the addition made under section 68 of the Income Tax Act. The ITAT found that the appellant adequately explained the source of the Rs. 10 lakhs deposited through cash book and cash flow analysis, contrary to the CIT(A)'s decision.

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Issues:
Appeal against addition made under section 68 of the Income Tax Act for the assessment year 2017-18.

Analysis:

1. Background of the Case:
The appellant, a partnership firm engaged in the business of a rice mill, declared an income of Rs. 7,00,300/- in the return filed for the assessment year 2017-18. The case was selected for scrutiny due to cash deposits during the demonetization period. The Assessing Officer (AO) questioned the source of a cash deposit of Rs. 27,50,000/-, leading to an addition of Rs. 10,00,000/- under section 68 of the Income Tax Act.

2. Appeal Before CIT(A):
The appellant appealed before the Commissioner of Income Tax (Appeals) [CIT(A)] against the addition of Rs. 10 lakhs. The CIT(A) confirmed the addition, stating that the appellant failed to produce documentary evidence supporting the cash deposits during the demonetization period.

3. Arguments Before ITAT:
The appellant argued before the Income Tax Appellate Tribunal (ITAT) that the cash deposits were explained through regular withdrawals for business purposes, supported by the cash book and audited balance sheet. The Departmental Representative contended that the appellant's submissions regarding the source of cash deposit were inconsistent.

4. ITAT's Decision:
The ITAT analyzed the cash book and cash deposits during the relevant period. It noted that the AO accepted the explanation for part of the cash deposit. Upon further examination of the cash flow and available cash in hand, the ITAT found that the appellant adequately explained the source of the Rs. 10 lakhs deposited. Consequently, the ITAT reversed the CIT(A)'s findings and deleted the addition of Rs. 10 lakhs under section 68 of the Income Tax Act.

5. Conclusion:
In conclusion, the ITAT allowed the appellant's appeal, ruling in favor of the appellant and deleting the addition made under section 68 of the Income Tax Act. The ITAT's decision was based on the satisfactory explanation provided by the appellant regarding the source of the cash deposit, as evidenced by the cash flow and available cash in hand.

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