ITAT rules in favor of Assessee, cash deposits during demonetization deemed explained

The Appellate Tribunal ITAT Ahmedabad allowed the appeal filed by the Assessee, overturning the decision of the CIT(A) regarding the consideration of cash deposit as unexplained cash. The Tribunal accepted the Assessee's explanation that the cash deposits were made during demonetization against cash sales and payments from debtors, noting the heavy cash sales during that period and delayed entries in the books of accounts. It was held that the Assessing Officer's addition under Section 69A of the Act was unjustified, leading to the favorable outcome for the Assessee.

---

---

Issues involved:
The appeal filed by the Assessee against the order passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18.

Details of the Judgment:

Issue 1: Consideration of cash deposit as unexplained cash

The assessee filed its return of income declaring income of Rs. 10,43,660/-. The Assessing Officer observed that the assessee, a retail dealer of Bharat Petroleum, deposited cash of Rs. 29,57,480/- on specific dates which exceeded its sales amount. The Assessing Officer requested justification for the excess cash deposit, and upon not receiving a satisfactory reply, made an addition of Rs. 9,00,000/- under Section 69A of the Act. The CIT(A) upheld this addition.

Issue 1 Decision:
The Ld. AR argued that the cash deposits were made during the demonetization period against cash sales and payments received from debtors. The AR submitted relevant details and contended that the source of cash deposit in the bank account should not be rejected without rejecting the books of accounts. The Ld. AR's explanation regarding heavy cash sales during the demonetization period and delayed entries in the books of accounts was accepted. It was noted that the cash received from debtors was deposited in the bank account on the same day, leading to a temporary negative cash balance in the books. The addition made by the Assessing Officer was deemed unjustified, and the appeal of the assessee was allowed.

In conclusion, the appeal filed by the Assessee was allowed by the Appellate Tribunal ITAT Ahmedabad, with the decision favoring the Assessee regarding the consideration of cash deposit as unexplained cash.

---