ITAT rules in favor of assessee on Section 69A cash deposits during demonetization with proper documentation

The ITAT Chennai ruled against the Revenue in a case involving cash deposits under Section 69A read with Section 115BBE during demonetization. The assessee successfully provided evidence including cash books and sales bills explaining the source of cash deposits in new currency notes. The AO's addition was based solely on differences between the cashier's rough cash book and the computer-generated cash book submitted during assessment. The ITAT accepted the assessee's reasonable explanation for these differences and upheld the CIT(A)'s recomputation of net profit at Rs. 1,14,60,846 after excluding corresponding sales and purchase costs, finding it consistent with accepted accounting principles.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of unexplained cash deposits during the demonetization period.
3. Deletion of addition by CIT(A) and recomputation of income.

Summary:

1. Condonation of Delay:
The Revenue's appeal was delayed by 15 days due to the Covid situation affecting the regular functioning of the office. Both parties agreed to condone the delay, and the Tribunal accepted the reasons provided, admitting the appeal for hearing.

2. Unexplained Cash Deposits:
The assessee, a dairy business firm, deposited Rs. 6,65,24,690/- in cash during the demonetization period, including Rs. 1,51,35,500/- in old demonetized currency notes. The AO added the entire amount as unexplained money under Section 69A r.w.s. 115BBE of the Act, rejecting the cash book submitted by the assessee due to discrepancies in the opening cash balance.

3. Deletion of Addition by CIT(A):
The CIT(A) sustained the addition of Rs. 1,10,30,000/- in old demonetized currency notes but deleted the addition of Rs. 5,54,94,690/- in new currency notes, accepting the assessee's explanation of cash sales. The CIT(A) recomputed the income by reducing the cost of goods sold from the declared income, resulting in a net profit of Rs. 1,14,60,846/-.

4. Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, agreeing that the assessee could not explain the source of Rs. 1,10,30,000/- in old currency notes, thus sustaining the addition. However, it found no error in the deletion of the Rs. 5,54,94,690/- addition, as the assessee provided sufficient evidence of cash sales and corresponding deposits in new currency notes. The Tribunal also upheld the recomputation of income by the CIT(A), concluding that the net profit of Rs. 1,14,60,846/- was correctly determined.

Conclusion:
The appeal filed by the Revenue was dismissed, with the Tribunal affirming the CIT(A)'s order in all respects.

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