ITAT deletes Section 68 addition for unexplained cash deposits during demonetization citing audited books

ITAT Delhi allowed the assessee's appeal and deleted the addition made u/s 68 for unexplained cash deposits during demonetization. The tribunal found that since the assessee maintained audited books of accounts which were not rejected by the AO, and cash deposits in 2016 (Rs. 54 lakh) were significantly lower than 2015 (Rs. 2.62 crore), the revenue authorities were precluded from making additions. CIT(A)'s order sustaining the addition was held erroneous without valid reasoning.

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Issues involved:
1. Appeal against the order of Learned Commissioner of Income Tax (Appeals) for Assessment Year 2017-18.
2. Addition of Rs. 8,00,000 on account of cash deposited during demonetization.
3. Denial of documents placed on record and confirmation of addition on account of cash sales.
4. Partial confirmation of the order framed by the Assessing Officer under section 143(3).
5. Consideration of material on record and comparison sheet in totality.
6. Adequate opportunity of being heard not given before confirming additions.
7. Partial relief given by the Commissioner of Income Tax (Appeals) without a valid base.
8. Action of the Assessing Officer confirmed despite alleged mala fide intention.
9. Addition made by the Assessing Officer deemed arbitrary and against natural justice principles.

Detailed Analysis:
1. The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) for the Assessment Year 2017-18. The grounds of appeal challenged the additions made by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals) regarding cash deposits during demonetization, denial of documents, partial confirmation of the assessment order, and alleged lack of consideration of material on record.

2. The Assessing Officer made an addition of Rs. 8,00,000 on account of unexplained cash receipts during demonetization. The appellant argued that the authorities did not consider past history, relevant documents, or material available on record. The Commissioner of Income Tax (Appeals) sustained a partial addition of Rs. 8,00,000 out of the total addition of Rs. 38,00,000. The appellant contested this decision in the present appeal.

3. The appellant contended that the denial of documents and confirmation of additions on account of cash sales were erroneous. The appellant argued that the authorities did not disrupt sales or reject the books of accounts, and failed to consider the material available on record.

4. The issue of partial confirmation of the order framed by the Assessing Officer under section 143(3) was raised. The appellant asserted that the authorities did not consider the material on record and comparison sheet in totality, leading to an incomplete assessment.

5. The appellant claimed that an adequate opportunity of being heard was not provided before confirming the additions. The appellant argued that the partial relief granted by the Commissioner of Income Tax (Appeals) lacked a valid base and should be deleted.

6. The appellant alleged that the action of the Assessing Officer was confirmed despite mala fide intentions and without rejecting sales and books of accounts. The appellant contended that the addition made was arbitrary and against the principles of natural justice.

7. The Commissioner of Income Tax (Appeals) observed that the appellant's books of account were duly audited and not rejected by the Assessing Officer. The Commissioner noted that the cash deposits of the appellant were lower than in the previous year, and sales were not disturbed. Despite these observations, the Commissioner sustained the addition of Rs. 8,00,000. The Tribunal found this decision to be erroneous and deleted the addition.

8. In conclusion, the Tribunal allowed the appeal filed by the assessee, overturning the addition sustained by the Commissioner of Income Tax (Appeals) regarding the cash deposits during demonetization. The order was pronounced in open court on 27th February 2024.

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