2024 (5) TMI 1656 - AT - Income Tax

Unexplained cash deposits during demonetization: addition as deemed income deleted after books and supporting evidence accepted

Addition treated as deemed income from unexplained cash deposits during the demonetization period was challenged on the basis that sales were duly ... Addition u/s 69A r.w.s 115BE - unexplained money - cash deposited during the demonetization period - Addition of deemed income - AO made the impugned addition on the basis that the assessee could not support the source and the sales were increased by two folds of the sales pertaining to the immediately preceding Assessment Year - CIT(A) deleted adidition HELD THAT:- Before CIT(A), assessee had filed certain evidences which were admitted and after calling remand report from AO and perusing the material placed before him, he deleted the impugned addition, by holding that it was not a fit case for invoking the provision of section 69A - CIT(A) found that sales made in cash were duly recorded in the books of accounts of the assessee. He recorded that the AO could not point out any defect in the books of accounts. AO failed to bring any evidence contradicting the finding on fact as recorded by CIT(A). More particularly, the fact that the assessee has recorded the sales in his books of accounts and proved such sales by supporting evidences. And AO himself accepted the books of accounts of the assessee. Therefore, condition precedent for invoking the provision of section 69A is not satisfied. Decided in favour of assessee. Issues: (i) Whether the addition of Rs. 71,49,000/- made under section 69A r/w section 115BBE/115BE of the Income-tax Act, 1961 on account of cash deposits during the demonetization period was sustainable where the assessee had recorded corresponding cash sales in books of account and the Assessing Officer had accepted the books.Analysis: The facts decided on record show that the assessee's sales for the year were recorded in audited books of account, VAT returns were filed, and various supporting documents (tax audit report, cash book, month-wise sale and deposit charts, DVAT returns, item-wise stock details, customer affidavits and acknowledgments, and identification documents) were placed before the appellate authority. The Assessing Officer did not point out defects in the sales register, stock register, purchase register or cash book and the books were accepted in arriving at the assessed income. The appellate authority obtained and considered the remand report and applied authorities addressing treatment of cash sales recorded in books where no contradiction or defect was identified by the Assessing Officer. The condition precedent for invoking section 69A (that the money is not recorded in books or no satisfactory explanation is offered) was examined against the admitted recording of cash sales and supporting material.Conclusion: The addition under section 69A r/w section 115BBE/115BE is not sustainable where cash sales are recorded in books of account and accepted by the Assessing Officer and supporting evidence was furnished; the deletion of the addition by the Commissioner (Appeals) is upheld and the Revenue's grounds are dismissed.Final Conclusion: The appellate order deleting the addition made under section 69A is affirmed and the Revenue's appeal is dismissed, leaving the assessment as computed on the basis of accepted books of account intact.Ratio Decidendi: Where cash sales are duly recorded in audited books of account, accepted by the Assessing Officer, and supported by contemporaneous documentary evidence, the conditions for treating corresponding bank deposits as unexplained money under section 69A are not satisfied and additions under that section cannot be sustained.