ITAT Overturns Assessment Order: Cash Deposit Explanation During Demonetization Upheld, Disallowance Unsustainable.

The ITAT allowed the assessee's appeal, setting aside the assessment order and the CIT(A)'s decision. The AO's disallowance under section 69A read with section 115BBE of the Act was deemed unsustainable, as the explanation for cash deposits during demonetization was not rejected legally. The decision reinforced the necessity of a reasonable explanation for cash transactions, drawing on relevant legal precedents.

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Issues:
The judgment involves the assessment of total income for the assessment year 2017-18, specifically focusing on the disallowance made under section 69A read with section 115BBE of the Act regarding cash deposits during the demonetization period.

Assessment Order and Appeal:
The appellant assessee filed an income tax return for the assessment year 2017-18, which was selected for scrutiny. The Assessing Officer (AO) made a disallowance under section 69A read with section 115BBE of the Act, alleging that the cash deposited during the demonetization period was unexplained. The appeal against this assessment order was dismissed by the Learned Commissioner of Income Tax (Appeals).

Grounds of Appeal:
The appellant argued that the cash deposits were from the normal business receipts of running a petrol pump, which included increased sales volume and per unit price during the relevant period. The appellant contended that the Assessing Officer was unjustified in holding the cash deposits as unexplained, citing relevant legal precedents.

Legal Precedents:
The appellant relied on the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 77 ITR 288, which emphasized the importance of genuine entries in books of account regarding cash balances to explain the source of high denomination notes. The Supreme Court's decision in this case highlighted the need for a reasonable explanation for cash transactions.

Judgment and Conclusion:
Upon examination of the facts and submissions, it was found that the Assessing Officer's reliance on the cash deposit figures without rejecting the explanation provided by the appellant was legally impermissible. Referring to the precedent set by Lalchand Bhagat Ambica Ram's case, the impugned orders were deemed not legal and sustainable, leading to the setting aside of the assessment order and the appeal being allowed.

Result:
The appeal of the assessee was allowed, and both the assessment order and the appeal decision were set aside, emphasizing the importance of providing a reasonable explanation for cash transactions in line with legal precedents.

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