2024 (5) TMI 1073 - AT - Income Tax

Unexplained cash deposits during demonetization period deletion upheld, section 68 addition found unjustified without adverse findings

The ITAT Delhi ruled in favor of the assessee regarding unexplained cash deposits during demonetization period. The AO made addition u/s 68 r.w.s. 115BBE ... Addition u/s 68 r.w.s. 115BBE - unexplained cash deposits during the demonetization period - assessee explained that this amount was deposited out of sale proceeds and past savings - HELD THAT:- AO did not point out any discrepancy in the purchases, sales and stocks recorded by the assessee in the books of accounts. In the circumstances, only an assumption that there could be some cash deposits based on the higher turnover in cash sales when compared to the cash sales made by the assessee in the immediately preceding assessment year is not correct. Thus, in the absence of any adverse finding by the AO that the purchases, sales and stock are not genuine and in the absence of rejection of books of account, there is no justification in assuming that the assessee has made cash deposits outside the books of accounts. Thus, the addition made by the AO u/s 68 of the Act is delete. Decided in favour of assessee. Issues Involved:1. Sustaining the addition of Rs. 28,25,000 under Section 68 of the Income-Tax Act, 1961 on account of cash deposits during the demonetization period.2. Evaluation of the evidence provided by the assessee to justify the cash deposits.3. Comparison of cash sales during the assessment year 2016-17 and 2017-18.4. Assessing Officer's acceptance of part cash sales and rejection of the remaining.5. Reliance on previous judicial decisions in similar cases.Detailed Analysis:1. Sustaining the addition of Rs. 28,25,000 under Section 68 of the Income-Tax Act, 1961:The primary issue in the appeal was the addition of Rs. 28,25,000 under Section 68 of the Income-Tax Act, 1961, attributed to unexplained cash deposits during the demonetization period. The Assessing Officer (AO) and the Commissioner of Income-Tax (Appeals) had sustained this addition, leading to the assessee's appeal.2. Evaluation of the evidence provided by the assessee to justify the cash deposits:The assessee, engaged in retail trading of jewellery, provided extensive documentation to justify the cash deposits, including a cash book, sales details, stock register, month-wise cash sales, and VAT returns. The AO did not find any defects in these records but remained unconvinced by the explanation that the cash deposits were from sale proceeds and past savings.3. Comparison of cash sales during the assessment year 2016-17 and 2017-18:The AO compared the cash sales during the assessment years 2016-17 and 2017-18, noting an abnormal increase in cash sales during the latter period. This discrepancy led the AO to question the legitimacy of the cash deposits and to add Rs. 32,95,000 as income from undisclosed sources. However, the AO accepted part of the cash sales amounting to Rs. 1,70,000.4. Assessing Officer's acceptance of part cash sales and rejection of the remaining:The AO accepted part of the cash sales but rejected the remaining amount, leading to the addition of Rs. 28,25,000. The assessee argued that the AO's acceptance of part cash sales should logically extend to the entire amount, especially since no discrepancies were found in the books of accounts.5. Reliance on previous judicial decisions in similar cases:The assessee's counsel cited several judicial decisions to support their case, including the Mumbai Bench of the Tribunal in the case of ACIT vs. M/s. Ram Lal Jewellers Pvt. Ltd., and the Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd. These cases established that if sales are duly recorded in the books and tally with the stock, high cash sales during demonetization cannot be treated as undisclosed income.Conclusion:The Tribunal concluded that the AO was not justified in disbelieving the cash sales simply because they were higher than the previous year. The AO had accepted the purchases, part sales, and stocks shown in the books without pointing out any discrepancies. Following the rationale in similar judicial decisions, the Tribunal held that the addition under Section 68 was unwarranted. Consequently, the appeal was allowed, and the addition of Rs. 28,25,000 was deleted.Order Pronouncement:The order was pronounced in the open court on 04/01/2024, concluding that the appeal was allowed in favor of the assessee.