Revenue's appeal dismissed for unexplained cash deposits of demonetized currency under section 68 double taxation avoided

ITAT Delhi dismissed revenue's appeal challenging deletion of addition u/s 68 for unexplained cash deposits of demonetized currency. The assessee had substantial cash sales running into crores, supported by audited books, invoices, VAT returns, and stock records. AO accepted sales and stock records for all years except 11-15 November 2016 period. CIT(A) found no defects in purchase, sale, and stock records after comparative analysis across four years. Since cash sales were already offered as income and taxed, treating the same amount again u/s 68 would result in double taxation. ITAT upheld CIT(A)'s deletion of addition.

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Issues Involved:
1. Deletion of addition of Rs. 2,43,37,500/- on account of unexplained money deposited during demonetization.
2. Validity of cash sales during October and November 2016.
3. Modus operandi of the assessee in allegedly managing artificial entries of cash sales.

Issue 1: Deletion of Addition of Rs. 2,43,37,500/- on Account of Unexplained Money Deposited During Demonetization
The Revenue challenged the deletion of the addition of Rs. 2,43,37,500/- made by the AO, arguing that the assessee failed to offer any valid explanation with supporting documentary evidence about the nature and source of cash deposits. The Tribunal noted that the assessee had made cash deposits amounting to Rs. 2,43,37,500/- in its bank accounts between 9.11.2016 to 30.12.2016, claiming the deposits were from the opening cash balance as on 09.11.2016. The ld. CIT(A) deleted the addition after verifying the availability of cash and the cash balance at hand, concluding that the cash deposits were satisfactorily explained by the assessee's regular business cash sales.

Issue 2: Validity of Cash Sales During October and November 2016
The AO observed that there were no cash sales from April to September 2016, but significant cash sales were reported in October and November 2016. The Tribunal examined the comparative details of sales, purchases, stock, and cash deposits over the financial years and found no abnormalities in the cash sales for October and November 2016. The ld. CIT(A) noted that the cash sales were consistent with the appellant's regular business pattern and that the VAT returns for the relevant periods were filed and not revised. The Tribunal upheld that the cash sales during these periods were bona fide and had a nexus with the sales effected by the assessee.

Issue 3: Modus Operandi of the Assessee in Allegedly Managing Artificial Entries of Cash Sales
The AO alleged that the assessee adopted a colorable device to manage artificial entries of cash sales to bring unaccounted cash into the books of account. The Tribunal found no specific defects in the audited books of accounts, purchases, sales, and stock of the assessee. The Tribunal also noted that the assessee had regularly made substantial cash sales in previous and subsequent years, and the cash sales during the demonetization period were not abnormal. The Tribunal concluded that the AO's suspicion was not backed by any concrete evidence or data and that the cash deposits made by the assessee were out of regular cash in hand from its business activities.

Conclusion
The Tribunal upheld the ld. CIT(A)'s decision to delete the addition of Rs. 2,43,37,500/- made by the AO u/s 68 r.w.s. 115BBE, finding that the cash deposits during the demonetization period were satisfactorily explained by the assessee's regular business cash sales. The appeal of the Revenue was dismissed.

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