2025 (2) TMI 1025 - AT - Income Tax

Demonetization cash deposits from recorded sales cannot be re-taxed under Section 69A after proper documentation

ITAT Chennai dismissed Revenue's appeal challenging CIT(A)'s deletion of addition under Section 69A read with Section 115BBE for unexplained cash deposits ... Addition u/s. 69A r.w.s. 115BBE - unexplained cash deposits -CIT(A) deleted addition on assessee’s submissions with regard to cash deposits during demonetization period is supported with documents and evidences - HELD THAT:- When the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation, which is impermissible in law. The cash sales made by the assessee have been credited in the books of accounts and the same form part of the assessee’s cash book. On these facts, it could be very well said that the assessee claim was backed up by relevant evidences. Thus, the assessee has discharged the burden of proving the source of the cash/SBN deposited in the bank and the AO failed to rebut the same. We also note that the assessee has sold only 17.50% on 08.11.2016 out of the stock held before the demonetisation day. The allegations/statistics relied upon by AO to take an adverse view is not backed up by relevant evidence/material and therefore the action of AO, which has been rightly set aside by the ld.CIT(A) and hence cannot be interfered. Finding of the AO that such abnormal sales could not be achieved immediately upon announcement of demonetization by the Governmentare bereft of any concrete evidence to prove otherwise on record. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises.Moreover, since cash generated out of sales has been credited in the books of accounts, the provisions of section 69A could not be invoked in the present case. Thus additions are not sustainable in the eyes of law and hence, we are of the considered view that the action of the ld.CIT(A) in deleting the addition need not be interfered and hence we dismiss the grounds raised by the Revenue. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this case were:1. Whether the delay of 440 days in filing the appeal by the Revenue should be condoned.2. Whether the addition of Rs. 8,41,81,000/- under Section 69A read with Section 115BBE of the Income Tax Act, 1961, made by the Assessing Officer (AO) on account of unexplained cash deposits during the demonetization period, was justified.ISSUE-WISE DETAILED ANALYSIS1. Condonation of Delay in Filing the Appeal- Relevant Legal Framework and Precedents: The Tribunal considered the affidavit submitted by the Revenue explaining the technical glitch in the TBA system, which led to the delay in filing the appeal. The Tribunal has the discretion to condone delays if a reasonable cause is demonstrated.- Court's Interpretation and Reasoning: The Tribunal found the cause of delay due to technical issues in the TBA system as reasonable and decided to condone the delay, allowing the appeal to be admitted for adjudication.- Conclusion: The Tribunal condoned the delay and admitted the appeal for adjudication.2. Addition under Section 69A read with Section 115BBE- Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, where the assessee is found to be the owner of any money not recorded in the books, and the explanation offered is unsatisfactory. Section 115BBE provides for taxation of such unexplained income at a higher rate. The AO relied on precedents such as CIT v. Durga Prasad More and CIT v. M. Ganapathi Mudaliar to support the addition.- Court's Interpretation and Reasoning: The Tribunal noted that the assessee had provided substantial evidence, including sales ledgers, cash books, stock registers, and VAT returns, to substantiate the cash deposits as arising from legitimate sales. The Tribunal emphasized that the AO did not find any defects in the books of accounts or stock records maintained by the assessee.- Key Evidence and Findings: The assessee provided detailed documentation, including sales invoices, stock registers, and VAT returns, which were not disputed by the AO. The Tribunal observed that the AO's suspicion was based on the impracticability of sales volume on a particular day, which was not backed by concrete evidence.- Application of Law to Facts: The Tribunal applied the principle that when sales are recorded in the books and offered to tax, adding the same amount again would result in double taxation, which is impermissible. The Tribunal found that the assessee had discharged the burden of proof regarding the source of cash deposits.- Treatment of Competing Arguments: The Revenue argued that the sales were fictitious due to the high volume in a short period. However, the Tribunal found the assessee's explanation plausible and supported by documentary evidence.- Conclusion: The Tribunal upheld the CIT(A)'s decision to delete the addition, finding no basis for the AO's conclusion that the cash deposits were unexplained income.SIGNIFICANT HOLDINGS- Verbatim Quotes of Crucial Legal Reasoning: 'We are of the considered opinion that when the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation which is impermissible in law.'- Core Principles Established: The Tribunal reinforced the principle that additions under Section 69A require concrete evidence beyond mere suspicion. Properly documented sales reflected in the books cannot be taxed again as unexplained income.- Final Determinations on Each Issue: The Tribunal condoned the delay in filing the appeal and dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition made under Section 69A read with Section 115BBE.