2025 (3) TMI 86 - AT - Income Tax

ITAT Delhi deletes section 68 addition for demonetization cash deposits without proven book defects

Sugriv Aggarwal Versus Income Tax Officer, Ward-44 (5), Delhi.

The ITAT Delhi allowed the assessee's appeal against addition under section 68 read with section 115BBE for cash deposits during demonetization period. ... Addition u/s 68 r.w.s.115BBE - cash deposited in the bank account treating the same as unexplained during the demonetization period - CIT(A) deleted part addition - HELD THAT:- There is material substance in the submissions advanced on behalf of the assessee that the addition was made without pointing out any defect in the books of account of the assessee and it cannot be ignored that the CIT(A) duly accepted the contentions of the assessee along with the evidences filed by the assessee, as mentioned hereinbefore and deleted the amount to some extent which is sales made from July 2016 – September 2016, confirmed the balance sales and Ld. AR submitted in this regard it was without any basis. It is relevant to mention here that while made addition, the Ld. AO is not rejected the book of accounts and not found any discrepancies in the stock, sales and purchases. As decided in Bawa Jewellers Pvt. Ltd. [2023 (7) TMI 494 - ITAT DELHI] wherein it was held that whereas the AO did not point out any defects in the books of account, no discrepancies were found in the stocks, sales and purchases and simply the AO concluded that there are huge deposits in the bank account during demonetization period and assessee amply demonstrated with the evidences that the cash sales and the cash deposits during relevant FYs were almost same and there was only a minimal increase in cash deposits during the FY 2016-17 relevant to A.Y. 2017-18. The addition could not be made. Appeal of the assessee is allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this case are:1. Whether the addition of Rs. 27,21,110/- made by the Assessing Officer (AO) on account of cash deposits during the demonetization period, treating them as unexplained under Section 68 read with Section 115BBE of the Income Tax Act, was justified.2. Whether the Ld. CIT(A) erred in confirming the addition despite the assessee's explanation and evidence that the cash deposits were from cash sales.3. Whether the Ld. CIT(A) relied on assumptions and presumptions without direct evidence against the assessee.4. Whether the addition resulted in double taxation, given that the cash sales were already recorded by the assessee.ISSUE-WISE DETAILED ANALYSIS1. Addition of Rs. 27,21,110/- as Unexplained Cash DepositsRelevant Legal Framework and Precedents: The addition was made under Section 68 of the Income Tax Act, which pertains to unexplained cash credits. Section 115BBE provides for tax on income referred to in Section 68.Court's Interpretation and Reasoning: The Tribunal noted that the Ld. CIT(A) confirmed the addition based on assumptions about the nature of cash deposits during the demonetization period. The Tribunal focused on whether the cash deposits were genuinely unexplained or if the assessee's explanation was credible.Key Evidence and Findings: The assessee provided detailed submissions, including audited financial statements, tax audit reports, bank statements, sales invoices, and stock summaries. The Ld. CIT(A) accepted part of the assessee's explanation, deleting Rs. 58,78,890/- of the addition but confirmed Rs. 27,21,110/-.Application of Law to Facts: The Tribunal examined the evidence provided by the assessee, which included cash sales records and stock details. The Tribunal found that the assessee had maintained proper books of account and that the Ld. AO had not pointed out any defects in these records.Treatment of Competing Arguments: The Tribunal considered the Ld. AR's argument that the cash deposits were from legitimate cash sales and that the Ld. CIT(A) had accepted this explanation for part of the deposits. The Revenue relied on the AO's findings, but the Tribunal found the assessee's evidence compelling.Conclusions: The Tribunal concluded that the addition of Rs. 27,21,110/- was not justified. The Tribunal found that the cash deposits were explained by the cash sales and that the Ld. CIT(A) erred in confirming the addition without sufficient basis.2. Double Taxation of Cash SalesRelevant Legal Framework and Precedents: The principle against double taxation is implicit in tax law, ensuring that the same income is not taxed twice.Court's Interpretation and Reasoning: The Tribunal considered whether the addition resulted in double taxation, given that the cash sales were already recorded and taxed.Key Evidence and Findings: The assessee provided evidence of cash sales and corresponding cash deposits. The Tribunal noted that the Ld. AO did not find discrepancies in the assessee's books of account.Application of Law to Facts: The Tribunal found that the cash sales were duly recorded and taxed, and the addition of the same amount as unexplained cash deposits would result in double taxation.Treatment of Competing Arguments: The Tribunal considered the Ld. AR's argument that the cash sales were already taxed and that the addition was unwarranted. The Tribunal agreed with this position.Conclusions: The Tribunal concluded that the addition resulted in double taxation and was therefore unjustified.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'The Tribunal found material substance in the submissions on behalf of the assessee and grounds of the appeal are deserve to be allowed and the addition in question is deleted.'Core Principles Established: The Tribunal reinforced the principle that additions under Section 68 must be based on concrete evidence and not on assumptions. It also highlighted the importance of not taxing the same income twice.Final Determinations on Each Issue: The Tribunal allowed the appeal, deleting the addition of Rs. 27,21,110/-. It found that the cash deposits were explained by the cash sales and that the Ld. CIT(A) had erred in confirming the addition.