2025 (11) TMI 1596 - AT - Income Tax

Cash deposits during demonetization held explained as petrol pump sales; addition under Section 69A deleted for assessee

ITAT Ahmedabad held that cash deposits made during the demonetization period could not be treated as unexplained income u/s 69A. The assessee, operating a ... Addition u/s.69A - sales made by the assessee during the demonetization period as bogus - increase in sales of the assessee - treating the cash deposits made by the assessee as unexplained income of the assessee - HELD THAT:- The assessee has produced on the file the relevant material to prove the sales made during the year including that were made during demonetization period. A perusal of the data submitted by the assessee shows that the assessee’s cash sales during demonetization period commensurate with the total sales and cash of the assessee for the year under consideration. So far as the contention of the Ld. DR that the cash sales have been slightly increased during demonetization period is concerned, the fact that the petrol pumps were allowed to accept demonetization currency during the relevant period, is a determining factor in this respect. When certain types of currency was barred from circulation, in that event, it was a normal tendency of the people to circulate/make purchases in demonetization currency since the said currency was accepted at petrol pumps, hence obviously, this factor was relevant for increase in cash sales of the assessee during the demonetization period. Such increase in sales of the assessee was not so high, but showed a normal increase under such circumstances. The assessee has duly proved that the amount deposited in the bank account was out of the cash sales made by the assessee. Therefore, there is no justification on the part of the lower authorities in making/confirming the impugned additions and the same are, accordingly, ordered to be deleted. Appeal of the assessee stands allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether cash deposits made during the demonetization period, corresponding to recorded cash sales of a petrol pump, could be treated as unexplained money under section 69A by characterizing the sales as bogus. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Treatment of cash deposits during demonetization as unexplained money under section 69A by disbelieving recorded cash sales Interpretation and reasoning 2.1 The Tribunal noted that the lower authorities had proceeded on the premise that the assessee did not file relevant details and evidences to substantiate that the cash deposits during demonetization were out of sales; however, the record showed that the assessee had in fact produced purchase register, sales register, stock statement and other material in support of its sales, including those during the demonetization period. 2.2 The business of the assessee was that of a petrol pump, and under Central Government Notification No. S.O. 3544(E) dated 24/11/2016, petrol pumps were specifically permitted to accept demonetized currency up to 15/12/2016; this factual and regulatory context was treated by the Tribunal as a 'determining factor' in assessing the genuineness of increased cash sales during the relevant period. 2.3 The data on record showed that total sales were about Rs. 9.40 crores, of which Rs. 7.65 crores were cash sales, and cash sales of Rs. 1.53 crores were made during the demonetization period; the Tribunal found these figures to be commensurate with the overall sales pattern and cash sales of the year, and not disproportionate. 2.4 The Tribunal accepted the explanation that, since demonetized currency was legally accepted at petrol pumps during the notified period, it was normal for the public to use such notes for fuel purchases, naturally resulting in some increase in cash sales; the increase observed was characterized as a 'normal increase' under the special circumstances and not of such magnitude as to justify an inference of bogus sales. 2.5 The existence of supporting records (including VAT returns) and the linkage between recorded cash sales and bank deposits led the Tribunal to hold that the assessee had duly proved that the cash deposited in the bank account was sourced from genuine cash sales, and that mere increase in cash sales during demonetization, without cogent contrary material, could not warrant invocation of section 69A. Conclusions 2.6 The Tribunal held that the characterization of recorded cash sales during demonetization as bogus, and consequent treatment of the corresponding cash deposits as unexplained money under section 69A, was unjustified. 2.7 The addition made by the Assessing Officer under section 69A and confirmed by the appellate authority was deleted, and the appeal of the assessee was allowed.