TaxTMI 
TaxTMI 
2026 (7) TMI 694
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....ed during demonetization period I Specified Bank Notes (SBN). Thereafter, the AO observed that the assessee has deposited total cash of INR 69,75,000/- during the demonetization period and the source of which was explained as out of cash sales made during the month of October, 2016 to 08.11.2016. The AO held the cash sales and cash balance of INR 17.00 Lakhs as fair and reasonable looking to eh past history of the assessee and made the addition of the differential amount of INR 52,75,000/- u/s 68 of the Act as unexplained credits and further invoked the provisions of section 115BBE for charging special rates of tax. Besides this, deduction claimed u/s 80C of the Act of INR 1,08,034/- and under section 80G of INR 22,250/- were disallowed for want of supporting evidences. 3. Against the said order, the assessee is in appeal before Ld.CIT(A) who vide impugned order dated 26.09.2025 though has confirmed the addition of INR 52,75,000/- made u/s 68 r.w.s.115BBE of the Act however, directed to reduce the said amount from the total turnover declared and to recompute the trading results accordingly. Regarding the disallowance made of the deduction claimed u/s 80C & 80G of the Act, Ld. CI....
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....r, 2016 as compared to preceding AY which clearly shows that the assessee has shown the cash sales to justify the source of cash deposits during the period of demonetization in the bank account in SBN. He therefore, submits that the AO has rightly allowed the deduction of INR 17.00 Lakhs and requested for the confirmation of the orders of the lower authorities. 9. Heard the contentions of both the parties at length and perused the material on record. In the instant case, assessee has made cash deposits of INR 69,75,000/- in SBN during the demonetization period for which the immediate source was explained as made out of the cash accumulated from the sales made during the month of October, 2016 to 08.11.2016. IN support of the claim, assessee had produced the books of accounts and other particulars before the AO which includes cash book, stock register, VAT returns etc. and no defects whatsoever were pointed out in the same either by the AO or by Ld. CIT(A). However, the source of cash deposited during the demonetization period was doubted and sales was estimated at INR 10.00 Lakhs and further availability of cash in hand of INR 7.00 Lakhs was held as reasonable and balance amount....
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....s basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon'ble High Court dismissed the appeal filed by the Department." 12. The Co-ordinate bench of Mumbai ITAT in the case of ACIT v. Ramlal Jewellers (P.) Ltd. Reported in [2023] 154 taxmann.com 584 (Mumbai - Trib.) under similar circumstances has deleted the addition made u/s 68 on account of cash deposit in SBN during the demonetization period by making following observations: "Section 68 of the Income-tax Act, 1961- Cash credit(Cash deposit in bank)- Assessment year 2016-17- Assessee-company was engaged in jewellery business- During assessment proceedings, Assessing Officer noted that immediately after demonetization assessee had shown inflated cash sales and also made deposits in bank account which was completely abnormal as compared to earlier year and also subsequent year - He, therefore, taxed cash deposits un....
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....ion or such explanations are not found to be satisfactory to the AO. In this case, the assessee has already declared the cash sales in its books of account and offers the explanation as cash sales, which the lower authorities has accepted it as regular business transactions because they have not rejected the book results and brought to tax the total sales declared by the assessee in its books. Since the cash were already recorded and explanation is already part of the book results, there is no avenue for the CIT(A) to reject such explanations. This expression "explanation is found not satisfactory to the AO" is purely relates to the money found with the assessee which are not recorded in the books of account. In this case, the above expression has no relevance since the assessee had already declared the cash sales in its books. In the similar situation, the coordinate bench has held in the case of J.R.Rice India (P) Ltd as under: "At the cost of repetition, to the extent of sales made, the stock position is also correspondingly reduced by the assessee which goes to prove the genuineness of the claim of the assessee. On examination of the cash book of the assessee, it is fo....