ITAT Ahmedabad Remands Demonetisation Cash Deposit Case for Fresh Verification Under Rule 46A

The assessee, a trader in gold and silver ornaments under the proprietorship “New Dagina,” filed a return declaring Rs. 19,06,770/- for AY 2017-18. During scrutiny, the Assessing Officer noted cash deposits of Rs. 5,51,19,000/- made during the demonetisation period. The assessee submitted detailed explanations, including cash purchase invoices, specimen sales bills, VAT returns, a daily stock register, and item-wise sales data. He explained that a promotional sale scheme during the festive season had increased footfall, resulting in high cash sales.

The AO rejected the explanation, treating the deposits as unexplained money under Section 69A read with Section 115BBE, citing an abnormal surge in sales and lack of confirmations from customers.

Appeal Before CIT(A): CIT(A) confirmed the addition, holding that the assessee had failed to prove the genuineness of cash sales or substantiate the cash deposits with supporting confirmations, despite the books not being rejected.

Issue Raised: Whether the CIT(A) was justified in sustaining addition of Rs. 5.51 crore as unexplained money under Section 69A without examining the detailed sales evidence produced and without following Rule 46A procedures.’

ITAT Decided: The Tribunal observed that the assessee had placed before the CIT(A) a comprehensive set of documents, sales registers, customer details including names, addresses and PANs, descriptions of items sold, contact information, and VAT-linked sales data. These materials were simply brushed aside by the CIT(A) without any verification or calling for a remand report. The ITAT held that such rejection violated Rule 46A(2) and principles of natural justice, as the appellate authority is duty-bound to examine additional evidence when offered and seek the AO’s comments.

The Tribunal, without adjudicating the merits of the addition, remanded the matter to the CIT(A) for proper verification of all evidence, direction to take a remand report from the AO, and fresh adjudication in accordance with law. The assessee must also be afforded a full opportunity of hearing. The appeal was thus allowed for statistical purposes.

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