Additions Under Section 69A Can be Made Only When Assessee Owns Unrecorded Money: ITAT

The Income Tax Appellate Tribunal (ITAT), Delhi, deleted an addition of Rs. 38,05,000 made by the tax authorities. These additions were made only on the basis of suspicion.

The assessee, Nathani Polymers, deposited cash of Rs 38,05,000 during the demonetisation period. The Assessing Officer treated the deposits as unexplained, alleging that the source of cash was not clear. As a result, he made an addition under Section 69A read with Section 115BBE of the Income Tax Act. The same was upheld by the CIT(A). Therefore, the assessee appealed before the ITAT.

The assessee company argued that deposits are made from the cash sales. It explained that the sales are largely made in cash to the small manufacturers. The assessee also said that the CIT(A) and AO did not point out any mismatch between the sale and purchase details. It also submitted the audited financial statements, details of purchase and sales, and VAT returns.

The ITAT noted that there was no defect in the books of account or the sales recorded by the assessee. The tribunal concluded that the addition had been made on the basis of suspicion regarding the genuineness of cash sales.

The Tribunal held that mere suspicion cannot be treated as evidence. It further held that the addition under section 69A can only be made if the assessee is found to be the owner of money which is not recorded in the books of account.

Therefore, the ITAT directed the AO to delete the addition of Rs 38,05,000.