Cash receipts from sale during demonetisation cannot be added if sales has been declared in VAT Return: ITAT

The brief facts of the case is that the assessee is an individual engaged in the business of manufacturing of electrical wires and trading un electrical equipment’s, product etc. The assessee filed his return of income for the A.Y. 2017-18 on 31.10.2017 declaring total income of Rs.9,55,960/-. The case of the assessee was selected for scrutiny and thereafter assessment was framed under section 143(3) making an addition of Rs. 37,99,500/-. The assessing officer in its assessment order stated that the assessee had deposited cash during the demonetization period and during the other period there were no cash deposits by the assessee. A.O. also noted that as per the details provided by the Bank, assessee had deposited cash in old currency denomination of Rs.500/- and Rs.1000/- notes aggregating to Rs.37,99,500/-. Therefore, assessing officer held that deposit of cash during the period of demonetization to be unexplained and from undisclosed sources and according made addition of Rs.37,99,500/- under section 69A of the Income Tax Act, 1961.

Aggrieved by the order of the A.O, assessee carried the matter in appeal before the Ld. CIT(A). The CIT(A) granted relief to the extent of Rs. 3 lakh and upheld the addition of 34,99,500/-. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

Before the ITAT, the ld. AR submitted that the cash deposits were out of the sales made by the assessee. Further, he submitted that most of the sales have been made to identifiable parties, all the cash sales made have been declared in the VAT return. He further submitted that the accounts of the assessee are audited and no defect has been pointed out by the Auditor in the maintenance of the books of account and the books of account have not been rejected by the A.O. and in such a situation cash sales cannot be added to the income of the assessee under section 69A of the Act. He further submitted that the purchases made for effecting the aforesaid sales has not been rejected by the Revenue and, therefore, the sales cannot be considered to be unexplained. He thus submitted that on the facts and circumstances of the case, no addition is called for in the present case. The Ld. D.R. on the other hand strongly relied on the order of the A.O. and the Ld. CIT(A). ITAT in its order held that when the sales have been accepted as revenue receipt, the same could not have been again added as income. It was of view that the no addition is called for in the present case and direct the assessing officer for deletion of the addition.

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