ITAT Deletes Rs. 35.22 Lakh Demonetisation Addition; Cash Sales Accepted as Genuine

The assessee, Marche Retail Pvt. Ltd., engaged in FMCG wholesale and retail business through multiple outlets, filed its return for AY 2017-18 declaring income of Rs. 59.94 lakh. The case was selected for complete scrutiny. During assessment, the Assessing Officer noticed that the assessee had deposited Rs. 1.44 crore in Specified Bank Notes (SBNs) during the demonetization period.

The Assessing Officer held that deposits made in December 2016, aggregating to Rs. 35,22,000, were not satisfactorily explained and treated them as unexplained cash credits under Section 68 read with Section 115BBE. The first appellate authority dismissed the appeal ex parte for non-prosecution, confirming the addition without examining the material already on record.

Issue Before ITAT: Whether cash deposits of Rs. 35,22,000 made during the demonetization period could be treated as unexplained under Section 68 despite sufficient recorded cash sales and available cash balance in audited books.

ITAT’s Decision: The ITAT observed that the assessee had furnished detailed cash deposit statements, bank confirmations, VAT returns and sales records during assessment. The Tribunal noted that as on the date of demonetisation, the assessee had a closing cash balance of Rs. 1.48 crore and had recorded substantial cash sales during November and December 2016. .

The Tribunal held that the Assessing Officer merely doubted the timing of deposits without bringing any material to show that the cash was not available or that the deposits were not out of recorded sales. It was further noted that the books of account were audited and not rejected. In absence of any contrary evidence, the addition of Rs, 35,22,000 was found to be unjustified.

Thus, the addition under Section 68 read with Section 115BBE was deleted and the appeal was allowed.

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