ITAT Delhi Deletes Rs 5.60 Crore Addition for Demonetisation Cash Deposits Under Section 69A

The Income Tax Appellate Tribunal (ITAT) Delhi has held that cash deposits made during the demonetisation period cannot be treated as unexplained money under Section 69A of the Income Tax Act when the source of such deposits stands recorded in the audited books of account.

The assessee, Mr Rakesh Kumar, conducts the business of jewellery and bullion trading under the proprietorship concern M/s R.V. Gold Hallmark. During the demonetisation period, he deposited cash amounting to Rs 5.60 crore in his bank account. The case was selected for limited scrutiny on account of substantial cash deposits.

During assessment proceedings, the assessee explained that the deposits represented cash advances received from customers prior to 8 November 2016 for the purchase of gold bullion. The AO issued summons under Section 131 to certain customers, and none of the summoned persons appeared. The Assessing Officer concluded that the alleged business activity was not genuine and treated the entire cash deposit of Rs 5.60 crore as unexplained money under Section 69A. The addition was also subjected to tax under Section 115BBE.

The CIT(A) affirmed the assessment made by AO.

The Tribunal observed that the assessee had maintained books of account, cash books, sales records, stock details and audited financial statements. It was also observed that the assessee had furnished a detailed cash account statement explaining the source of deposits, including customer advances, cash balance and other receipts. These transactions were accordingly reflected in the books of account.

Allowing the appeal, the Tribunal held that the source of cash deposits had been satisfactorily explained and the provisions of Section 69A were not attracted. Accordingly, the addition of Rs 5.60 crore made under Section 69A was deleted.