ITAT Delhi Grants Relief to Pharmacy Owner on Demonetisation Cash Deposits

The assessee, Ajit Batra, who runs a pharmacy, received demonetised notes from the customers on doctor’s prescriptions and proof of identity. He made cash deposits of Rs 19,68,000, arising out of medical Cash Sales. However, the AO treated them as unexplained deposits and made an addition under section 68 of the Income Tax Act to the assessee’s income.

However, the assessee argued that notification No. S.O.3416/E/dated 09.11.2016 allowed the pharmacies to receive demonetisation notes on production of a doctor’s prescription and proof of identity. Further, the assessee stated that the receipts from cash sales were genuine, and he also produced a cash sales register along with copies of the doctor’s prescription and identity.

The ITAT reviewed the case and observed that the AO has wrongly treated the cash sales made by the assessee as unexplained cash credit under section 69 of the Act. It noted that the assessee had reported these cash sales and paid tax on them, and making a separate addition under section 68 would lead to a double addition.

Further, the Tribunal cited a case of ITAT Bangalore, where the bench had held that there is no requirement in the circular that the doctor’s prescriptions and the identity of the persons buying the medicines need to be kept on record to prove the genuineness of the cash sales during the demonetisation period.

Based on this, the tribunal directed the AO to delete the addition.