ITAT Delhi Upholds Rs 1.34 Crore Addition on Demonetisation Cash Deposits And Holds Purchase Transactions Non-Genuine

The Income Tax Appellate Tribunal (ITAT) Delhi, dismissed assessee’s appeal and sustains addition under Section 69A after finding inconsistencies in cash sales and due to lack of supporting evidence for purchases

The assessee under the name Garima Leather Exports, does the business of manufacturing and trading of footwear and filed its return of income declaring a loss of Rs 7.73 lakh for assessment year 2017-18. During scrutiny proceedings under Section 143(3), the AO took note of cash aggregating to Rs 1.34 crore being deposited during the demonetisation period. The assessee submitted that the amount represented cash sales.

However, enquiries initiated by the AO under Section 133(6) to verify the transactions remained unanswered by the supplier. During examination of the books, the AO found out that the assessee had issued as many as 539 local tax-free sale vouchers, each for an identical amount of Rs 18.4 thousand between 4 October 2016 and 27 October 2016 which created doubts about the genuineness of the transactions. Accordingly, the amount deposited during the demonetisation period was treated as unexplained cash under Section 69A of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) affirmed the addition.

The Tribunal observed that the genuineness of the sales evidenced through 539 vouchers of identical value was highly doubtful. Additionally, there was non-compliance with notices issued under Section 133(6) by the proprietor of Sharma Chemicals and Adhesive, which was allegedly connected with the assessee firm, increased doubts on the genuineness of the purchase transactions.

Holding that the deficiencies and inconsistencies identified by the AO could not be ignored, Tribunal did not interfered with the order of the CIT (A) Accordingly, ITAT Delhi confirmed the addition of Rs 1.34 crore made under Section 69A and dismissed the appeal filed by the assessee.