ITAT Rules Controlled Liquor Trade And Audited Sales Records Support Cash Deposits :

The assessee is Elcon Impex Pvt. Ltd. And was engaged in the retail trade of liquor in Delhi under an L-10 licence. The Tribunal recorded that the purchase and sale prices of liquor were fixed, regulated and controlled by the Excise Department. For AY 2017-18, the assessee had declared income of Rs 56,27,940, which was subjected to scrutiny assessment. The AO made an addition of Rs 1,50,50,000 under Section 68 read with Section 115BBE on account of cash deposited during the demonetisation period from 9 November 2016 to 31 December 2016. The addition was subsequently upheld by the CIT(A).

The assessee submitted that the cash deposits represented sales proceeds duly reported to the VAT authorities and included in its income. It further submitted that its accounts were audited and had not been rejected or disturbed by the Department. The Revenue primarily questioned the substantial increase in the assessee’s cash-in-hand, which rose from Rs 52,71,919 as on 30 April 2016 to Rs 1,50,51,083 as on 8 November 2016, and argued that there was no plausible explanation for maintaining such cash balance. 

The Tribunal, however, noted that the AO had not rejected the books of account. During assessment proceedings, the assessee had furnished details relating to opening stock, purchases, sales, closing inventory and quantitative particulars, and the AO had accepted the trading results. No discrepancy was identified in the financial statements or audited books. The Tribunal further observed that the assessee’s liquor sales were subject to regulation by the Excise Department and VAT authorities. There was no material to establish that the assessee lacked the requisite stock corresponding to the liquor sales, or that the sales proceeds reflected in the audited financial statements were not genuine.

Accordingly, the Tribunal allowed the assessee’s appeal on merits and quashed the  assessment order, thereby deleting the corresponding Section 68 addition.