No Additions u/s 68 if Cash Deposits during Demonization are in accordance with Cash Sales: ITAT

The assessee is an individual and filed his return of income declaring a total income of Rs. 11,39,450. During the course of assessment proceedings the Assessing Officer noticed that the assessee has deposited an amount of Rs.30.00 lakhs in cash during the demonetization period in old denomination i.e. Rs.1000 currency notes in his bank account held with Indian Overseas Bank. He made an addition of Rs.30.00 lakhs u/s 69A being cash deposit in the Bank A/c during the demonetization period as sale proceeds received in the old denomination, as admitted by the assessee himself cannot be treated as the receipt from the business and the addition of Rs.2.40 lakhs on account of low withdrawals.

Appeal before CIT(A): In appeal, the learned CIT (A) sustained the addition of Rs.30.00 lakhs made u/s 69A of the Act and the addition of Rs.2,40,000/- on account of low withdrawal

Appeal before ITAT: Aggrieved with such order of the CIT (A), the assessee is in appeal before the Tribunal. The tribunal found that NFAC sustained both additions as the tribunal finds force in arguments made by the ld. Counsel for the assessee that the deposit of old currency notes in the Bank A/c is out of the sale proceeds effected prior to the ban of currency notes and that a perusal of the month-wise cash deposits made by the assessee during the financial year 2015-16 and 2016-17 shows that such cash deposits made in the Bank A/c are commensurate with the sales made by the assessee in every month both during the preceding year and subsequent year. A perusal of month-wise cash sales and cash deposits made by the assessee in the Bank A/c shows that the cash sales made by the assessee during every month are substantial.

The tribunal relied on the Hon’ble Delhi High Court in the case of Pr. CIT vs. Anson Global (P) Ltd, “With regards to the trend of cash sales and corresponding cash deposited by the assessee with earlier years, we are of the view that there was nothing placed on record—which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e. made cash deposits that were not represented by cash sales. Therefore, in our opinion, the Tribunal correctly found in favour of the assessee and deleted the addition made by CIT(A) of Rs.73.13 crores, under Section 68 of the Act.”

The tribunal held that the learned NFAC was not justified in sustaining the addition of Rs.30.00 lakhs made by the Assessing Officer. Hence the order of NFAC was set aside and ground raised by the assessee was allowed.

As regards the addition of Rs. 2,40,000 made by the Assessing Officer and sustained by the NFAC is concerned, the tribunal observed that there was nothing on record to suggest that the assessee has purchased any movable or immovable properties, incurred any expenditure for marriage, or any other function, or is leading a lavish lifestyle and it was based on presumptions and surmises without bringing any material on record to suggest that the assessee has incurred more expenditure than what has been shown in the capital a/c towards withdrawals. Hence, the order of NFAC was set aside and the AO was directed to delete the addition. Hence, the appeal filed by the assessee was allowed.

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