2024 (1) TMI 1262 - AT - Income Tax

Unexplained cash deposits during the demonetization period - assessee failed to explain the source thereof satisfactorily during the assessment proceedings - AO dismissed the claim of sales and went on to make addition u/s 69A treating the deposits as income from undisclosed sources and computed the tax as per provisions of section 115BBE - CIT(A) deleted the addition - HELD THAT - The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment. The assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and it is not the case of the AO that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period. No reason to interfere with the factual findings of the ld. CIT(A) - Decided against revenue.

Summary

Issues involved:
The appeal concerns the deletion of an addition of Rs. 69 lakhs made on account of unexplained cash deposits during the demonetization period, with the key issue being the failure of the assessee to satisfactorily explain the source of the deposits during the assessment proceedings.

Summary:
The assessee, engaged in the business of sawing and wholesale trading of timber, filed its Return of Income for A.Y. 2017-18, declaring an income of Rs. 13,08,230. The case was selected for scrutiny assessment, focusing on cash deposits of Rs. 69 lakhs during the F.Y. 2016-17. The assessee attributed these deposits to cash sales of wood made during the demonetization period, supported by bills, sales/VAT returns, stock register, and VAT assessment order.

The Assessing Officer disregarded the explanation and evidence provided by the assessee, making an addition of Rs. 69 lakhs under section 69A of the Act. The ld. CIT(A) later deleted this addition after finding that the amount was duly recorded in the audited books of account, supported by invoices, stock register, VAT returns, and VAT authorities' acceptance of sales made by the assessee.

The Tribunal upheld the CIT(A)'s decision, noting the absence of any defects in the maintained books of account and the acceptance of sales by VAT authorities. It was emphasized that the assessee had sufficient stock for the sales during the demonetization period, and there was no indication of bogus transactions to cover up the cash deposits. The appeal of the Revenue was dismissed, affirming the deletion of the addition.

The order was pronounced on 03.01.2024 by the Appellate Tribunal ITAT DELHI, with the decision favoring the assessee in the matter of the disputed cash deposits during demonetization.