2024 (11) TMI 1018 - AT - Income Tax

Addition on account of cash deposited in bank account - Addition u/s.69A on account of unexplained cash deposit - AO s allegation that assessee has shown inflated cash sales - HELD THAT - Assessee is a Wholesaler for Sapat Brand Tea. During the assessment proceedings, assessee had explained that the amount deposited was out of the Opening Cash Balance and Sales made. However, AO rejected assessee s submission and made the addition. As observed from the above table that during the month of October November, there has been substantial increase in the Cash Sales of the assessee in all the three Financial Years. Assessee claimed that these were the months of Festivals. Therefore, AO s allegation that assessee has shown inflated cash sales during October, 2016 to deposit his unaccounted cash is unsubstantiated. Because, consistently there is increased cash sales as compared to other months. It is also a fact that assessee s Books of Accounts are audited. The Audit Report along with Profit and Loss Account, Balance Sheet and its Annexures were filed before the Assessing Officer. AO has not pointed any defect in these Books of Accounts or Audit Reports. CIT(A) has also not pointed out any defect in the Audit Report. Assessee had also filed copy of all the bank statements before the Assessing Officer. There were regular cash deposits even before the Demonetization. Assessee had submitted before the AO details of monthly cash sales, details of monthly purchases. Assessing Officer has not doubted Assessee s purchases or sales. The entire sales and purchases are reflected in the Profit and Loss Account and AO has not brought out on record any evidence to rebut the assessee s claim. AO has merely made addition based on surmises and conjectures. Thus, AO s allegation that cash deposited on 11.11.2016 and 15.11.2016 are out of unaccounted sales is baseless. We have already reproduced the details of cash sales shown by the assessee much before the Demonetization. Therefore, in these factual background, there is no reason to doubt the cash deposits made on 11.11.2016 and 15.11.2016. Assessee appeal allowed.

Summary

Issues:
Appeal against addition on account of cash deposited in bank account under section 69A of the Income Tax Act 1961.

Analysis:
The appellant, engaged in a trading business, filed an appeal against the addition of Rs. 67,86,500 under section 69A of the Income Tax Act for unexplained cash deposits during demonetization. The Assessing Officer (AO) made the addition based on the cash deposited in the bank account during demonetization. The appellant contended that the deposits were from opening cash balance and regular sales. The AO rejected the explanation and made the addition. The appellant presented monthly sales data for multiple financial years to show a consistent increase in cash sales during festive months. The appellant's books of accounts were audited, and no defects were found. The appellant regularly deposited cash in the bank account even before demonetization, which was supported by bank statements. The Tribunal observed the regularity of cash deposits before demonetization and the absence of any evidence to refute the appellant's claims. The Tribunal concluded that the cash deposits during demonetization were from regular sales and directed the AO to delete the addition. The grounds of appeal raised by the appellant were allowed, and the appeal was allowed in favor of the appellant.

This case involved a challenge to the addition of cash deposits in a bank account during demonetization under section 69A of the Income Tax Act. The appellant, a wholesaler, argued that the deposits were from regular sales and opening cash balance. The AO had rejected this explanation and made the addition. The Tribunal analyzed the appellant's sales data for various financial years, showing a consistent increase in cash sales during festive months. The appellant's audited books of accounts and bank statements supported the regularity of cash deposits even before demonetization. The Tribunal found no basis to doubt the source of cash deposits during demonetization and directed the deletion of the addition. The Tribunal emphasized the lack of evidence to support the AO's allegations and ruled in favor of the appellant, allowing the appeal.

In conclusion, the Tribunal overturned the addition of cash deposits made during demonetization, as the appellant demonstrated the source of funds from regular sales and opening cash balance. The Tribunal highlighted the regularity of cash deposits before demonetization and the absence of defects in the appellant's audited books of accounts. The Tribunal found the AO's allegations baseless and directed the deletion of the addition under section 69A of the Income Tax Act. The appellant's appeal was allowed, emphasizing the lack of evidence to support the AO's contentions.