2023 (7) TMI 1009 - AT - Income Tax

Addition u/s 69A - unexplained cash deposits during the demonetization period - HELD THAT - We agree with assessee that only source of income is from sale of crackers, and it can be concluded that the cash deposits in the assessee s bank account arise only out of cash sale. No material against the assessee is brought on record by the AO for the cash deposits. When the purchases and closing stock was not disputed by the Revenue, it is imperative to admit that the difference ought to be the sales made by the assessee. The assessee in its written submissions accepted the additional profit. Relying on the decision of Sridevi Ravi 2020 (12) TMI 665 - ITAT CHENNAI we find that the assessee has therefore explained the cash deposits and hence no addition can be made U/s. 69A r.w.s. 115BBE - Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in this case are the treatment of unexplained cash deposits during the demonetization period, computation of business income u/s 44AD of the Income Tax Act, and the application of sections 69A and 115BBE of the Act.

Unexplained Cash Deposits:
The appellant, a wholesale and retail seller of crackers, declared a turnover and income for the AY 2017-18. The Assessing Officer (AO) observed discrepancies in the cash deposits made during the demonetization period and estimated unexplained money u/s 115BBE of the Act. The CIT(A)-NFAC partly allowed the appeal, directing an addition of Rs. 19,35,996 as unexplained. The appellant contended that the actual cash deposits were lower than assessed. The Tribunal noted the appellant's submissions and discrepancies in the AO's estimation. Referring to a similar case, the Tribunal concluded that no addition could be made u/s 69A r.w.s. 115BBE, as the appellant explained the cash deposits adequately. Consequently, the appeal was allowed.

Computation of Business Income:
The AO computed the appellant's business income u/s 44AD based on VAT turnover, resulting in a lower income than declared by the appellant. Discrepancies in cash balance and deposits led to the estimation of unexplained money. The CIT(A)-NFAC upheld a partial addition, considering the appellant's declared turnover. The Tribunal analyzed the appellant's submissions regarding purchases, sales, and profit margins. Referring to the Chennai Tribunal's decision, the Tribunal found merit in the appellant's arguments that the cash deposits arose from legitimate business activities. Accepting the additional profit explained by the appellant, the Tribunal ruled that no addition could be made u/s 69A r.w.s. 115BBE. Consequently, the appeal was allowed.

Conclusion:
The Tribunal allowed the appeal, emphasizing that the appellant adequately explained the cash deposits and no addition could be made u/s 69A r.w.s. 115BBE. The Tribunal considered the appellant's legitimate business activities, profit margins, and submissions, leading to the decision in favor of the appellant.