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Facts
The assessee, a private limited company engaged in transportation, filed its return for AY 2017-18. The AO made an addition of Rs. 29,95,000/- under Section 68 as unexplained cash deposits.
Held
The Tribunal held that in the absence of contrary evidence from the revenue disproving the assessee's sales, the addition was not sustainable. The Tribunal noted a direct correlation between cash outflow and deposits, and relied on a precedent that additions cannot be made in demonetization cases solely based on variances in cash deposits and sales ratio if the genuineness of sales is established.
Key Issues
Whether the addition made under Section 68 for unexplained cash deposits is sustainable in the absence of concrete evidence from the revenue disproving the assessee's sales, especially during the demonetization period.
Sections Cited
143(3), 68
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Income Tax Appellate Tribunal, “SMC” BENCH, DELHI
Before: MS. MADHUMITA ROY
The instant appeal filed by the assessee is directed against the order passed by the Ld. CIT(A) NFAC, Delhi, dated 15.02.2024 arising out of the Assessment Order passed by the ITO, Ward 23(2), Delhi under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2017-18.
Shiv Shankar Cargo Movers Pvt. Ltd. (AY: 2017-18) 2. Brief facts leading to the case is this that the assessee is a private limited company engaged in transportation of goods to various states from Delhi by using own trucks as well as using trucks of other transporter filed its return of income on 04.11.2017 declaring total income of Rs.8,03,450/- assessment whereof was completed under Section 143(3) of the Act upon making addition of Rs.29,95,000/- under Section 68 of the Act as unexplained cash deposits.
It was submitted by the Ld. Counsel appearing for the assessee that the amount was deposited out of the cash in hand; the deposit was made during the assessment year from the opening cash and cash in hand; deposits were made out of withdrawals on various dates which has not controverted by the Ld. AO.
Before us the entire set of documents were furnished including the payment received by the assessee from different parties and the bank statement showing withdrawals and deposits thereafter made by him. The Ld. AO added the impugned amount as unexplained cash credit under Section 68 of the Act in the absence of details of the persons from whom the appellant had received freight being furnished holding such case made out by the appellant an afterthought. Moreso, the Ld. CIT(A) was of the opinion that the assessee in Assessment Year 2016-17 deposited cash of Rs.87,80,740/-, Assessment Year 2017-18 Rs.148,79,840/-, subsequent Assessment Year 2018-19 of RS.70,53,697/-. Since, the year under consideration being demonetization year, the cash deposited by the assessee is much higher than that of the other two preceding year and succeeding year and the Ld. AO applying the test of human probability concluded that no prudent Shiv Shankar Cargo Movers Pvt. Ltd. (AY: 2017-18) businessman would withdraw cash when much cash is already in hand and therefore, finally confirmed the addition of Rs.29,95,000/- as made by the Ld. AO for want reliable explanation made by the assessee. It is noted that the month wise and date wise cash flow chart for the year particularly for the demonetization period from 9.11.2016 to 31.12.2016 as has been submitted being perused. The reconciliation statement is also been perused. The case made out by the assessee is this that the only source of cash received is freight and forwarding income; the cash proceeds from the freight income were duly credited in the profit and loss statement under the head ‘freight and forwarding income’ and offered to tax. In fact, the same cash proceeds were then deposited in the bank account. There is a direct correlation between the cash outflow in the cash ledger with the cash deposited in the bank account is found. When the cash deposited in post demonetization by the assessee was out of the cash sales has not been refuted by the Ld. AO then the cash deposit could not have been treated as undisclosed income of the assessee under the present facts and circumstances of the matter. Apart from the detailed statement of bank account of the assessee showing sufficient withdrawal and respective deposit thereafter estatablishes the source of impugned cash deposit. The Ld. Counsel appearing for the assessee relied upon the judgment passed by the Coordinate Bench in the case of Agsons Global Private Limited Vs. ACIT reported in (2021) 115 taxmann.com 342 wherein it has held that the additions cannot be made in the demonetization cases by the assessing authorities on the basis of deviation/variance in cash deposits and cash sales ratio of the demonetization with that of the earlier periods since the appellant had established the authenticity and genuineness of such cash sales; there cannot be a fixed sales pattern in any business. Suspicion however,
In that view of the matter in the absence of any contrary document in the hands of the revenue disproving the sales of the assessee the addition is found to be not sustainable and thus, deleted.
The appeal of the assessee is allowed.
Order pronounced in the open court on 21.05.2025