ABBIRAMI THANKA MAALIKAI,ERODE vs. ITO, WARD-2(2), ERODE

The only issue to be decided in this appeal is whether the ld. CIT(A) was justified in upholding the addition of ₹25,00,000/- on account of cash deposits made during the demonetization period by treating the same as unexplained credit in the instant case.

I have heard the rival submissions and perused the material available on record. The assessee firm is engaged in the business of purchase and sale of silver and gold jewellery items. The return of income for the assessment year 2017-18 was filed by the assessee firm on 08.02.2018 declaring total income of ₹73,400/-. During the course of scrutiny assessment proceedings, the assessee firm furnished the details along with written submissions by furnishing the profit and loss account, capital account of the partners of the assessee firm, cash book for the period 01.04.2016 to 31.03.2017, and the written submission along with evidences filed on 09.12.2019 before the ld. AO. It was noticed that the assessee had deposited cash of ₹30,63,000/- in specified bank notes during the demonetization period. The assessee also stated that the cash was deposited out of the available cash balance and cash sales made by the assessee, in support of which various cash sales bills were enclosed. The assessee also submitted that it had made cash sales in the month of October, 2016 to the tune of ₹34,61,110/-, being the month containing various auspicious dates and occasions. The ld. AO noted from the examination of the gold sales account that the assessee had made sales on 26.10.2016, 27.10.2016 and 28.10.2016 to the tune of ₹8,66,610/-, ₹15,08,250/- and ₹4,98,600/- respectively. The entire cash book for the whole year was also furnished before the ld. AO. From the verification of the cash book, the ld. AO also noticed that the assessee firm, on 01.11.2016, had received ₹12,50,000/- from three partners in cash by way of introduction of capital in the firm. The assessee also enclosed the capital accounts of the partners in support of the same. The ld. AO, on obtaining information from the bank under Section 133(6) of the Income Tax Act, 1961 (for the sake of brevity, ‘the Act’), noted that a sum of ₹25,00,000/- was deposited in specified bank notes during the

With regard to the explanation given by the assessee that the cash deposit had emanated out of cash sales made by the assessee, I find that the assessee had already disclosed the cash sales as part of the total sales credited in the profit and loss account and which is part of the income-tax return also. The said sales, corresponding purchases and stocks were not doubted by the Revenue. The books of account were not rejected by the Revenue by invoking the provisions of Section 145(3) of the Act. Hence, making a separate addition on account of cash sales would only result in double addition. I find that the ld. AO had started the computation of income from the return of income, which obviously includes the cash sales already credited in the profit and loss account and offered to tax. The cash sales made by the assessee have been duly reflected in the cash books of the assessee. Hence, I hold that ₹12,50,000/- emanating out of cash sales is fully explained. No addition could be made thereon by treating it as unexplained cash under Section 68 of the Act.

With regard to the capital introduced by the partners of the assessee firm in the sum of ₹12,50,000/-, ld. AR Mr. N.C. Ravi Krishnan, Advocate, before us furnished copies of the ITRs together with the balance sheets of the partners as additional evidence before me. These

In the result, the appeal filed by the assessee is allowed for statistical purpose.