THILAGAVATHI,PUDUCHERRY vs. ITO, WARD-5, , PUDUCHERRY

The only issue to be decided in this appeal is whether the ld. CIT(A) was justified in restricting the addition of ₹3,36,000/- on account of cash deposits made during the demonetization period in specified bank notes in the facts and circumstances of the instant case.

I have heard the rival submissions and perused the material available on record. The assessee is an individual and proprietor of M/s Bala Marketting and had filed her return of income for the assessment year 2017-18 on 29.10.2017 declaring a total income of ₹6,92,220/-. The assessee is a dealer in Aachi Masala products and the business is predominantly carried out in cash by the assessee. It is not in dispute that the assessee had made cash deposits during the demonetization period in specified bank notes in the sum of ₹6,47,500/-. The assessee explained the source to have emanated out of the available cash balance as on 08.11.2016 in the sum of ₹3,11,500/- and sales made during the demonetization period, for which collections were made in specified bank notes by the assessee during the demonetization period to the tune of ₹3,36,000/-, which stood deposited in the bank account. This explanation was found not satisfactory by the ld. AO and the total cash deposit of ₹6,47,500/- was treated to be unexplained cash credit under Section 68 of the Act, on the ground that the assessee was not entitled to make cash sales during the demonetization period and that the assessee does not fall under the category of eligible persons authorized to collect cash in specified bank notes, such as petrol pumps, pharmacies, etc. The ld. CIT(A) gave credit to the assessee only to the extent of the availability of

I find that the assessee, though not authorized to collect cash in specified bank notes during the demonetization period, had indeed made sales and collected cash thereon in specified bank notes. The cash sales so made had been part of the total sales credited in the profit and loss account and disclosed by the assessee. The said sales had been accepted by the Revenue in the instant case. The corresponding purchases made by the assessee are also not doubted by the Revenue. The books of account and the entries therein are not sought to be rejected by the Revenue by invoking the provisions of Section 145(3) of the Act in the instant case. In these circumstances, any addition being made separately on account of cash deposits made in the bank account would only result in double addition in view of the fact that the Revenue had accepted the sales disclosed by the assessee and the cash balance and the cash source emanating out of such cash sales are only one side of the same transaction of cash sales. In other words, one side of the coin/transaction is cash sales, which is accepted by the Revenue, and the other side of the same coin/same transaction is the cash balance

Hence, I hold that the explanation given by the assessee that the cash sales made by the assessee emanated as a cash source for explaining the cash deposits during the demonetization period in specified bank notes deserves to be accepted, as non-acceptance of the same would only result in double addition. Accordingly, I hold the entire cash deposits to be properly explained out of the available cash balance as per the books. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal filed by the assessee is allowed.

आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR & 5. गाड� फाईल/GF.